HEARD : 18-21, 24-27 FEBRUARY 2003, 4-5, 10-12, 15-19, 24-26 MARCH 2004

Trade Practices Act 1974 (Cth)- Mortgage debts - Plea of misleading and deceptive conduct raised in counterclaim - Whether mortgage debts should be set aside - Verbal misrepresentations allegedly made by financier concerning the provision of development funds - Whether borrower misled by silence - Alternative causes of action in contract and tort - Whether any or any sufficient causative connection between the conduct complained of and the alleged loss - Paucity of documentary and circumstantial evidence - Findings that verbal misrepresentations not made as alleged - Counterclaim dismissed - Judgment for plaintiff in respect of the mortgage debts - Turns on own facts

Fair Trading Act 1987 (WA), s 9

Trade Practices Act 1974 (Cth), s 52, s 84

Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353

Beach Petroleum NL v Johnson [1993] FCA 283; (1993) 43 FCR 1

Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

Custom Credit Corporation Ltd v Ravi Nominees Pty Ltd (1992) WAR 42

Daniels (formerly practising as Deloitte Haskins & Sells) v Anderson (AWA case) (1995) 37 NSWLR 438

Henville v Walker [2001] HCA 52; (2001) 206 CLR 459

Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109

Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR ASC 55-943; (1989) ATPR 46­054 FCA 27 July 1989

Verdell Pty Ltd v F&G Nominees Pty Ltd [2002] WASC 58(S)

Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 175 CLR 514

1 The plaintiff, Custom Credit Corporation Ltd, seeks to recover debts said to be due under four mortgages executed by the first defendant, Dallas Development Corporation Pty Ltd, between 26 June 1989 and 1 May 1990. The second defendants have ceased to play any active part in the proceedings with the result that the claim is being defended by Dallas alone.

2 The principal witness for Dallas was the second defendant, Barry Daniel O'Rourke. He became a director of Dallas soon after the formation of the company but ceased to be so in 1986. Thereafter, he acted as the de facto manager of the company and in that capacity was involved in the events giving rise to the litigation.

3 It appears from the statement of claim that the debts said to be due to Custom Credit under the four mortgages in question amount in aggregate to $2,750,002.70 plus accrued interest. Dallas denies that it is indebted to Custom Credit in the amounts claimed. In essence, it contends that even if it is found to be liable to Custom Credit in the amounts claimed, or as to any other amounts, it is entitled to relief against such liability pursuant to the Dallas counterclaim.

4 I pause to say that with the passage of time the mortgage debts described in the pleadings have increased. The actual amounts now said to be due under each secured loan have been re-calculated by allowing interest at the high rates of interest applicable on a monthly cumulative basis as envisaged by the schedules to the mortgages, and then deducting any moneys received or obtained by way of mortgagee sales. Ms Lianne Noonan, a senior manager assisting the liquidator of Custom Credit, gave evidence that the total owed by Dallas to 30 April 2004 is $40,608,849.28.

5 It appears from the pleadings that Dallas admits the entry into the mortgage arrangements, the receipt of funds, and the making of demands for repayment under each mortgage, but the issue of default has not been admitted in each case.

6 Both parties recognise that the matter principally in controversy concerns certain misrepresentations which are alleged by Dallas to have been made by or on behalf of Custom Credit in mid-1989, and which are said to have brought about the loans to Dallas. It is said that Dallas was misled into acquiring property known in the proceedings as the Irwin property in exchange for land owned by Dallas known as the West Coast Highway land, to the ultimate detriment of Dallas (the "swap transaction"). Thus, as a consequence of pre-trial orders and directions, arrangements were made for the Dallas case to be presented first at trial.

7 The trial commenced in 2003 but had to be adjourned, part heard, because the eight days allowed for the hearing proved to be not sufficient. While the matter stood adjourned, Dallas applied to amend its counterclaim. That application, and a related application by Custom Credit to strike out the Dallas pleading and enter judgment, became the subject of a ruling by me as the trial Judge which is reflected in Custom Credit Corporation Ltd v Dallas Development Corporation Pty Ltd & Ors [2003] WASC 98. The reasons for decision given on that occasion should be read in conjunction with this judgment.

8 The Dallas application to amend was vigorously opposed. I will not repeat what I said on the prior occasion. However, in summary, I was persuaded that the proposed amendment did not change the Dallas counterclaim in any essential respect. I concluded that the four representations underlying the Dallas counterclaim, which were said to have been made in mid-1989, and the related causes of action relied upon by Dallas, remained the same. I was of the view that the amendments were directed to straightening out a rather confused position concerning the timing of certain events. I held that Dallas should be permitted to ensure that its pleadings conformed to the evidence given at the trial, bearing in mind that Custom Credit would have ample time to respond to the changed plea during the period of the adjournment. When the trial resumed arrangements were made for Mr O'Rourke to be recalled as a witness so that counsel for Custom Credit would have an opportunity to cross-examine him with respect to the amendments.

9 The trial resumed on 4 March 2004. The pleadings, including the amendments made on both sides as a consequence of the events I have just described, are now contained in a spiral bound volume comprising 73 pages described as "Further Re-Amended Papers for the Judge". I will treat this document as the operative point of reference and henceforth describe its various parts simply as the "statement of claim" or "statement of defence" or the "pleadings" as the case may be. I note in passing that the pleadings as they stood at the commencement of the trial were received into evidence at the resumption of the trial as Exhibit D57 and consist of a volume comprising 83 pages described as "Re-Amended Papers for the Judge". For ease of reference, I will call the latter volume the "original pleadings" or, as to various parts of the volume, the "original claim" or the "original defence and counterclaim" as the case may be.

10 Custom Credit contends that the amendments sought by Dallas should be brought to account in assessing the credibility of Mr O'Rourke and other witnesses for Dallas, notwithstanding my allowance of the amendments. I will return to this aspect of the matters in issue later.

11 It will be apparent from the narrative to this point that at the initial hearing of the trial in 2003 evidence was received from Mr O'Rourke and other witnesses for Dallas directed to the Dallas allegation that on or about 19 June 1989 it was induced to enter the swap transaction and related financing arrangements as a consequence of misrepresentations made by or on behalf of Custom Credit.

12 Put shortly, the Dallas case is that it wished to obtain finance from Custom Credit in order to proceed with certain land development projects that had the potential to produce substantial profits. The misrepresentations which are said to have induced Dallas to enter the swap transaction were allegedly made in the course of conversations between Mr O'Rourke and Mr Phil Lewis, a senior officer of Custom Credit. Dallas pleads also that at the relevant time Mr Lewis failed to disclose that he had an interest in the swap transaction resulting from his prior association with the vendor of the Irwin property.

13 Dallas contends that the swap transaction and related events, including an alleged failure by Custom Credit to provide certain funds, prevented Dallas from proceeding with its development projects and meeting its commitments under the mortgages. The Dallas counterclaim therefore reflects a claim for damages based upon loss of opportunity and loss of profits.

14 It follows from this overview that it will be useful to begin by looking at the background to the dispute and at the events leading up to the swap transaction in mid-1989. The sequence of the relevant events is important. The financial considerations bearing upon the respective positions of the parties are important too. There was a good deal of evidence to the effect that after the share crash in 1987 the demand for property was strong, property developers such as Dallas were active in the marketplace, notwithstanding high interest rates, and finance companies such as Custom Credit were vigorously in pursuit of new business. It seems to have been an era in which all those with an interest in land development were willing to take risks.

15 Two of the valuers called by Dallas, namely, Mr Keith Collins and Mr Richard Marr, gave evidence to this effect. The valuer called by Custom Credit, Mr Kennedy, said this at page 7 of his report concerning the West Coast Highway land (P56 @ 9/3134):

"Property values increased dramatically in the late 1980's and developers were key players in this market phase. Funding was relatively easy to obtain and purchasers were ever present. With all players of the property development process participating readily, (developers, financiers, purchasers) the market built up this momentum. Early signs of a market correction began to emerge in mid 1989 as some of the financiers began to show concern at their exposure. The extent of the over development and risk profile did not become obvious to the wider market place until probably very early 1990. The concern was not limited to the office market and it was not long before the market momentum began to correct itself. Residential unit developments were another segment of the market to feel the effects of this change. Once the end users (purchasers/tenants) of property withdrew, the effect of high carrying costs quickly took their toll and financiers began to react."

16 Having regard to the mood of the era, I must keep steadily in mind that the misrepresentations complained of are not said to have been set out expressly in written form. They are said to have been made verbally at various meetings. Accordingly, it becomes necessary to give careful consideration to the credibility of the principal witnesses and to the circumstances giving rise to the swap transaction. This will assist me in determining whether the verbal statements complained of were made by Mr Lewis as alleged, and, if so, whether they in fact caused the losses referred to in the Dallas counterclaim.

17 Dallas was formed in 1985. It was established to facilitate construction, development and joint ventures. It was the parent company to Dynasty Constructions Pty Ltd and was involved in various developments within the metropolitan area of Perth. I noted in earlier discussion that at all material times Mr O'Rourke appears to have acted as the de facto manager of the company. Directors of Dallas included Mr O'Rourke's son-in-law, Gordon Carruthers, and his daughter, Suzanne Carruthers.

18 It is apparent from a Trust Deed dated 7 July 1986 that Dallas undertook to act as the trustee of a trust described as the "Dallas Constructions Unit Trust". It follows that the various properties acquired by Dallas were acquired in its capacity as a trustee company and were held for and on behalf of the Trust.

19 The financial statements of Dallas were prepared under the supervision of Mr Con van Mannen who at that time was a partner in the firm Ernst & Young, Chartered Accountants. He said in evidence that the first financial statement for the company was the statement for the year ending 30 June 1987 (Exhibit D68 @ 8/2776). Dallas received no income during that year and did not hold any significant assets. The financial statement for the year ending 30 June 1988 (Exhibit D69 @ 8/2794-2803) show total assets of $467,081. The total current liabilities amounted to $464,048.

20 The financial statements for the year ended 30 June 1989 (Exhibit D29 @ 8/2814-2823) depict a significant increase in the activities of the company. The income of the company is said to be $155,449 derived principally from development profit and profit on sale of land. The loss before income tax is described as $237,355. The total current assets are described as $4,298,192. The total current liabilities are given as $4,685,885.

21 Note 4 to the accounts, being an inventory of properties held by Dallas as at 30 June 1989, shows that during the financial year 1989 the company added to its land holding known as St Michaels various other land holdings. I will turn to the details of these acquisitions in a moment. However, I note in passing that in the course of his evidence at the resumed trial the accountant Mr van Mannen said that the figures presented in Note 4 were derived from information obtained from Dallas and represented the amount of money spent by Dallas on the various land projects up to 30 June 1989.

22 In the course of cross-examination, counsel for Custom Credit put to Mr van Mannen that on one view of the matter it might be suggested that Dallas was insolvent as at 30 June 1989 in that its current liabilities of $4,685,885 exceeded its total current assets of $4,298,192 by $234,598. Mr van Mannen said that this was not necessarily so as arrangements could have been made to cover the outgoings of the company. He did not have sufficient information before him to address such an issue. However, he agreed that the financial statement revealed a ten-fold increase from total current liabilities of $464,048 in 1988 to $4,685,885 in 1989. This was accompanied by a significant increase in the assets of the company.

23 Mr van Mannen was referred also to the financial statements of Dallas for six months to 31 December 1989 (Exhibit D30 @ 8/2826). He said that these accounts must have been brought into existence pursuant to the express instructions of the client. Note 1 to the accounts declared that there had been a change in accounting policies in respect of valuation of completed developments and land held for developments. At the end of June 1989 the developments and land were stated in the accounts at cost. At the end of December 1989 the developments and land were stated in the accounts at sworn valuation. The increase in value of the developments and land had been brought to account as income.

24 I pause to note that the operating profit at 31 December is said to be $2,945,711. However, it is apparent that the figure for expenses of $669,573 exceeds the total income of the company from sources other than the large figure attributed to "increased value of developments" pursuant to the changed accounting policies.

25 The total current assets are said to be $9,264,505 which is largely comprised of the figure $8,971,316 attributed to "Inventories". The total current liabilities are said to be $6,601,168 giving rise to a figure for net assets of $2,711,113.

26 Note 4 to the financial statements concerning "Inventories" reads as follows:

27 Mr van Mannen also adduced in evidence financial statements for the year ended 30 June 1990 (Exhibit D31 @ 8/2849). The change in accounting policies noted in the preceding financial statements continued to apply. The total expenses of $1,541,335 included an item of $1,318,009 in respect of interest (which can usefully be contrasted with the sum of $258,623 in respect of interest in the preceding year). The list of secured loans forming part of the current liabilities included Esanda $2,236,645, Custom Credit $2,615,841 and Beneficial Finance $2,176,406.

28 These accounts leave an impression that, subject to the effect of any capitalisation of interest clauses within the documentation evidencing borrowings, Dallas had to complete its various development projects promptly and take advantage of a steady demand for the marketable properties thus produced, in order to meet its commitments.

29 It will now be useful to look at the acquisition of the properties mentioned in the "Inventories" item and the way in which certain values came to be attributed to them. Information of this kind will assist an understanding of the financial arrangements that Dallas made with Custom Credit in mid-1989 and of the events giving rise to the controversial swap transaction.

30 In September 1987 Dallas purchased land known as the St Michaels land for $360,000. Approval was given by the local authority to construct 34 quality units in four stages (D10 @ 1/355). The site situated at 220 Fairway Circle, overlooked the Joondalup Country Club and was intended to be a prestigious estate for quality dwellings. It seems that on or about 18 March 1988 Esanda approved a loan of $400,000 to complete the purchase.

31 It seems that with financing from Esanda, Dallas proceeded with development work during 1988 and in early 1989. According to the accountant, Mr van Mannen, the figure of $2,326,894 attributed to the land in the Dallas accounts for the year ended 30 June 1989 was arrived at by calculating the amount expended on the land prior to the end of that financial year.

32 It appears from a Dallas letter to Custom Credit dated 18 May 1989 (D10 @ 1/355) that at that time the final stage was "now 70% complete". Dallas wished to re-finance the remaining unsold units in Stages 1 and 2 which were said to comprise units in Stage 1 (2 type B units) and Stage 2 (4 type B units and 6 type C units). On the Dallas case, the approval of this proposal by Custom Credit set the scene for the swap transaction.

33 I note in passing that the St Michaels project became the subject of a valuation by Mr Richard Marr and Mr K J Collins of Hillier Parker dated 19 June 1989 at about the time of the swap transaction (D22 @ 2/711).

34 By an offer and acceptance dated 15 June 1988 Dallas contracted to purchase the property known as the St Andrews land, being Lot 530 Fairway Circle, Connolly, for the sum of $400,000 (D11 @ 10/54). The registered proprietor of the subject land was the Joondalup Development Corporation. Dallas had in mind to establish 22 (later 29) residential units upon the land but finalisation of the purchase remained in abeyance while the vendor Corporation completed road works and other facilities in the area. The contract in question was subject to special conditions whereby development of the land was to be effected in accordance with restrictive covenants. The settlement date was given as 1 March 1989.

35 The Dallas entry into the swap transaction in mid-1989 was prompted to some extent by a need to obtain funds to complete the purchase of the St Andrews land. The land was transferred into the name of Dallas by Transfer E154844 on 21 July 1989 that is, about one month after the swap transaction. The transfer was accompanied by Mortgage E154845 (P9 @ 2/749) in favour of Custom Credit to secure an advance of $1,440,000 being the advance that permitted Dallas to complete the swap transaction. This advance was secured also by a Custom Credit mortgage affecting the Irwin property.

36 I note in passing that it was a matter in controversy at the trial as to whether the misrepresentations complained of included an assertion by Mr Lewis on behalf of Custom Credit that, if Dallas entered into the swap transaction, funds would be provided to Dallas not only to complete the purchase of the St Andrews land but also to proceed with development work. This gave rise to an evidentiary issue as to whether Dallas was in a position to proceed with such work as soon as the swap transaction was carried into effect.

37 I will return to this issue in due course. In essence, Dallas contended that a 22 unit scheme designed by its architect, Ian Howard of Woodhead Australia, was ready to go to tender in or about May 1989. Further, a feasibility study concerning the St Andrews land was supplied to Mr Lewis of Custom Credit by Dallas shortly before the misrepresentations complained of were made. Dallas alleged that Custom Credit failed to provide the funds promised for development work at the St Andrews site.

38 The Shenton Shopping Centre land (Lot 851 Shenton Avenue) was acquired by Dallas from the Joondalup Corporation at a price of $300,000 pursuant to an offer and acceptance form dated 2 September 1988 (P93 @ 1/163). The form was not signed by or on behalf of the Joondalup Corporation but it was common ground that its acceptance of the Dallas offer was effected by a letter dated 12 October 1988 with the result that a binding contract was brought into existence (P94 @ 1/215). Settlement was made subject to certain approvals being obtained.

39 There is a valuation from Mr K J Collins of Hillier Parker concerning this land dated 27 October 1989 (P37 @ 4/1056). It is described at that date as vacant land upon which it is proposed to build a local shopping centre. The land value was said to be $815,000 and the estimate of value on completion of the shopping centre was said to be $2,250,000. These figures were cited in a letter from Beneficial Finance to Dallas dated 24 November 1989 whereby the finance company approved an advance to pay out the existing finance owing to Esanda and the ANZ Bank and for construction of 8 rental units with provision for capitalisation of interest (P60 @ 4/1120).

40 I note in passing that at about this time, by an offer and acceptance form dated 30 November 1989, Mr Collins and Mr Marr of Hillier Parker offered to purchase the land for $2,200,000 with settlement to be within 14 days of a strata plan being in order for dealing, that is, after the development was completed (P54 not in the agreed bundle). The proposed transaction did not proceed further.

41 By an offer and acceptance dated 14 January 1989 Dallas contracted to purchase from St Ives Development Pty Ltd Lots 2, 254 and 255 West Coast Highway, Scarborough for the sum of $950,000 (D13 @ 1/230). The contract provided for plans and specifications (with approval from all relevant authorities) for the construction of 36 units upon the land to be supplied by the vendor on acceptance of the offer at no cost to the purchaser.

42 The land was transferred into the name of Dallas pursuant to a transfer of land dated 3 April 1989 (P95 @ 1/323). A mortgage to Perpetual Finance Corporation Ltd to secure $1,000,000 was registered on 4 April 1989.

43 Mr O'Rourke said in evidence that Dallas acquired the land with a view to establishing residential units upon the land but Dallas was open to offers. Indeed, as appears from an exclusive authority to sell dated 16 March 1989 signed by Mr O'Rourke (P24 @ 1/245) it appears that Satterley Real Estate was instructed to place the property on the market for sale at a price of $1,500,000, that is, prior to the land being transferred into the name of Dallas.

44 A short time later an offer to purchase the site at a price of $1,100,000 was received from a prospective purchaser named Adam Zencich (D15 @ 1/331). Mr O'Rourke amended the proposed price to $1,300,000 and arranged for the common seal of Dallas to be affixed to the form denoting the willingness of Dallas to accept an offer at that figure. However, in the event, it seems that this counter offer was not acceptable to the prospective purchaser and nothing came of the negotiations. As at mid-1989 the land was unimproved and remains unimproved to the present day.

45 I note in passing that the West Coast Highway land is described in the Note 4 Inventories item in the 30 June 1989 Dallas accounts as "Horizons at Scarborough". A value of $1,003,207 is attributed to the land being the purchase price of $950,000 paid by Dallas and some incidental expenses.

46 Five months after contracting to purchase the West Coast Highway land Dallas exchanged the land for the Irwin property pursuant to the swap transaction in the circumstances I will come to shortly. For the moment, it is sufficient to note that settlement pursuant to the swap transaction had not been effected prior to 30 June 1989 and for that reason, presumably, the West Coast Highway land was included in the Note 4 Inventories item as an asset of Dallas as at 30 June 1989. As we shall see, settlement pursuant to the swap transaction was in fact effected on 31 August 1989, with the result that thereafter the West Coast Highway land does not appear in the Dallas financial statements.

47 On 19 May 1989 Dallas submitted an offer to the agents representing Joondalup Development Corporation to acquire two hectares of land approved for use by the Corporation as a retirement village/nursing home complex. The purchase price specified in the offer was $750,000 payable by a deposit of $37,500 with the balance to be paid on settlement. The offer was accepted by the Corporation on 2 June 1989 upon the basis that the vendor would undertake to subdivide the land and create the proposed lot as soon as possible with settlement to be effected seven days after availability of title. The consequence of this was that the value attributed to this land in the Note 4 Inventories item in the 30 June 1989 accounts was $37,500 representing the value of the deposit.

48 There were two other properties mentioned in the Note 4 Inventories item in the 30 June 1989 Dallas accounts, namely, Irwin Chambers valued at $10,000 and Wittenoom Place valued at $188,706. The Irwin property was the property acquired by Dallas in exchange for the West Coast Highway land. I will come to the details in that regard shortly. The Wittenoom Place land can be put to one side for the time being as it does not have an immediate relevance to the representations complained of by Dallas in its defence and counterclaim or to the swap transaction.

49 It emerges, then, from the narrative to this point that as at mid-1989 Dallas had acquired or contracted to acquire a number of properties in a comparatively short period of time and needed to proceed with development of the same in order to meet its commitments. It owed $1,000,000 to Perpetual Finance in respect of the West Coast Highway land. It was looking for finance to proceed further with the development of the St Michaels land. In addition, it required finance to complete the purchase of the St Andrews land and to proceed with the development of that land. The existing loans were subject to high rates of interest. The only way in which Dallas could fund development work was via "construction loans" whereby advances were made as work progressed and the value of the land serving as security increased.

50 It was against this background, on the Dallas case, that Mr O'Rourke commenced to deal with Custom Credit. Accordingly, it will be useful to look briefly at the situation of that company as at mid-1989.

51 Custom Credit was incorporated in the State of New South Wales and as at mid-1989 was carrying on business in Western Australia as a financier. At the trial Custom Credit led evidence from James Bonwick, who was employed by the company as National Manager Property Finance between 1987 and 1992. I am satisfied, and so find, that his evidence comprised a reliable account of the way in which Custom Credit conducted its business at that time.

52 Normal procedure for the approval of finance applications at Custom Credit would begin with potential borrowers making an application for finance. The application would then be the subject of a written assessment document produced by a lending officer and a property finance manager and, if viewed favourably, recommended to the State Manager for approval.

53 Up to September 1988, Custom Credit State Managers had authority under lending guidelines to approve loans, at their discretion, up to a limit of $1,000,000 to any client group. From September 1988 the limit was increased to $3,000,000. If a loan application exceeded the limit placed on State Managers, the procedure was for the State Manager to recommend the application and forward it to the Head Office of Custom Credit in Sydney for approval.

54 Applications for finance were prepared by the local lending officer and a property finance manager for submission to the State Manager. They were if necessary, forwarded to Sydney Head Office, depending on the amount of the application. At Head Office, either Mr Bonwick or someone in authority would consider the application and either approve or reject it or seek more information. In most cases Mr Bonwick would accept and rely on all the facts as presented on the document.

55 The policy manual of Custom Credit contained, at the time, words providing that if an employee of Custom Credit held a personal interest or was personally involved with an application for a loan from Custom Credit, this should be fully disclosed. It was the responsibility of the local State Manager to communicate this policy to the personnel within the local office.

56 As at 1988 and 1989, Property Finance Managers of Custom Credit had no authority on their own to grant or approve loans, or to commit Custom Credit to any lending transaction. They were responsible for dealing with customers and for putting together loan applications that would then go through internal lending procedures leading in the end, either to approval or rejection of a proposed loan.

57 According to Mr Bonwick, Custom Credit did not prescribe the type of property applicants for finance needed to own or acquire in order to obtain finance. Custom Credit was a finance company which was in the business of lending funds. It was not a property valuation company. It was not qualified to offer property valuation advice to its clients. It employed specialist outside consultants to perform those tasks. Hillier Parker was on Custom Credit's panel of valuers in Perth at the time. When an applicant applied for finance, internal policy was for Custom Credit to nominate or engage one of the panel members, based on criteria such as availability and experience for the particular property to perform the task.

58 The State Manager of Custom Credit in Western Australia as at mid-1989 was Mr Graham Exton. He left in June 1989 and was replaced by Mr Jim Richards. One of the latter's colleagues was Mr Phillip Lewis who held the position of Senior Property Finance Manager, having been with the company since 1981. At a crucial moment in June 1989, while Mr Richards was on leave, Mr Lewis served as Acting State Manager.

59 I pause to say that Mr Lewis had a brother-in-law in the property business in Perth at this time, namely, Mr Brian Conway. It was a keenly contested issue as to whether Lewis, by reason of his association with Conway, and another businessman, Philip Simcock, and additionally, by reason of his association with two companies - Westminster Properties Pty Ltd and Telbe Pty Ltd - had a financial interest in the Irwin property at the time of the swap transaction. I will address this issue in due course. For the moment, it will be sufficient to say that, on his own account at trial, Lewis did not mention any of these associations to O'Rourke.

60 Another Custom Credit officer at the relevant time was Simon Adams. He was employed by Custom Credit as a Lending Officer after graduating from Edith Cowan University. As at mid-1989 he was 23 years of age and been in the position of Lending Officer for about 12 months. He dealt with Dallas in this capacity initially but in mid-1989 he was promoted to Property Finance Manager. He signed certain documents concerning the St Andrews/Irwin loan to Dallas in the latter capacity.

61 It appears to be common ground that by mid-1989 Mr O'Rourke and Mr Lewis were known to each other to some extent. Mr Lewis said that he first met Mr O'Rourke in 1987 at a lunch to welcome Mr Exton to Perth. It is a matter of controversy as to the nature and frequency of their meetings and communications but I am prepared to accept that there was a relationship of sorts between them. This probably had a bearing on Mr O'Rourke's decision to approach Custom Credit with a view to obtaining finance.

62 I note in passing that at the trial Mr Lewis steadfastly denied that he was close to Mr O'Rourke. He said that to the best of his recollection Mr Adams handled the Dallas loan requirements. However, it was common ground at the trial that on 13 June 1989 Mr O'Rourke, Mr Exton and Mr Lewis were together at the Joondalup Golf Course. On that day Channel 9 put to air a story about Mr O'Rourke taking possession of a new kind of golf buggy. The relevant footage includes a glimpse of the three men having a look at the new buggy at the Joondalup Golf Course on what appears to be a social occasion. They are dressed in casual attire.

63 Mr O'Rourke was the principal witness for Dallas at the trial of the action. He submitted a witness statement (D35) and supplementary witness statement (D36) to the Court, and gave verbal evidence concerning the events described in his statement. He was cross-examined at considerable length.

64 Mr Lewis submitted a witness statement to the Court (P89), and gave verbal evidence. He was cross-examined at length. Custom Credit led evidence also from Mr Simon Adams who spoke of his role as a Property Lending Officer, and of his later association with Dallas as a Property Finance Manager. He submitted a witness statement (P70).

65 For the time being, I will put to one side the differences between the principal witnesses concerning the matters in contention and endeavour to set out the sequence of events bearing upon the present dispute having regard to the contemporaneous documents and the pleadings. This will be of assistance in understanding and narrowing the issues reflected in the pleadings. I will turn to the evidence of the principal witnesses concerning the misrepresentations complained of in due course.

66 By letter dated 18 May 1989 Dallas applied to the Business Development Manager of Custom Credit for a loan of $1,560,000 to assist with the refinancing of Stages 1 and 2 of the St Michaels development. In addition, the loan would be used to provide a working capital advance and to make provision for interest during the selling period. The letter was signed by Mr O'Rourke's son-in-law, Mr Carruthers, who was a director of Dallas (D10 @ 1/355).

67 The D10 letter says that in September 1987 Dallas contracted to purchase the St Michael' site. As I noted in earlier discussion, the letter went on to say that approval was given by the local authority to construct 34 quality home units in four stages. The final stage was now 70 per cent complete. The letter said further that the project had been financed to date by Esanda but Dallas now wished to refinance 12 unsold units in Stages 1 and 2.

68 The request was for $1,560,000 of which $1,000,000 would be to refinance existing borrowings, $404,000 was to be advanced progressively as and when required, and $156,000 was to be advanced progressively for interest. The amount of $156,000 contained within the advance was to support the loan during the selling period. As to repayment of principal, it was said the loan would be repaid from the sale proceeds of the individual strata title units.

69 The next significant document is a letter from Custom Credit to Dallas dated 6 June 1989 confirming that Custom Credit was willing to approve a loan of $1,460,000 in respect of the St Michaels land (D47 @ 1/380). The adjustment downwards from the figure of $1,560,000 applied for to the figure of $1,460,000 granted suggests that the application became the subject of discussion.

70 Custom Credit approved the loan of $1,460,000 for a term of 6 months to be secured over 12 strata title units forming part of the St Michaels land. $1,000,000 was to be advanced at settlement with $300,000 to follow progressively on pre-sale of four units. The balance of the loan was to be applied to an interest capitalisation facility.

71 The application for finance prepared internally by Custom Credit was approved on 16 June 1989 (D71 @ 2/430). It is significant that the typewritten figure of $1,560,000 has been altered by hand to become the sum of $1,460,000, being the figure the subject of the approval letter dated 6 June 1989. There are other features of the St Michael's D71 loan application which invite comment.

72 The application is said to be for a "progressive bridging" loan. The loan is to be secured against the St Michaels land with the land value to be confirmed by a panel valuer. The rate of interest is 20.50 per cent with a penalty rate of 22.50 per cent. The author of the document refers to the applicant (Dallas) having approached Custom Credit to refinance Stage 2 of the St Michaels project so that Dallas can use the funds from the current financier, Esanda, for other development projects. The form notes that Mr O'Rourke has had more than 15 years experience in the property development market. Dallas has plans "to build a suburban shopping centre and retirement village located opposite the current Joondalup Shire Offices and a luxury residential complex on the perimeter of the Joondalup Golf Course".

73 It appears from the form that the St Michaels D71 loan application was signed, and thus recommended for approval, by the Lending Officer, Simon Adams, on 15 June 1989, and by the Senior Property Finance Manager, Philip Lewis on 16 June 1989. It was signed, and thus approved, by the State Manager of Custom Credit, Graham Exton, on 16 June 1989.

74 In effect, the St Michaels' loan approval represented a partial refinancing of the project previously financed by Esanda. The loan by Custom Credit was carried into effect in due course by Mortgage E142583 which purports to have been signed on 26 June 1989. This was known in the pleadings as "the third mortgage" (P5 @ 2/510).

75 It seems that at about this time, in June 1989, Dallas formed a view that it would be useful to acquire a commercial property in the Central Business District of Perth. It was a matter of acute controversy between the parties at the trial as to how this notion came into being. The representations allegedly made by Mr Lewis are relevant to this issue. Again, for the time being, I will begin by looking simply at the relevant documents and the sequence of events.

76 It is a matter of undisputed fact that by an offer and acceptance dated 19 June 1989 Dallas contracted to purchase the strata title to floor three of an office block known as Irwin Chambers in the CBD of Perth. The price paid for the Irwin property was $1,475,000. The relevant offer and acceptance (D20 @ 2/503) was prepared by a real estate agent, Malcolm Dempsey, who at that time was employed by Satterley Real Estate. I note in passing that the offer and acceptance prepared by Mr Dempsey refers to all carpets and lightings "as inspected 19 June 1989". This note in Mr Dempsey's hand is cogent evidence that the inspection and the signing of the contract took place on 19 June 1989.

77 On the same day, the vendor of the Irwin property, Westminster Holdings Pty Ltd, contracted to purchase the West Coast Highway land from Dallas for the same price, namely, $1,475,000 (D21 @ 2/505).

78 In effect, the two vendor companies, Westminster and Dallas, had agreed to swap their respective pieces of land. The offer in each case was described as a cash offer and settlement was to be effected two months later. For ease of reference, I have described the making of these two contracts on 19 June 1989 as the "swap transaction".

79 It follows from earlier discussion that Dallas was obliged to obtain funding from Custom Credit in order to complete the swap transaction, for, as I have noted, the West Coast Highway land was subject to a mortgage to Perpetual Finance. Further, Dallas was looking for finance at this stage in order to complete its purchase of the St Andrews land. On the Dallas case at trial, Dallas was also looking for funds to proceed with development work at the St Andrews site.

80 On this occasion (unlike the Dallas application for the St Michaels loan per the D10 letter dated 18 May 1989) there is no initial letter from Dallas setting out its wish to obtain finance in order to complete the swap transaction, or for any related purpose. This suggests that the Dallas requirements were the subject of discussions between Mr O'Rourke and one or more officers of Custom Credit. The most likely candidates in that regard were the Lending Officer, Mr Adams, or his superior, Mr Lewis, or both.

81 It is an undisputed fact that on 20 July 1989 an application for finance by Dallas as reflected on the assessment form prepared in-house by Custom Credit was approved by Mr Lewis in his capacity as the Acting State Manager. It allowed for a loan to Dallas of $1,540,000 (P83 @ 2/739).

82 I pause to observe that the St Andrews/Irwin P83 loan application was undoubtedly prepared in-house by officers of Custom Credit, but it was a matter of acute controversy as to who played the leading role in that regard. It was a matter of controversy also as to what discussions (if any) preceded the preparation of the loan application, who was involved in such discussions, and as to when and where they took place. The Dallas case at trial was that the relevant discussions occurred before Dallas entered the swap transaction and that, in every respect, Mr Lewis was the principal spokesman on the Custom Credit side. I will come back to these issues later.

83 In the meantime, it will be useful to look at certain features of the St Andrews/Irwin P83 loan application which have a bearing upon the swap transaction.

84 The loan is described as a "progressive bridging loan". Reference is made to an existing indebtedness of $1,460,000 (being the earlier St Michaels' loan). One notices immediately that the two loans amount to $3,000,000 in all, with the result that the $3,000,000 limit applicable to the Perth branch of Custom Credit was not exceeded. The application refers to a Hillier Parker valuation dated 27 June 1989 in respect of the St Andrews land and to a valuation from the same firm dated 12 July 1989 in respect of the Irwin property.

85 The purpose of the funding is said to be to assist Dallas with the purchase of a group housing site and a strata titled office space at the 3rd floor of Irwin Chambers. Elsewhere, under the heading "Preamble", being a section in which the background to the application is described, the author of the document says that: "an application for development funds will be forwarded in due course".

86 It is said that the Irwin property "will be held as a long term investment". A project feasibility for the St Andrews land is included, in which the realisable value of the land is said to be $1,500,000, with other comments suggesting that this is in respect of a 22 unit project. It is said that the Custom Credit debt will be financed at the end of the term by institutional finance or "by sale of the completed unit project".

87 The form was signed, and thus recommended for approval, by Simon Adams (as Property Finance Manager) on 20 July 1989; and signed, and thus approved by Philip Lewis (as Acting State Manager) on the same date.

88 The St Andrews/Irwin loan was secured by Mortgage E154845 as to the St Andrews land (P9 @ 2/749). At par 5 of the statement of claim, the mortgage concerning the St Andrews land was called "the first mortgage", notwithstanding that the subject loan was applied for after the St Michaels loan. The St Andrews/Irwin loan was secured also by Mortgage E182823 ("the second mortgage") as to the Irwin property (P10 @ 3/765). Both mortgages purport to have been signed on 20 July 1989, that is, the day on which the loan was approved.

89 The formal letter of approval to Dallas concerning the St Andrews/Irwin loan is dated 26 July 1989 (D3 @ 3/782). The Custom Credit letter is said to have been signed on behalf of Dallas at the offices of Custom Credit. The letter suggests that the loan funds of $1,440,000 will be used to pay the amount required for Dallas to complete the purchase of the St Andrews land ($530,000) and to discharge the amount owed by Dallas to Perpetual Finance in respect of the West Coast Highway land so that Dallas can complete the swap transaction ($760,000). The balance will be applied as a security deposit to cover interest ($150,000). There is no mention of funds for development of the St Andrews land.

90 The nature of the discussions between Mr O'Rourke for Dallas and Mr Lewis for Custom Credit concerning the swap transaction and related matters is at the heart of the controversy between the parties. It will be of assistance in assessing what was said and done to look at the values attributed to the principal pieces of land in mid-1989.

91 The St Michaels D71 loan application by Dallas, which was approved by Mr Exton on 16 June 1989, attributed a value of $1,950,000 to the subject land. This was to be confirmed by Custom Credit's panel valuer.

92 It seems that the Custom Credit Finance Manager engaged Hillier Parker to provide a formal valuation. The Hillier Parker St Michaels' valuation (D22 @ 2/453) is dated 19 June 1989 and was signed by Mr Richard Marr, the senior valuer at Hillier Parker, and his colleague, Mr Keith Collins, of that firm. It appears from the valuation that it relates to twelve strata lots, being Lots 17 - 19.

93 This valuation was clearly brought into existence in response to the Dallas application for refinancing in respect of the St Michaels land. The valuers purport to assign a value to the land upon completion of the 12 units in question, but without specifying the comparable sales evidence. They assign values to the units ranging from $143,000 to $168,000 which produces a total value of $1,878,250 (being slightly less than the value attributed to the land in the application form).

94 I remind myself that the St Andrews/Irwin P83 loan application approved by Mr Lewis on 20 July 1989 refers expressly to Hillier Parker valuations in respect of each piece of land. On this occasion, each of the valuations is said to have been prepared under instructions from Dallas.

95 The Hillier Parker valuation of the St Andrews land is dated 27 June 1989 and was therefore finalised 8 days after the signing of the contracts comprising the swap transaction on 19 June 1989. The valuation was signed by Mr Collins of that firm (P7 @ 2/528). He referred to a lack of comparable sales but fixed the value of the St Andrews land at $1,500,000. I pause briefly to remind myself that Dallas had contracted to purchase the land twelve months earlier for $400,000 and settlement of the transaction, as at 27 June 1989, had not yet been effected. No development work had taken place on the land.

96 The Hillier Parker valuation of the Irwin property is dated 12 July 1989 and was signed by Mr Loughnan of that firm (D19 @ 2/652). He referred to the potential of the property as a site for serviced offices. He assessed the value of the property at $1,530,000.

97 The effect of the swap transaction was to attribute a value of $1,475,000 to each of the Irwin property and the West Coast Highway land. It will be recalled that the West Coast Highway land had been purchased by Dallas about five months earlier for $950,000. Accordingly, it might be said that if the Irwin property being obtained by Dallas in exchange for the West Coast Highway land was worth the figure of $1,530,000 assigned to it by Hillier Parker, or even was worth the contracted price of $1,475,000 attributed to it for the purpose of the swap transaction, then Dallas had obtained a significant windfall.

98 However, I am conscious that care must be exercised in weighing up the pros and cons of the swap transaction. The three Hillier Parker valuations, and the value attributed to the West Coast Highway land by the swap transaction, leave an impression that the parties were inclined to talk about land values in general terms, and to be guided by estimates rather than valuations based on comparable sales evidence.

99 I have noted that by letter dated 26 July 1989 Custom Credit confirmed approval in principle of a loan to Dallas of $1,440,000 on the security of the St Andrews land and the Irwin property for a period of twelve months (D3 @ 3/782). The letter indicates that of the amount in question $530,000 was to be applied to completing the purchase of the St Andrews land and $760,000 was to be used in paying out Perpetual Finance. The latter payment meant that Dallas would be able to discharge the mortgage on the West Coast Highway land and complete the swap transaction. Dallas would finish up as the registered proprietor of both the St Andrews land and the Irwin property.

100 I have noted that the overall advance of $1,440,000 was secured by Mortgage E154845 dated and stamped 20 July 1989 affecting the St Andrews land (P9 @ 2/749). This is described in the pleadings as the first mortgage. The advance was secured also by Mortgage E182823 dated 20 July 1989 (the second mortgage) affecting the Irwin property (P10 @ 3/765).

101 These mortgages were duly registered. The relevant payments were made by Custom Credit via the St Andrews/Irwin account 15644025345. The account created earlier in time in respect of the third mortgage was described in the books of Custom Credit as the St Michaels account 156445025244.

102 The funding arrangements with Custom Credit enabled Dallas to complete the purchase of the St Andrews land from the Joondalup Development Corporation. Settlement was effected on 21 July 1989. Dallas became the registered proprietor of the subject land.

103 Settlement pursuant to the two offer and acceptances dated 19 June 1989 comprising the swap transaction was effected on 31 August 1989. Thereafter, Dallas became the registered proprietor of the office premises comprising the Irwin property.

104 I pause briefly at this point to touch on a matter that gave rise to a good deal of controversy at the trial, namely, a further payment made by Custom Credit to Dallas in the sum of $500,000.

105 The misrepresentations complained of are said by Dallas to have included an undertaking that Custom Credit would provide funds for the development of the St Andrews land. I observed in earlier discussion that the purpose of the St Andrews/Irwin P83 loan application was described on the form as being to assist Dallas with the purchase of the St Andrews land and the Irwin property, although, elsewhere in the form, it was said that "an application for development funds would be forwarded in due course".

106 Mr O'Rourke gave evidence to the effect (at par 68 of his witness statement) that he understood the St Andrews/Irwin P83 loan application extended to development funds for St Andrews. When he attended at Custom Credit with his daughter, Suzanne Carruthers, to sign the D3 approval letter evidencing the loan arrangements dated 26 July 1989 (D3 @ 3/782), he was disconcerted to find that provision had been made for $1,440,000 only being $530,000 to complete the purchase of the St Andrews land, $760,000 to pay out Perpetual Finance with respect to the West Coast Highway land, and $150,000 to secure the payment of interest. The letter made no mention of development funds for St Andrews.

107 Mr O'Rourke said in evidence that he spoke to Mr Lewis about this at the time and was told that it was just an error and would be fixed up. Mr O'Rourke said that on the basis of this assurance the loan documents were signed and he guaranteed the arrangements on behalf of Dallas.

108 I pause here to say that in the agreed bundle at trial there was another letter from Custom Credit bearing upon these events which was dated 27 July 1989, that is, the day after the D3 approval letter (D75 @ 3/791). Both letters were signed by Simon Adams in his new role as Property Finance Manager.

109 Unlike the 26 July D3 approval letter, the 27 July letter bears a date stamp which suggests that it was received by Dallas on 2 August 1989. The 27 July letter opens with a reference to St Michaels, St Andrews and Irwin Chambers and commences by saying:

"Please find enclosed approval letters for the advances provided on the above projects which we require you to sign and return one copy."

110 The letter goes on to say that funds distributed to date from the St Michaels account (account number 156445025244) amounted to $1,300,000; from the St Andrews/Irwin account (account number 156445025345) $530,000 plus an amount of $1,114.70 for legal costs. These figures corresponded to figures mentioned in the 6 July D47 approval letter concerning the St Michaels loan and the 26 July D3 approval letter concerning the St Andrews/Irwin loan. However, inadvertently, the names attributed to the respective accounts were incorrectly transposed in the 27 July letter. Dallas was invited to contact Adams if it had any queries.

111 The 27 July P 75 letter was a source of controversy at the hearing. It was open to the interpretation that Dallas received the two letters of loan approval by post and signed the same at about the same time, at its own office, notwithstanding that the St Michaels loan was approved on 16 June and the St Andrews/Irwin loan on 20 July. Such an interpretation would bring into question Mr O'Rourke's evidence that he protested the absence of development funds for St Andrews while signing the 26 July D3 approval letter at Custom Credit's office. On the other hand, the 27 July P75 letter leaves an impression that Custom Credit was accustomed to advancing funds without having attended to all of the relevant documentation beforehand.

112 I will return to evidentiary issues of this kind later, save to note that for the time being Dallas did not make any written protest about the alleged absence of development funds for St Andrews, or raise any other queries in writing about the payments made.

113 It seems that about two months later, at a time when Mr O'Rourke was in Melbourne, arrangements were made for Suzanne Carruthers to collect a cheque for $500,000 from Custom Credit in favour of Dallas. It appears from the "Customers Contract Statement" maintained by Custom Credit with respect to Dallas that a payment of $582,000 from the lending institution Citibank had been credited to the Dallas St Michaels' account 16544502544 on 28 September 1989. On the following day a payment of $500,000 to Dallas was debited to the same account.

114 The Dallas case at trial was that this payment, albeit inadvertently debited to the St Michaels' account, was made in order to fulfil the undertaking given by Mr Lewis to provide development funds for St Andrews. Dallas said that the payment should be regarded as evidence corroborating the Dallas case that an undertaking to provide development funds was given.

115 Custom Credit sought to rebut these assertions by pointing to a Custom Credit memo dated 29 September 1989 prepared by Mr Adams and signed by him and the State Manager, Mr Richards (P78 @ 3/1020). The memo reads as follows (omitting the introductory parts and signatures):

"DALLAS DEVELOPMENT CORPORATION PTY LTD

Our client has arranged for the refinancing of six of his home units at the St. Michael's development in Joondalup through Citibank for a consideration of $714,000 and has requested that $500,000 of these funds be released to him for the following purposes:

2. Working capital to be used primarily with costs associated with the planning stages for his proposed retail centre and retirement village

3. A further $100,000 for an interest capitalisation facility to support these borrowings

Should we agree to this request, we would have the following security position:

1. Registered First Mortgage over a floor of Irwin Chambers valued by Hillier Parker at $1,530,000.

2. Registered First Mortgage over land adjoining Joondalup Golf Course known as St. Andrew's valued by Hillier Parker at $1,500,000.

3. Registered First Mortgage over four units at the St. Michael's development in Joondalup valued at $600,000.

Based on this safer ratio and the fact that we are holding sufficient interest capitalisation to cover the next 5 months, it is recommended that we agree to his request."

116 The authenticity of the 29 September P78 memo was challenged in cross-examination. The cross-examiner spoke of it as a "concocted" document. I note in passing that a copy of the document does not appear to have been provided to Dallas at the time or signed by the company. It was simply an in-house memorandum signed by Custom Credit officers.

117 A protest of sorts was made by Dallas concerning the payment of $500,000 in a letter dated 10 November 1989 from Ms Carruthers to Mr Adams (D5 @ 4/1107). However, it is immediately noticeable from the terms of the letter that no complaint is made expressly about an alleged failure to provide development funds for the St Andrews land. The letter reads as follows (omitting the inessential parts):

"We refer to our recent conversation and wish to confirm the following arrangement.

According to the statements provided we note that on 28th September 1989, the balance remaining on four units at St Michaels was $406,964.11. Since then $500,000 was taken out and we appreciate at that time it was more convenient this way as one of our guarantors was in the Eastern States. However, as per our conversation, we wish these monies of $500,000 to be taken over to the St Andrews and Irwin Chambers loan with a second mortgage on Irwin Chambers.

This will then free St Michaels of the excess and enable us to clear the loan upon sale of those remaining four units.

Please confirm that this arrangement is mutually acceptable and we thank you for your assistance."

118 It seems that some attempt was made by Custom Credit to respond to this request. By letter dated 11 December 1989 Mr Adams forwarded documentation to Dallas for a second mortgage over each of the St Andrews land and the Irwin property (D27 @ 4/1137). He said that "this mortgage is to be put in place to cover the return of $500,000 made from your facility for the St Michaels development." He said also that in addition to the sum of $150,000 provided by Custom Credit at the commencement of the St Andrews/Irwin loan facility as a security deposit to cover interest, a further payment of $50,000 to secure interest was now required.

119 In the event, Dallas did not execute the further documents and the issue concerning the sum of $500,000 appears to have been left in abeyance. Early in 1990 Dallas was said to be in default with respect to the St Michaels loan.

120 It will now be convenient to turn to events that took place after the making of the $500,000 payment to Dallas.

121 Dallas alleges that in the months following the swap transaction it was unable to lease the Irwin property in the manner envisaged by the Hiller Parker valuations. Towards the end of 1989, while steps were still being taken by Mr O'Rourke to proceed with the various Dallas projects, Custom Credit terminated the services of Mr Lewis. It was common ground at the trial that Mr Lewis was thought to have misconducted himself during the course of his employment. He was in fact subsequently charged with thirteen criminal offences arising out of his employment by Custom Credit with respect to the period 3 November 1988 to 19 May 1989. He was later found guilty of eight out of the thirteen counts.

122 In the months following the departure of Mr Lewis, Mr O'Rourke and the directors of Dallas were in contact with other senior officers at Custom Credit including Mr Simon Adams, Mr Hubbard and Mr Bonwick.

123 Dallas eventually applied to Custom Credit for a loan of $2,950,000 to proceed with the development of the St Andrews land.

124 On 1 May 1990 Mr Bonwick arranged for a further mortgage to be executed by Dallas to cover all outstanding interest payments, which amounted to the sum of $115,000. This mortgage (P38 @ 6/2123) affected the St Andrews land, the Irwin property and various units within the St Michaels project. Mortgage E388742 is described in the pleadings as the "fourth mortgage".

125 Shortly after the execution of the fourth mortgage Custom Credit proceeded to lodge three caveats against the titles of the properties owned by Dallas and Mr O'Rourke on the grounds that it was an equitable chargee. These caveats were lodged on 25 June 1990. Some months later, notices of demand dated 31 October 1990 were served upon Dallas for payment of the whole of the moneys secured by the third and fourth mortgages (P40 @ 6/2104 and P41 @ 6/2158).

126 At the same time, on 31 October 1990, Custom Credit lodged Caveat E478108 (P42 not in the agreed bundle) against the titles to various Dallas properties. Custom Credit claimed an estate or interest in the properties in question as equitable chargee pursuant to cl 14(c) of the registered Mortgage E142583, that is, the third mortgage.

127 A notice of demand dated 25 January 1991 was then served upon Dallas for payment of the whole of the money secured by the first and second mortgages.

128 In due course, Custom Credit took steps to exercise its powers of sale pursuant to the various mortgages. In 1991 it commenced legal proceedings against Dallas and the second defendants as parties to the relevant transactions. I note in passing that the exhibits adduced by Custom Credit at trial included a Notice to Admit Facts dated 11 February 2004 (P43 not in the agreed bundle). That Notice was relied upon to establish that demands were directed to Dallas and Notices of Default issued for the amounts specified as alleged.

129 These events led to Dallas setting up a claim for damages against Custom Credit by way of a counterclaim.

130 In essence, Dallas asserts that any liability that might arise to Dallas should be set off against moneys due by Custom Credit to Dallas pursuant to the counterclaim. Dallas contends that it was induced to enter into the swap transaction and related financial arrangements made in mid-1989 as a consequence of misrepresentations made by Mr Lewis. It is said that Custom Credit's misconduct was compounded by the lodgement of caveats against land held by Dallas, with the result that Dallas was deprived of any capacity to meet its obligations or to realise the profits that might otherwise have been available to it.

131 Against this background it will now be convenient to look at the case put by Dallas in its statement of defence and counterclaim.

The Dallas statement of defence and counterclaim

132 The Dallas statement of defence and counterclaim commences with a series of admissions which confirm the making of various advances as alleged by Custom Credit and reception of the funds in question. Dallas submits in par 5 that it did not make any interest payments for the months of June, July, August, September and October 1990 or pay the principal sum to Custom Credit on 20 July 1990. Dallas says further that, by its set-off and counterclaim, it is entitled to relief from any liability pursuant to the first mortgage and the second mortgage. It denies that it was in breach of the first and second mortgages and denies being liable to Custom Credit. It denies being indebted to Custom Credit in the sum claimed or any amount.

133 Dallas pleads at par 26 of its counterclaim that it had contracted to purchase the St Andrews land for the purpose of developing 29 residential units. It goes on to say that it was the registered proprietor of the West Coast Highway land which it was planning to develop. In or about early June 1989 O'Rourke approached Lewis on behalf of Custom Credit for finance to purchase and develop the St Andrews land and to finance the cost of developing the West Coast Highway land. Lewis is described in the pleading at par 25 as Custom Credit's Business Development Manager having actual or apparent authority to negotiate with and make representations to prospective borrowers from Custom Credit concerning their borrowing proposals.

134 Dallas pleads in par 29 that in or about early June 1989 O'Rourke met with Lewis and Mr Graham Exton, the State Manager of Custom Credit, on the site of the St Andrews land at which time the financing of the purchase and development of the site and the development of the West Coast Highway land was discussed. This is called "the Joondalup meeting".

135 It is said in par 30 that Lewis asked O'Rourke to obtain a valuation of the St Andrews land and requested feasibilities for the development of the two sites ("the feasibility"). It is said that O'Rourke presented "the feasibility" to Lewis and Exton at the Joondalup meeting with a view to Custom Credit lending moneys to Dallas for the purchase and development of the St Andrews land and the development of the West Coast Highway land. O'Rourke also sent a feasibility of the development of the West Coast Highway land to Lewis by fax on 8 June 1989.

136 I digress briefly to say that on the Dallas case at trial the feasibility concerning the West Coast Highway land, which was allegedly presented to Lewis and Exton at the Joondalup meeting, was an undated document portraying a total project cost of $4,546,000 and an expected net return of $854,000 (D12 @ 10/107). The feasibility for that site, which was then allegedly faxed to Lewis on 8 June 1989, was an undated document portraying a total project cost of $4,754,000 with an expected net return of $1,006,000 (D17 @ 10/112). Construction costs in each case were said to be $2,870,000.

137 However, there was considerable controversy at the trial as to whether any feasibility study had been created in respect of the St Andrews land as at mid-1989, and thus as to what document, if any, was the feasibility being referred to in par 30 of the Dallas counterclaim. Custom Credit had requested further and better particulars of the counterclaim directed to that issue.

138 The Dallas amended answers to the request for particulars, filed July 2003 (at page 34 of the pleadings) contained an assertion that the feasibility with respect to the St Andrews land was prepared by O'Rourke in consultation with Pindan Constructions Pty Ltd, Palmerston Building Co Pty Ltd and Woodhead Australia (WA) Pty Ltd and is undated. Further on, at par A9, it is said that a feasibility was prepared for each of the St Andrews land and the West Coast Highway land. Dallas prepared the feasibilities in-house under the direction of O'Rourke and they were done in conjunction with the building manager on information supplied by the architects - Woodhead Australia.

139 I note in passing that these particulars suggested that the document which Dallas sought to rely upon as the feasibility presented at the Joondalup meeting for St Andrews was an undated document portraying the total project costs as $4,513,000 comprised principally of land at valuation $1,500,000 and building costs of $2,784,000. However, there was a good deal of controversy as to when exactly this document was created. I will return to this issue later. The only other document adduced in evidence at the trial which could be described as a feasibility for the St Andrews land referred to financial statements made up to 31 March 1990 and was clearly not brought into existence until after mid-1989 (D34 @ 8/2992).

140 Dallas pleads in par 31 that shortly after the Joondalup meeting Lewis informed O'Rourke by telephone that he was aware of a purchaser who would acquire the West Coast Highway land on the basis that it would be exchanged for a commercial property in the Perth CBD. If that happened, Custom Credit would then advance moneys to Dallas on a higher ratio against the security of a commercial property than it would on a development property for the purpose of purchasing the Perth CBD property and financing the purchase and development of the St Andrews land. O'Rourke informed Lewis that neither he nor Dallas had any previous experience with commercial properties and said further that if Dallas entered into the exchange it would be handled by his agent, Mal Dempsey, of Satterley Real Estate Agents.

141 The pleading goes on to say in par 32 that shortly thereafter "in about mid-June 1989" O'Rourke met Lewis on the Burswood Golf Course where Lewis enquired whether O'Rourke had considered the proposed exchange of properties ("the Burswood meeting").

142 Dallas pleads in par 33 that "shortly after the Burswood meeting" O'Rourke, together with Ms Carruthers, met with Lewis and Simon Adams in the offices of Custom Credit when Lewis orally represented to O'Rourke that upon Dallas selling the West Coast Highway land in exchange for the Perth CBD property, Custom Credit would lend to Dallas 85 per cent, or thereabouts, of a valuation by Hillier Parker of the Perth CBD property to finance the purchase of that property and the purchase and development of the St Andrews land. This is called "the first representation".

143 It is then alleged in par 34 that "in the course of one or other of the meetings and conversations" referred to earlier (that is, those mentioned in pars 30 - 33) Lewis further represented to O'Rourke that the Perth CBD property constituted an excellent investment, a net rental of $122,400 per annum could be expected, cash received from rentals would provide an excellent cash flow which would contribute to the payment of interest on the proposed financing, and there would be no difficulty in obtaining the tenant for the Perth CBD property ("the second representation").

144 I pause to say that the plea in this form did not expressly identify the property described as "the Perth CBD property". However, the case at trial was fought essentially on the assumption that Dallas was advancing an allegation that by this stage, in the course of one or other of the meetings and conversations, it had been made known to O'Rourke that the property in question was the Irwin property. In other words, the pleadings were construed as though par 34(1)(a) referred to a representation by Lewis to O'Rourke that the Perth CBD property being talked about was the Irwin property and constituted an excellent investment. However, for the time being, I will continue to echo the language utilised in the pleading in which the subject property was described simply as "the Perth CBD property".

145 Lewis is said in par 34(2) to have represented also that Dallas had to be the owner of the Perth CBD property before Custom Credit would lend any moneys for the purchase and development of the St Andrews land, Custom Credit would not advance money for the purchase and development of the St Andrews land unless Dallas purchased the Perth CBD property, Dallas had to exchange the West Coast Highway land for the Perth CBD property if Custom Credit was to advance money, and informed O'Rourke that he should obtain valuations from Hillier Parker of the St Andrews land and the Perth CBD property for the purpose of the proposed exchange ("the third representation").

146 Dallas pleads in pars 35 and 36 that these representations were made by Lewis to induce Dallas to enter into the exchange ("the swap transaction") and to borrow money from Custom Credit. Acting upon and induced by the representations, O'Rourke engaged Hillier Parker to undertake the required valuations. Hillier Parker valued the St Andrews land at $1,500,000 by valuation dated 27 June 1989, valued the Irwin property at $1,530,000 by valuation dated 12 July 1989, and provided the valuations to Custom Credit on or about the dates just mentioned.

147 O'Rourke, accompanied by Carol O'Rourke, Mal Dempsey and Ms Carruthers, is said to have inspected the Irwin property on 19 June 1989 in conjunction with Keith Collins of Hillier Parker with a view to effecting the exchange, obtaining finance from Custom Credit as proposed by Lewis in the first, second and third representations, and financing the purchase and development of the St Andrews land. On 19 June 1989, Dallas entered into agreements effecting the exchange and proceeded to complete the purchase of the St Andrews land and to plan and undertake the development of the same. This is the transaction I have called "the swap transaction".

148 Dallas pleads in par 37 that Custom Credit approved finance for the purchase of the St Andrews land and Irwin property, such finance being secured by the first mortgage (Mortgage E154845 dated 20 July 1989) and the second mortgage (Mortgage E182823 dated 20 July 1989). The exchange was completed by the registration of a transfer of the St Andrews land to Dallas on 21 July 1989 and the registration of transfers to complete the swap transaction on 1 September 1989.

149 Dallas pleads in par 42 that by making the first, second and third representations Custom Credit, by Lewis, conveyed the overall impression to O'Rourke that if Dallas exchanged the West Coast Highway land for the Irwin property Dallas would be making a good investment and would have no difficulty in quickly tenanting the Irwin property. Further, Dallas would be able to meet its financial commitments in respect of the related borrowing, would be regarded by Custom Credit as more creditworthy, would be in a sounder financial position to borrow from Custom Credit for the purposes of purchasing and developing the St Andrews land, and would be able to borrow sufficient money from Custom Credit for that purpose.

150 However, in fact the purchase of the Irwin property was a bad investment because tenants could not be obtained quickly, no cash flow was received from the property to contribute to interest payments due to Custom Credit, holding and developing the West Coast Highway land was a better investment, Custom Credit did not intend to and did not finance the cost of development of the St Andrews land. Also, Dallas lost its creditworthiness as a borrower from Custom Credit, was not able to borrow sufficient money to meet the cost of developing the St Andrews land and was not able to meet its financial commitments resulting from the swap transaction.

151 The counterclaim contains an assertion that in reliance upon the misrepresentations complained of, and the impression pleaded in par 42, Dallas borrowed the funds secured by the mortgages, entered into and completed the swap transaction, completed the purchase of the St Andrews land and undertook the development of that site.

152 Dallas pleads in par 47 that by reason of the matters relied upon by Dallas and by operation of s 51A of the Trade Practices Act 1974 and s 9 of the Fair Trading Act 1987 (WA) Lewis engaged in misleading and deceptive conduct or conduct likely to mislead or deceive. It is said in par 48 that by operation of further provisions of the statutes Custom Credit is deemed to have engaged in the misleading and deceptive conduct of Lewis.

153 Put shortly, then, the Dallas counterclaim sets up initially a plea of misleading and deceptive conduct based upon verbal misrepresentations allegedly made by Lewis prior to the signing of the two offer and acceptances dated 19 June 1989 which gave rise to the swap transaction and related borrowings ("the misleading conduct claim").

154 I pause to say that the misrepresentations complained of, which are said to have induced Dallas to enter the swap transaction, include the fourth representation. For the sake of an orderly exposition, I will deal with the fourth representation separately. However, I take this opportunity to affirm that henceforth any references to the misleading conduct claim should be construed upon the basis that I have taken account of and given proper weight to the facts and matters giving rise to the fourth representation.

155 In effect, as to this first head of claim, Dallas pleads in par 54 that by reason of the misleading and deceptive conduct of Custom Credit, Dallas and O'Rourke suffered loss and damage, particulars of which were provided in the pleadings and at trial. It is apparent from par (c) of the prayer for relief that Dallas seeks to obtain certain orders, which the Court is said to have power to make under s 87 of the Trade Practices Act, relieving the defendants from liability under the mortgages sued upon.

156 Dallas contends (at par 38 of its closing submissions) that its statement of defence and counterclaim, if successful, will provide either a complete defence to the Custom Credit claim, or a partial defence by way of set-off to the extent of the damages awarded to Dallas. Additional causes of action based upon breach of contractual promise and negligent mis-statement are also pleaded but each is said to be comprehended within the misleading conduct claim. According to the defence submissions (at par 40) if Dallas succeeds as to its principal claim by an award of damages and the grant of relief under s 82 and s 87 of the Trade Practices Act the further claims will fall away.

157 The stance adopted by the defendants is expressed in this way in the Dallas closing submissions:

"41. CCC seeks some $40 million for unpaid balances of monies advanced and accrued interest claimed to be owing under the mortgages. Dallas and O'Rourke do not admit the validity of the alleged defaults under the mortgages. In essence Dallas and O'Rourke say that if the alleged misleading and deceptive conduct is found against CCC it should follow that the Court should both award damages to Dallas and relieve Dallas and O'Rourke from liability to the CCC for any sum pursuant to the provisions of s.82 and the powers of the Court under s.87 of the TPA and the equivalent provisions of the Fair Trading Act (WA). Both remedies are available to the Defendants, s.87(1). Relief from liability is available under s.87(2), particular in this case under s.87(2)(ba).

42. Marks v GIO Australia Holdings [1998] HCA 69; (1998) 196 CLR 494 establishes that the Court has ample power under s.82 and s.87 to grant that relief; per the Court as a whole, Gaudron J; McHugh, Hayne and Callinan JJ; Gummow J and Kirby J, (Kirby only dissenting on whether the appellants were entitled to some relief under s.87); see commentary in Miller's Annotated Trade Practices Act 23rd ed. 1.82.60 at 686,687.

43. The Court held in Marks that 'once causation was established, neither the amount recoverable under s 82(1) nor the orders that might be made under s 87 were limited by analogy with breach of contract, tort or equitable remedies' (headnote)."

158 The fourth representation involves an allegation that Lewis failed to disclose an interest he is alleged to have had in the Irwin property and the making of the swap transaction. The facts and matters bearing upon this representation are rather complicated and it will therefore be convenient to deal with them at some length separately. Accordingly, I will deal first with the two further causes of action reflected in the counterclaim, namely, breach of contract and negligent mis-statements.

Related claims for breach of agreement and negligent mis-statement

159 Dallas advances a plea in the alternative at par 38 to the effect that on or about the occasion referred to in par 33 (a meeting at the offices of Custom Credit shortly after the Burswood meeting) a concluded agreement was made whereby, in consideration of Dallas entering into the swap transaction, Custom Credit agreed to lend Dallas 85 per cent of the Hillier Parker valuation of the Irwin property and other moneys required to purchase the Irwin property and complete the purchase and development of the St Andrews land as proposed in the feasibility. This is called the "financing agreement".

160 Dallas goes on to allege in par 39 that in breach of the financing agreement Custom Credit advanced only $760,000 on the security of the Irwin property and did not advance moneys under the securities required for the development of the St Andrews land.

161 There is a further plea in par 40 and par 41 to the effect that at the time of execution of the securities, Lewis promised O'Rourke that Custom Credit would advance finance for the cost of developing the St Andrews land with the result that Dallas gave the securities to the plaintiff and completed the swap transaction and the purchase of the St Andrews land. This further agreement is said to have been breached in that Custom Credit failed to advance finance for the cost of developing the St Andrews land as proposed in the feasibility.

162 These pleas concerning breach of the alleged par 38 financing agreement and the subsequent par 40 development funds for St Andrews agreement underline the need for a finding as to whether a feasibility document for St Andrews was provided to Custom Credit at the Joondalup meeting as alleged by Dallas. In each case the agreement concerns development "as proposed in the feasibility". If no feasibility document for St Andrews was provided the agreements contended for will fall away.

163 Dallas pleads in par 54 that by reason of Custom Credits breaches of agreement Dallas and O'Rourke suffered the loss and damage described in that paragraph which I referred to earlier. I will call this the "breach of agreement claim".

164 Dallas pleads in par 50, as a further plea in the alternative, that the first, second and third representations and the statements referred to in par 40, constituted mis-statements made by Custom Credit negligently in that they were made when Custom Credit possessed special skill or knowledge concerning the said representations and statements, or was otherwise in a special relationship with the defendants and with the intention of inducing Dallas to borrow money from the plaintiff.

165 It is said that in making the statements Custom Credit failed to use reasonable care to ensure the accuracy of the representations whereby Dallas was induced to enter into and complete the swap transaction and borrow moneys from Custom Credit.

166 This plea is supported by particulars to the effect that Lewis made the representations in circumstances in which he or Custom Credit never believed or never should on any sound commercial basis have believed that the statements were in fact true and accurate. It is said he made no or no sufficient enquiries to establish that the statements were reliable and well informed and knew of no or no sufficient facts which justified the making of the statements.

167 Dallas pleads in par 52 that at all material times Custom Credit knew or ought to have known that Dallas and Mr O'Rourke were engaged in the business of project property development and obtained and had obtained finance for such activities from Custom Credit and other financiers.

168 Again, the loss and damage said to flow from the alleged negligence is that pleaded in par 54 of the counterclaim. I will call this "the negligent mis-statement claim".

169 The facts and matters giving rise to the fourth representation (allegedly made by Mr Lewis) are of a discrete character. It appears from par 47 of the Dallas counterclaim that the facts and matters relied on can be regarded either as a constituent of the misleading conduct claim to be taken account of with the first, second and third representations or, alternatively, as giving rise to a discrete cause of action in respect of misleading and deceptive conduct or conduct likely to mislead or deceive.

170 On this occasion, as this aspect of the dispute stands to one side of the main narrative, it will be useful to look first at the ingredients of the plea and then at some of the evidence concerning the plea. However, in touching upon the evidence, I do not purport to make any findings of fact at this stage. My observations about the evidence are made with a view to defining the issues.

171 Dallas pleads in par 44 that at all material times Lewis had an interest in the Irwin property and the exchange of the Irwin property for the West Coast Highway land which he failed to disclose to Dallas or any of the second defendants.

172 Particulars are provided in support of this plea. It is said that Westminster Properties Pty Ltd was the registered proprietor of Irwin Chambers. Westminster mortgaged the property to Custom Credit to secure the principal sum of $11,000,000 lent by Custom Credit to Telbe Holdings Pty Ltd as borrower under the mortgage. Lewis was a shareholder of Telbe. Lewis was a shareholder and director of Madella Holdings Pty Ltd which was a shareholder of Telbe. The wife of Lewis was a director of Telbe and a shareholder and director of Madella.

173 The particulars go on to say that the principal activity of Telbe was property development. The principal activity of Madella was that of financial managers. Coincident with Westminster becoming the registered proprietor of the West Coast Highway land upon completion of the swap transaction, Westminster mortgaged the West Coast Highway land to Custom Credit to secure the principal sum of $11,000,000 lent by Custom Credit to Telbe as borrower under the mortgage.

174 It is said in par 45 that by reason of the employment of Lewis by Custom Credit, the agreement by Custom Credit to lend money to Dallas to purchase the Irwin property and the conduct of Lewis referred to earlier in the pleading, Lewis was under a duty to disclose to Dallas and to the second defendants his and the interest of Telbe and Madella in the swap transaction and the mortgages entered into by Westminster.

175 Dallas pleads in par 46 that Lewis at all times remained silent about and failed to disclose his and the interest of Telbe and Madella in the swap transaction and the mortgages which silence constituted misleading or deceptive conduct by Custom Credit or conduct likely to mislead or deceive Dallas and O'Rourke into believing that the swap transaction was a bona fide requirement of Custom Credit if money was to be lent to Dallas for the development of the St Andrews land.

176 It is said further in par 46(b) that in fact Lewis had an interest in the swap transaction and the mortgages. The swap transaction was not a bona fide requirement of Custom Credit but was intended by Lewis to benefit him or Telbe or Madella or Westminster or all of them to the detriment of the defendants.

Evidence concerning the fourth representation

177 Evidence was presented at the trial to the effect that Telbe was incorporated on 19 September 1988 and shortly after incorporation the directors were Judith Lewis and her brother Brian Conway. The shareholders were Mr Lewis and Madella (of which Lewis was a shareholder).

178 The Telbe annual return for 1989 signed by Lewis (D84A not in the agreed bundle) records that Phillip and Judith Lewis were directors and that Phillip Lewis and Madella each owned one share in Telbe as at 30 June 1989.

179 Mr Lewis gave evidence concerning these matters at the trial via his witness statement (P89 @ par 23 - 55) and was cross-examined at some length. He said that in 1988 his brother-in-law, the late Brian Conway, purchased a shelf company as a vehicle to become involved in the property business. The notion was that the company would be under the exclusive control of Mr Conway although it was necessary, having regard to company law at that time, for there to be more than one director and shareholder. It was envisaged that arrangements would be made with Mr Conway's accountant in that regard. However, in the event, Mr Conway and Mr Lewis's wife, Judith Lewis, became directors of the company. Telbe had two shares, one held by Lorraine Conway and one by Madella. Mr Lewis and his wife have owned all the shares in Madella since 1983. As to the share held by Madella in Telbe, that share was held in trust.

180 Mr Lewis said that on 25 November 1988, Telbe made an application for finance to Custom Credit to acquire the whole of the building known as Irwin Street Chambers and to fund other developments being undertaken by Westminster.

181 Mr Lewis said that he prepared the application and recommended it to the State Manager at the time, Graham Exton. It was agreed between Brian Conway and himself that as he was employed by Custom Credit as the Senior Property Finance Manager he would not have a financial interest in the project. At that time, he was not a director or shareholder of Telbe. His wife's role as a director of Telbe was not for a financial gain or benefit.

182 Mr Lewis went on to say in evidence that Telbe and Westminster were business partners in the Irwin property deal and for a project in Meadowvale Avenue, South Perth. It was initially intended by all parties concerned that Telbe would be the registered proprietor of the Irwin Chambers. However, the offer and acceptance had been executed by Westminster. The vendor would not execute a further contract with Telbe with the result that the registered proprietor became Westminster, with Custom Credit taking a first registered mortgage over the property. The acquisition by Westminster of the Irwin Chambers building was settled on 13 December 1988.

183 Mr Lewis said further that he drew funds from the Telbe/Irwin Chambers account as the Portfolio Manager of Custom Credit for a project owned and managed by Creative Holdings Pty Ltd in Meadowvale Avenue, South Perth. Telbe acquired Creative Holdings Pty Ltd and the Meadowvale project. The latter project was a shopping centre development in South Perth. The Meadowvale project was financed as part of the original $11,000,000 advanced by Custom Credit to Telbe.

184 Mr Lewis was cross-examined about these matters and matters leading to his conviction of certain charges for stealing while being a servant of Custom Credit. He acknowledged that at a trial before a jury in the District Court between 21 April and 9 May 1997 he was convicted also of certain charges involving dishonesty and false accounting. It was against this background that he answered various questions which presented this picture.

185 Mr Simcock was a property developer. He operated through various private companies including Westminster and Phil Simcock Pty Ltd. Mr Simcock was associated with another company, Creative Holdings Pty Ltd which was a client of Custom Credit. Creative involved a consortium of investors and Mr Simcock was a director and shareholder. The Custom Credit loan portfolios for Mr Simcock's private companies and for Creative were managed by Mr Lewis.

186 In June 1987 Mr Lewis prepared and submitted a loan submission for $1,200,000 for the construction of the Meadowvale Shopping Centre on behalf of Creative. This loan was approved by Head Office and mortgages were put in place as security. By October 1988 Custom Credit had loaned $9,260,000 to Mr Simcock and his companies. On 12 October 1988 a restriction had been placed on extending any further loans to them.

187 In September 1988 Mr Simcock commenced negotiations for the purchase of Irwin Chambers for $7,750,000. The contract was eventually concluded at that price. Mr Lewis, being the brother-in-law of Mr Brian Conway, approached Mr Conway and invited him to participate in a joint venture with Mr Simcock for the purchase of Irwin Chambers and the Meadowvale Avenue Shopping Centre. After receiving assurances from Mr Lewis, Mr Conway agreed to participate by using the company Telbe to obtain and guarantee the finance from Custom Credit. It was contended by the Crown that this was a device to hide the involvement of Westminster.

188 The Crown case was that Telbe was formed on the instruction of Mr Lewis who had an interest in that company through another private company he controlled, namely, Madella. The Crown case was that Mr Lewis used Telbe to apply to Custom Credit for funding to avoid the restriction placed by Head Office on extending further finance to Mr Simcock and his companies.

189 Mr Lewis prepared an application in the name of Telbe for a loan of $11,000,000 from Custom Credit for the purchase of Irwin Chambers and the Meadowvale development. The application failed to disclose to Custom Credit that Telbe would not be the registered proprietor of Irwin Chambers, Telbe would not provide a first mortgage over Irwin Chambers, Westminster would be the registered proprietor, Westminster was involved in a joint venture with Telbe, Mr Lewis had an interest in Telbe, his wife was a director of Telbe, the accountant, Mr Kestel, was not a director of Telbe, Mr Conway was Mr Lewis's brother-in-law and the registered office of Telbe was at Mr Lewis's residence.

190 Custom Credit approved the proposed loan to Telbe at Head Office relying on the information contained in the loan application. As a result of the loan approval a loan facility in the sum of $11,000,000 in the name of Telbe was made available to Mr Simcock and was overseen almost exclusively by Mr Lewis.

191 The Crown case was that Mr Lewis omitted from a document, namely, an application for advance by Telbe, belonging to his employer, Custom Credit, material particulars with intent to defraud.

192 I will return to the various evidentiary issues raised by the Dallas claim concerning the fourth representation at a later stage. However, for the time being, it is sufficient to notice in passing, having regard to the present proceedings, that as at mid-1989 when Dallas commenced to deal with Custom Credit, Mr Lewis was apparently familiar with the Irwin Street Chambers property, of which the Irwin property (level 3) formed a part, and was clearly familiar with the prior activities of the registered proprietor of the Irwin property, namely Westminster.

193 It will now be useful to stand back and summarise the causes of action reflected in the Dallas counterclaim with a view to defining the issues to be resolved.

194 It emerges from my review of the Dallas counterclaim that Dallas relies upon various discrete causes of action, namely, the misleading conduct claim, the breach of agreement claim and the negligent mis-statement claim. As to each of these causes of action the first, second and third representations, being verbal representations allegedly made by Mr Lewis, are said to give rise to the cause of action. The fourth representation is said to be a constituent of the misleading conduct claim but it is obviously of a distinctive character in that, as to this plea, liability is said to flow not from words uttered by Mr Lewis but as a result of his failure to disclose certain information, that is, as a result of his silence. The fourth representation is said to give rise also to a discrete cause of action for misleading and deceptive cause of action.

195 Dallas seeks relief from any liability to Custom Credit under the securities and the third and fourth mortgages. It seeks to invoke the broad powers allowed to a court by s 87 of the Trade Practices Act in order to obtain the relief sought. Dallas seeks to set-off damages recovered pursuant to the counterclaim against the moneys claimed by Custom Credit from Dallas under and by virtue of the various loan arrangements.

196 Let me now turn to the stance of Custom Credit in regard to the issues raised by the counterclaim as reflected in its reply and in its position at the trial.

197 By its reply Custom Credit admits that Dallas acquired the West Coast Highway land and the St Andrews land as alleged. It admits also that it approved the St Michaels' loan in an amount of $1,000,000 and on 6 June 1989 forwarded a letter in such terms. It accepts that on one occasion Mr Exton and Mr Lewis attended the Joondalup Golf Course with O'Rourke. The relevant date was said to be Tuesday, 13 June 1989. However, otherwise Custom Credit denies the main allegations reflected in the counterclaim with the result that the making of the misrepresentations complained of is put in issue.

198 Custom Credit pleads further, and in the alternative, that if the first, second and third representations were made by Lewis as alleged, he had no authority to offer advice or express opinions of the kind conveyed by the representations. In addition, Custom Credit asserts in par 8 of the reply that Dallas or O'Rourke did not rely upon said representations or any other conduct emanating from Lewis in making the swap transaction. The first representation was, in any event, inconsistent with the terms of the Custom Credit loan offer dated 26 July 1989 (D3 @ 3/782) which was signed and accepted by Dallas. Any alleged agreement arising from the representations was void for uncertainty in the absence of certain crucial terms such as the amount to be advanced, the date of the advance, the rate of interest, the term of the loan and the feasibility of the development.

199 By way of further answer to par 37 of the counterclaim Custom Credit says that Dallas entered into the swap transaction because O'Rourke and Dallas considered the Irwin property was worth $1,475,000 or more and a straight exchange for the West Coast Highway land represented a significant profit to Dallas on the purchase and sale/exchange of the latter land which had been acquired by Dallas in April 1989 for $950,000.

200 Custom Credit says further, as to par 39 of the counterclaim, that an advance of further funds to make a total advance of 85 per cent of the combined aggregate advance of $3,050,000 would not have enabled Dallas to develop the St Andrews land. In any event, Dallas did not submit an application to Custom Credit for an advance of funds to develop the St Andrews land until in or about April 1990 by which time Dallas was in default by failing to repay the St Michaels' loan upon the expiry of six months after the making of that loan.

201 Custom Credit pleads in answer to par 40 and par 41 of the counterclaim that the alleged promise to advance finance for the cost of developing the St Andrews land as proposed in the feasibility was inconsistent with the terms of the Custom Credit letter of loan offer dated 26 July 1989 which was signed and accepted by Dallas. Further, Lewis had no authority to make such an agreement and as with the making of the misrepresentations complained of the circumstances of the alleged agreement was such to excite a reasonable apprehension that Lewis had no such authority.

202 As to the fourth representation, Custom Credit says in par 15B that if (which was not admitted) Lewis did have a personal interest in the exchange and the mortgage granted by Westminster to Custom Credit over the Irwin property then Lewis remained silent about that issue and Dallas did not know of such matters. Such matters were in any event irrelevant to and not relied upon, nor causatively associated with the Dallas decision to enter the swap transaction. Any security granted to Custom Credit by Westminster over the West Coast Highway land was a matter wholly irrelevant to Dallas. In any event, there was no net benefit to Custom Credit arising from the discharge of its first mortgage security held over the Irwin property and Custom Credit's subsequent acquisition of a first mortgage granted to it by Westminster over the West Coast Highway land. Custom Credit says that Lewis was not authorised to conduct himself in the manner alleged. It admits that the exchange was not a bona fide requirement of Custom Credit.

203 Custom Credit denies the allegations contained in pars 50 to 54 of the counterclaim concerning the Dallas claim for relief save that it admits lodging caveats against property of Dallas as it was entitled to do by reason of its rights under the first, second, third and fourth mortgages and the Dallas default there under. Custom Credit denies that the defendants suffered the loss and damage alleged or that the alleged conduct of Lewis or Custom Credit caused or contributed to any of the losses claimed by Dallas. It therefore denies that the defendants were entitled to the relief claimed or any relief.

204 Custom Credit pleads also in par 18A that none of the matters raised in the counterclaim could or do detract in law from the Dallas continuing indebtedness to Custom Credit secured under the third mortgage in respect of the loan moneys admitted by Dallas to have been received by it at par 12 of the statement of defence and counterclaim.

205 Having regard to the stance of Custom Credit reflected in the reply, it will now be useful to identify in summary form some of the principal issues to be addressed.

206 The issue at the heart of the case is whether the first, second and third representations were made by Mr Lewis as alleged by Dallas. As I have indicated in earlier discussion, this requires me to give careful consideration to the situation of each of the respective parties as at mid-1989 and to the sequence of events leading up to the entry into the swap transaction by Dallas on 19 June 1989 by the execution of offer and acceptance forms concerning the West Coast Highway land and the Irwin property. I am conscious that events after that date will have to be examined closely also as they may provide a basis for drawing inferences as to whether the verbal misrepresentations complained of were made. I will also be required to determine whether Mr Lewis was acting within the actual or apparent scope of his authority at the relevant time.

207 A related issue concerns the so-called fourth representation. As to this, Dallas alleges that there was a failure to disclose certain information by Mr Lewis concerning the dealings of Westminster and Telbe with Custom Credit prior to the making of the swap transaction. It will therefore be necessary to review the evidence bearing upon the prior association of Lewis with those companies and with the Irwin property. Again, in relation to this issue it will be necessary to make findings as to whether Mr Lewis was acting on behalf of Custom Credit and whether the company can be said to have benefited by his actions.

208 If it be found that the various representations were made as alleged, it will be necessary to go further in order to determine whether the representations or any of them had the causative effect complained of by Dallas so as to complete the misleading conduct cause of action and provide a basis for relief. In other words, Custom Credit has raised various issues to the general effect that as at mid June 1989, and thereafter, Dallas was in a precarious financial position and for this reason, and due to a lack of detailed planning, it could not have completed the projects under discussion, irrespective of whether the misrepresentations complained of were made as alleged. This brings with it the further issue as to whether the loss portrayed in the Spence Report can be linked to the conduct complained of.

209 If findings are made in favour of Dallas in regard to the central issue and the matters just mentioned, I am required also to determine whether orders can be made in favour of Dallas pursuant to s 87 of the Trade Practices Act which will relieve the company of its obligations under the mortgage agreement. I note in passing that findings are only required as to whether Dallas is entitled to relief because the second defendants were not represented at the trial and did not contest the case being advanced by Custom Credit, notwithstanding the pleas set out on their behalf in the pleadings. This was made clear to me by counsel on both sides at the beginning and at the end of the trial.

210 It was made clear to me also that if Dallas succeeds in its primary claim (that is, the misleading conduct claim) then there will probably not be any need to proceed further and deal with the breach of agreement and negligent mis-statements claim because the relief sought by Dallas will be sufficiently provided for under and by virtue of its primary claim. However, if necessary, I will proceed to deal with these further claims. Findings will have to be made as to whether a feasibility document for St Andrews was provided to Custom Credit at the Joondalup meeting as alleged and gave rise to agreements by Custom Credit to provide development funds "as proposed in the feasibility" being the par 38 so-called financing agreement or the par 40 development funds for St Andrews agreement.

211 Accordingly, against this background, I must now proceed to the evidence of Mr O'Rourke as the principal witness for Dallas. However, before doing so, I remind myself that the burden of proof lies upon Dallas to establish on the balance of probabilities that the representations complained of were made.

212 In that respect I am conscious that the representations are not set out explicitly in any document. In the period leading up to the making of the swap transaction on 19 June 1989 the pleadings refer to comparatively few meetings or exchanges, that is, occasions on which verbal representations could have been made. Accordingly, having regard to the pleadings and certain undisputed facts, it will be useful to list the key events contended for by Dallas during the relevant period as a framework for consideration of the Dallas case.

213 The key events appear to be as follows, although findings will be required in due course as to whether each of these events occurred as alleged by Dallas and, if so, in what order. For the time being, this summary should be regarded simply as an aide memoire to facilitate discussion.

Dallas writes to Custom Credit for loan funds re St Michaels

In or about early June (the Joondalup meeting - par 29)

Alleged first visit and lunch at Joondalup Golf Course and delivery by Suzanne Carruthers of feasibilities for West Coast Highway and St Andrews (Exton, Lewis, O'Rourke, Suzanne Carruthers (briefly)).

Alleged faxing of West Coast Highway feasibility to Lewis.

Alleged phone call Lewis/O'Rourke re swap transaction

Channel 9 video of visit to Joondalup Golf Course re new golf buggy (Exton, Lewis, O'Rourke)

Burswood Golf Course meeting (Exton's farewell - Exton, Lewis, O'Rourke)

Alleged meeting at Custom Credit/Adams office (O'Rourke, Suzanne Carruthers, Adams, Lewis) followed by lunch at Mediterranean Restaurant (Lewis, O'Rourke)

Approval of the St Michaels loan application (Adams, Lewis, Exton)

Inspection of the Irwin property (Dempsey, Collins, O'Rourke, Mrs O'Rourke, Suzanne Carruthers) and signing of the two swap transaction contracts

214 I will call this the "summary of alleged events". In formulating this summary I give weight to an acknowledgement by Mr O'Rourke under cross-examination that the swap transaction was first mentioned by Lewis in a telephone call a few days after the Joondalup golf course meeting (transcript P173). For that reason, and because the feasibilities were said to have been handed over at the lunch in question, the alleged Joondalup meeting (whenever it was in June) can be regarded as the appropriate starting point for any review of the events preceding the swap transaction.

215 I remind myself also that Dallas pleads that the first representation was made at the Item 7 (undated) Adams office/Mediterranean lunch meeting. The second and third representations were allegedly made in the course of one or other of the encounters comprising the Item 2 Joondalup meeting, the Item 4 telephone call, the Item 6 Burswood meeting or the Item 7 Adams office/Mediterranean lunch meeting.

216 I note in passing, in regard to Item 7, that par 33 of the counterclaim refers only to an undated meeting at the offices of Custom Credit. However, it emerges from a consideration of the O'Rourke and Suzanne Carruthers evidence that the Dallas case at trial was presented on the basis indicated in Item 7, that is, discussion at the Adams office with Lewis and O'Rourke going on to lunch at the Mediterranean Restaurant.

217 Put shortly, the first representation was that if Dallas entered the swap transaction, Custom Credit would provide the necessary finance, plus funds to purchase and develop the St Andrews land. The second representation was that the Irwin property constituted an excellent investment with a prospective net rental of $122,400 per annum. The third representation echoed the first representation in asserting that Dallas had to acquire the Irwin property in order to obtain finance for the St Andrews land.

218 In reviewing the evidence given by Mr O'Rourke at the trial, I am conscious of certain difficulties. It is necessary to recall that at the end of the first hearing in 2003 significant amendments to the Dallas counterclaim were allowed so that the pleaded case would conform to the evidence. As I have indicated, the amendments were directed to the sequence of events but the underlying plea concerning the causes of action and the misrepresentations complained of did not change.

219 Mr O'Rourke's final position as to the order in which certain events occurred unfolded during his lengthy cross-examination at the first hearing and at the further hearing in 2004. By that time, of course, his evidence-in-chief, which was principally reflected in his signed witness statement prepared before trial, had been received into evidence. The witness statement is not entirely consistent with the position contended for by Dallas at the end of the trial.

220 The stance adopted by counsel for Dallas concerning these developments was that Mr O'Rourke's revised position was simply due to the vagaries of memory, bearing in mind that the trial commenced close to 14 years after the swap transaction. Further, the controversy at the heart of the dispute concerned verbal representations made on dates which were difficult to establish. Counsel argued that the events reflected in my summary of alleged events remained essentially the same, save for the introduction of an additional meeting at the Joondalup Golf Course (the Item 2 Joondalup meeting on the summary in or about early June 1989). In short, upon reflection, Mr O'Rourke was of the view that Suzanne Carruthers brought feasibilities concerning the West Coast Highway land and the St Andrews land to a lunch meeting that occurred at Joondalup in early June rather than on 13 June 1989, being the date originally contended for.

221 On the other hand, counsel for Custom Credit contended that the change in position occurred when it dawned upon Mr O'Rourke that his story was flawed by what counsel called the "temporal paradox" in the Dallas case as originally pleaded.

222 In order to understand these respective positions, and to view the O'Rourke evidence in its proper context, it becomes necessary to explore these respective positions in greater detail before turning to the particulars of the O'Rourke evidence. I remind myself that the original pleadings are contained in Exhibit B57 which was received in evidence at the resumed trial in March 2004.

223 The Dallas case, as pleaded originally, proceeded from the premise that there was a golf game and lunch at the Joondalup Golf Course on 13 June 1989. It was said in the original par 31 that "about two weeks" after the Joondalup meeting Lewis spoke to O'Rourke by telephone and invited him to consider the swap proposal. This led to an inspection of the Irwin property and to the bringing into existence of the Hillier Parker valuation dated 12 July 1989 which valued that property at $1,530,000 (D19 @ 2/652).

224 The Hillier Parker valuation of 12 July 1989 suggested that the West Coast Highway land and Irwin property were of much the same value. Accordingly, it was then that Mr Lewis, "on or about 12 July 1989" (as pleaded in the original par 34) made various representations in the office of Mr Adams at Custom Credit which induced Mr O'Rourke on behalf of Dallas to proceed with the swap transaction in the belief that the Irwin property was an excellent investment and that funds to purchase and develop the St Andrews land could only be obtained from Custom Credit on that basis.

225 The O'Rourke witness statement and his additional evidence-in-chief was generally consistent with the case pleaded in this form. Mr O'Rourke said he spoke to Mr Lewis in the presence of his daughter and Mr Adams in the Adams office at Custom Credit. It was at this meeting that Mr Lewis said that if the swap proceeded Custom Credit would be able to lend funds for the purchase and development of the St Andrews land. Mr O'Rourke then agreed to proceed with the swap proposal.

226 According to Mr O'Rourke, after the meeting at the Custom Credit Adams office, he and Mr Lewis went out to lunch at the Mediterranean Restaurant. Mr Lewis told him also that if his advice was accepted then Custom Credit would be able to assist Dallas in future developments like the retirement village.

227 I digress briefly to say that the O'Rourke evidence in its original form, especially in the signed witness statement, was quite explicit that (again by reference to the summary of alleged events) the Item 9 inspection of the Irwin property on 19 June 1989 preceded the Item 7 meeting at the Custom Credit office I have just described (the Adams office/Mediterranean lunch meeting). It was equally explicit that what Lewis said (amounting, in essence, to the first, second and third representations) gave rise to a decision taken by Mr O'Rourke at that meeting, which was affirmed at the lunch afterwards, to proceed with the swap transaction.

228 However, for whatever reason, there was a shift in the Dallas case as the evidence proceeded. This led to the position reflected in the Dallas counterclaim (as amended) that the first representation was made at a meeting at the Custom Credit office shortly after the Burswood meeting and prior to the Irwin property being inspected on 19 June 1989. On the amended Dallas case, 19 June was the day on which Dallas acted upon and was induced to enter the swap transaction by the first, second and third representations. This was because the offer and acceptances required to effect the swap transaction, which had been prepared by the agent Mal Dempsey, were signed by the parties on that day.

229 The tenor of the evidence-in-chief given by Mr O'Rourke on the first day of the trial, prior to any incongruities concerning the sequence of events being put to him for comment, can be gleaned from the following exchanges with counsel for Dallas.

230 The first passage concerns lunch at the Mediterranean Restaurant and reads as follows (transcript @ page 52):

"What did Lewis say to you at the Mediterranean Restaurant about the transaction you had been discussing?---During the lunch he went over the whole conversations of the past, where we were going. He explained to me the reason why he didn't think I should do the two developments at one time was because one was in Joondalup, one was in Scarborough, it was a bit far. 'However, look at the benefits' - and he reiterated the benefits of having this one-stage property, the taxation benefits on it, and virtually reiterated everything he had said to me in the past and why he thought it was a great deal.

When you say one - you said a word I didn't quite catch - property, what property were you referring to? Lewis said he---?---He reiterated the benefits of the Irwin property, what a great buy it was, because all the things he had said before, especially about being opposite the law courts; the solicitors of the day were moving down into this area because the courts were all in the one area.

You said that you told Lewis that Dallas would proceed with the Irwin property and the West Coast Highway swap. Did you say anything like that to him at the Mediterranean Restaurant?---Well, at the luncheon I said that we would be going on doing the deal as he had outlined it.

And why did you make that decision?---I had been in the Custom Credits - we had gone through it all in the offices in Custom Credits. We had had so many conversations about it."

231 There is a further passage from Mr O'Rourke's evidence-in-chief (in close proximity to the passage just mentioned) bearing upon his decision to proceed with the swap transaction (transcript @ page 54):

"Mr O'Rourke, would you have gone ahead with the purchase of the Irwin Street property if it had not been on the basis of your sale of West Coast Highway and purchase and development funding from Custom Credit?---Definitely and utterly not. There would be no purpose. We already had funding approved for St Andrew's and I was only then going into this because I thought - I had funding for the purchase. These people were offering me not just the funding for the purchase but also offering me the funding for the development and, without that, why would I bother doing something out of character?"

232 Mr O'Rourke went on to say at par 68 of his witness statement that a few days after the Adams office/Mediterranean lunch meeting he and his daughter and Gordon Carruthers attended Custom Credit to sign the loan agreement. Mr O'Rourke, in his evidence at trial, identified the loan agreement as being the 26 July D3 letter of approval concerning the St Andrews/Irwin loan of $1,440,000 (D3 @ 3/782).

233 With the benefit of hindsight, it is apparent that there was a puzzling feature of the Dallas case as originally pleaded when the chronology reflected in my summary of alleged events and the dates on the contemporaneous documents are brought to account. The offer and acceptance forms required to effect the swap transaction were executed on 19 June 1989. The execution of these contracts suggest that on or before 19 June 1989 Dallas had taken a decision to proceed with the swap transaction. This in turn suggests that the Dallas decision to proceed with the swap transaction was taken prior to preparation of a written valuation by Hillier Parker dated 12 July 1989. However, as I have indicated, the Dallas pleaded case in its original form proceeded from the premise that the crucial representations and consequential decision by Dallas to enter into the swap transaction were taken on or about 12 July 1989, being the date of the Hillier Parker valuation pertaining to the Irwin property; that is, about three weeks after the swap transaction had actually been effected.

234 Incongruities concerning the Dallas pleaded case, especially as to the sequence of events, were raised with Mr O'Rourke in the course of his lengthy cross-examination. I will look at the cross-examination in more detail later. However, the puzzling feature of the chronology I have just referred to was characterised by counsel for Custom Credit as a "temporal paradox" that represented a basic flaw in the Dallas case. How could Mr O'Rourke claim to have been induced to enter the swap transaction effected on 19 June 1989 if the representations complained of and the decision to proceed with the swap transaction were made on or about 12 July at the Adams office/Mediterranean lunch meeting, shortly after receipt of the Hillier Parker (Irwin property) valuation?

235 In essence, Mr O'Rourke dealt with the cross-examination by saying that, with the passage of time, he had been led astray by the video of the Channel 9 news item. This clearly established that he, Mr Exton and Mr Lewis were together at the Joondalup Golf Course on 13 June 1989. He had given too much weight to this date. Upon reflection, he recalled that there was a preceding meeting in or about early June 1989, being the meeting at which feasibilities were handed to Mr Exton and Mr Lewis (the Item 2 Joondalup meeting on my summary of alleged events). He said further that he had received verbal assurances from Mr Collins of Hillier Parker as to the value of the Irwin property on the occasion of the inspection on 19 June 1989. The figures mentioned on that day by Collins were reproduced later in the formal valuation. The combination of what was said during the course of the various events depicted in my summary of alleged events, including the assurances from Collins, meant that the various representations were made prior to and had the effect of inducing Dallas to enter the swap transaction on 19 June 1989. Thus, the Dallas counterclaim was amended to reflect this reconsideration of Mr O'Rourke's position.

236 In due course, it will be necessary to determine what weight should be given to Mr O'Rourke's evidence, having regard to matters brought out in cross-examination and to the evidence of other witnesses. However, for the time being, with a view to understanding the position contended for by each party at the end of the trial, I will put these considerations to one side and now endeavour to set out the main thrust of the O'Rourke evidence, that is, his final position, albeit with some observations in passing about the matters I have just described and the rather fragmented way in which Mr O'Rourke's version of the key events was presented at trial.

237 Mr O'Rourke said in his evidence-in-chief that in June 1989 he went to Custom Credit to obtain certain loans for units on the St Michaels land. He dealt with Jim Richards who at that time was the Business Development Manager but later became the State Manager for Custom Credit.

238 At the time of his initial approach to Custom Credit, Dallas was looking for finance to complete the purchase and undertake the development of the St Andrews land. Dallas had signed a contract to purchase that land. It was vacant land with the potential for development of 29 residential units. Accordingly, Mr O'Rourke invited the State Manager of Custom Credit, Mr Graham Exton, and the Business Development Manager, Mr Phil Lewis, to come and have a look at the St Andrews land with a view to assessing its potential.

239 Mr O'Rourke said initially in his signed witness statement that on 13 June 1989 he and Mr Exton and Mr Lewis went to Joondalup in the same motor vehicle. They drove past the St Andrews land as it was close to the entrance to the Joondalup Golf Club. They played a game of golf and had lunch at the Clubhouse. During the lunch meeting he spoke to Mr Exton and Mr Lewis about his wish to develop two parcels of land held by Dallas, namely, the St Andrews land and the West Coast Highway land. Dallas had feasibilities for both pieces of land which had been prepared by Mr O'Rourke himself, so he arranged for the feasibilities to be brought to the Clubhouse by his daughter, Suzanne Carruthers. The feasibilities were handed to Lewis and Exton. Mr O'Rourke identified as the document handed over concerning the West Coast Highway land (transcript P123) an undated document showing an expected net return of $854,000 (D12 @ 10/107 to 109; also at 10/80), and the document handed over concerning the St Andrews land (transcript P126) as an undated document referring to 29 units and showing an expected total outlay of $4,513,000 (D16 @ 10/80).

240 It emerged during the course of Mr O'Rourke's evidence at the trial (considered as a whole) that Mr O'Rourke, on his account, had fixed the date of this lunch meeting having regard to the fact that a video of the Channel 9 Golf Buggy Story clearly placed Mr O'Rourke, Mr Exton and Mr Lewis at the Joondalup Golf Course on that day. His evidence under cross-examination in that regard was as follows (transcript P172):

"You're the initiator of the golf game, are you not?---Yes.

Because you say that in paragraph 8 of your statement?---Yes.

In terms of all travelling up in the one motor vehicle, whose vehicle?---They've actually come to our offices in Ocean Reef and then they've gone in my car across to the course because that way I can kind of show them exactly where I'm going. They don't know the directions, of course, of Joondalup those days, so it's simpler if they came to the office and we went from there.

That was on 13 June 1989?---I believe so, yes.

That's by reference to the golf video?---That's what I'm using as the date time, yes.

Yes?---A long time ago."

241 However, at a later stage in the cross-examination, possibly because his memory was refreshed by the questioning, or possibly because certain incongruities in the Dallas' case became apparent to him, Mr O'Rourke reviewed his position. He began to speak of two meetings at the golf course, the first of which preceded the 13 June "golf buggy" news item (video occasion). As I have indicated, the original counterclaim was revised to conform to Mr O'Rourke's revised position.

242 The exchanges concerning this matter occurred over two days and are lengthy (transcript P174 to P240). In essence, Mr O'Rourke said that, having noticed a reference to two meetings in the particulars to the counterclaim, and having been referred to the faxing of a feasibility to Lewis on 8 June (Item 3 on the summary), he was reminded that there had in fact been two meetings at Joondalup. A game of golf was played at the first but no game was played on 13 June, being the "golf buggy" day.

243 I digress to say that in my earlier judgment concerning this matter I described the particulars filed in support of the counterclaim and I will not repeat what I said then. Put shortly, the particulars were expressed in different ways, in general terms, and were not entirely consistent with the main pleading.

244 The overall thrust of Mr O'Rourke's evidence at trial was that the initial lunch meeting occurred in or about early June. This was followed by a later meeting on 13 June 1989 being the date of the golf buggy incident. Thus, in my summary of alleged events, the Joondalup meeting, described as such in par 29 of the Dallas counterclaim, is Item 2 on the summary and the later golf buggy meeting on 13 June 1989 is Item 5 on the summary.

245 In essence, then, Mr O'Rourke's final position at trial was that feasibilities concerning the St Andrews land and the West Coast Highway land were brought to the clubhouse by Suzanne Carruthers and given to the Custom Credit officers at the so-called Joondalup meeting in or about early June. In due course, I will come back to the incongruities in the Dallas case that would have been evident if Mr O'Rourke had held fast to his original position.

246 Mr O'Rourke said also that after the Joondalup meeting, on 8 June 1989, he faxed a different version of the feasibility document concerning the West Coast Highway land to Custom Credit, marked for the attention of Mr Lewis. In earlier discussion, in the course of reviewing the pleadings, I indicated that there was a considerable degree of controversy at the trial as to what feasibility documents, if any, were in existence as at June 1989, and as to whether any feasibility studies were provided to Custom Credit as alleged. I will defer a closer look at this issue until later.

247 Mr O'Rourke said in evidence that a few days after the Joondalup meeting Mr Lewis spoke to him by telephone. Lewis said that Custom Credit could not lend on the St Andrews land and the West Coast Highway land at the same time. According to Mr O'Rourke, Mr Lewis went on to say that he had a buyer who was very interested in the West Coast Highway land. He did not identify the prospective buyer but said that the person in question owned some commercial property in Perth. Mr Lewis then proposed a swap. Mr O'Rourke said he would consider the matter but it should be through Mr Mal Dempsey of Satterley Real Estate Agents.

248 Mr O'Rourke said in evidence that later, about mid-June, he played golf with Mr Lewis again at Burswood as part of an outing to farewell Mr Exton. On that occasion Mr Lewis asked if Mr O'Rourke had considered the swap. At that stage, Mr O'Rourke had not seen the commercial property in Perth. He told Mr Lewis that he had not considered the swap. He was advised by Mr Lewis that he should give the matter serious consideration as the commercial property was highly valued and Custom Credit would be able to lend a higher ratio on the commercial property. In other words, Custom Credit would lend more money on a commercial property than they would on a development site.

249 Again, at this point, it becomes necessary to summarise the effect of the O'Rourke evidence at trial, bearing in mind his shifts in position as to the sequence in which various events occurred. Put shortly, Mr O'Rourke came to rest at the position ultimately reflected in the Dallas counterclaim (as amended) that at some time prior to the signing of the contracts required to effect the swap transaction on 19 June 1989 he attended a meeting at which Lewis outlined the merits of the Irwin property and he then proceeded to inspect the property; that is, putting it another way, O'Rourke participated in the Item 7 event on my summary of alleged events (the undated Adams' office/Mediterranean lunch meeting attended by O'Rourke, Suzanne Carruthers, Adams and Lewis) and was present during the Item 9 event (the 19 June inspection of the Irwin property by the agent Dempsey, the valuer Collins, O'Rourke, Mrs O'Rourke and Suzanne Carruthers). The two events were said by O'Rourke to have happened in the order I have just given. He agreed that the offer and acceptance forms required to effect the swap transaction were prepared by Dempsey and signed on behalf of Dallas on 19 June 1989 shortly after the inspection.

250 On Mr O'Rourke's account, Mr Lewis said in the course of the Item 7 meeting at Custom Credit (Adams office) that if Dallas proceeded with the swap, Custom Credit would also be able to lend funds for the purchase and development of the St Andrews land. Mr O'Rourke said that he had never dealt with a city commercial property before but was told that the rent would give Dallas a cash flow amounting to a net rental of $122,400 per annum. Mr Lewis said that Custom Credit could not consider Dallas from a purely development point of view and would be reluctant to advance funds to companies which were only developers. He said that the Irwin property would put Dallas in an excellent position as far as Custom Credit was concerned. The rentals would service the Custom Credit mortgage and whilst the return may have seemed low, the strong capital gain would be of assistance to Dallas, not only now but in future borrowings.

251 According to Mr O'Rourke, Mr Lewis told him that if Dallas did not consider buying a commercial property, then Custom Credit would not consider financing the St Andrews land. He said that the Irwin property was across the road from the Central Law Courts and there would be no difficulty in securing tenants. He said that there were already solicitors in the building and solicitors favoured the spot. They were excellent tenants as they could be relied upon to pay their rentals on time. He explained that there were presently no tenants in the Irwin property because it was a new building, the carpets had just been laid and strata titling had just been approved.

252 Mr Lewis is alleged to have said also at this meeting that on purchase of the Irwin property, Custom Credit would lend money for the purchase and development of St Andrews, and Mr O'Rourke could spend all his time supervising the development of St Andrews because the Irwin property would then be taking care of itself. He said Dallas could not do two developments at one time, that is, the West Coast Highway land and St Andrews land.

253 It was against this background, Mr O'Rourke contended, that arrangements were made to inspect the Irwin property and a decision was taken by O'Rourke, on behalf of Dallas, to purchase the property in the belief, induced by the Lewis representations, that funds would be advanced by Custom Credit at the required level to effect the purchase and development of the St Andrews land.

The O'Rourke evidence after the swap transaction

254 Mr O'Rourke gave evidence that after taking a decision to proceed with the swap transaction he attended at the Custom Credit office to sign a loan agreement concerning the same. He said that Lewis and Adams conducted the meeting. When the loan agreement was presented it allowed $760,000 with respect to the acquisition of the Irwin property and the balance of the loan was for the purchase of the St Andrews land.

255 Mr O'Rourke understood he had a verbal approval from Lewis for loan funds with respect to the development of St Andrews so he spoke to Lewis about the absence of funds for the development of the St Andrews land. On Mr O'Rourke's evidence, Lewis said it was just an error and a matter of adjusting the mortgages. The important thing was to settle with Perpetual Finance who had the first mortgage over the West Coast Highway land so that the swap transaction could proceed. On the basis of this assurance the directors of Dallas signed the loan agreement and Mr O'Rourke guaranteed the same on behalf of Dallas.

256 I note in passing that, from the description given by Mr O'Rourke, the loan agreement the subject of this evidence was the 26 July D3 loan approval letter mentioned in earlier discussion (D3 @ 3/782). This means that, the encounter just described took place a month or so after the signing of the offer and acceptances effecting the swap transaction on 19 June 1989. By then - late July - Dallas had executed mortgages dated 20 July 1989 over the St Andrews land and Irwin property in order to carry the swap transaction into effect. The sum of $390,000 required to complete the purchase of the St Andrews land had been paid to the Joondalup Corporation at settlement on 21 July 1989. There is a degree of ambiguity as to how the balance of the funds attributed to the St Andrews land in the 26 July D3 loan approval letter were distributed (that is, the amount representing the difference between $560,000 for St Andrews mentioned in the letter and $390,000 paid at settlement). It appears from the particulars of moneys advanced pursuant to the subject mortgages at par 4 of the counterclaim that additional payments were made to Dallas of $130,666 on 20 July 1989 and $100,000 on 18 August 1989.

257 Mr O'Rourke said in evidence that after signing the loan agreement in late July he set about trying to get the Irwin property (the third floor of Irwin Chambers) rented out. Within about six weeks he realised that there was likely to be a problem in that regard, so he put the Irwin property on the market. Dallas received an offer for $1,000,000 in respect of the Irwin property, being less than the recently prepared Hillier Parker valuation concerning the property. Mr O'Rourke continued to advertise for tenants but could not get any.

258 On his account, Mr O'Rourke went to Melbourne on holiday at the end of August, leaving Suzanne Carruthers in charge of Dallas and Dynasty. According to him, she phoned to say that the development funds for St Andrews were not forthcoming. He rang Mr Lewis from Melbourne who said that he would fix it up.

259 As I have indicated in earlier discussion, it was common ground at the trial that on 29 September 1989 the Dallas/St Michaels account with Custom Credit (account number 16544502544) was debited in the sum of $500,000. According to Mr O'Rourke, that sum of money went to Dallas for the redevelopment of St Andrews. Dallas paid architects fees, prepaid interest back to Custom Credit, made progress draws and paid a sum of $85,000 at the behest of Beneficial Finance. Transfer fees and establishment fees were also paid out from this amount.

260 Mr O'Rourke said further that at the time Dallas owned three St Michaels units which had a mortgage over them in favour of Custom Credit. Five of the units settled and Custom Credit took $500,000 from the proceeds of sale. The three remaining units at St Michaels had a mortgage of approximately $800,000 over them. (The Dallas case at trial was that the consequences of Custom Credit improperly debiting the St Michaels account in the sum of $500,000 was that Dallas was left with no prospects of discharging its liability with respect to that loan, and thus Custom Credit was directly responsible for the default that eventually occurred).

261 Mr O'Rourke said that in his absence his daughter sought funds to develop the St Andrews land but got nowhere. When Mr O'Rourke returned he had a meeting with Mr Lewis and asked him what was going on. Mr Lewis said that Custom Credit were having a few problems but that he would get back to Dallas. Mr O'Rourke was then advised by Mr Adams that Lewis had been fired and that Custom Credit was not going to advance the money to develop St Andrews. Mr O'Rourke said he complained about this.

262 Mr O'Rourke said that Dallas continued to seek development funds for St Andrews from Custom Credit. He dealt with Mr Adams and dealt also with Mr Exton (the previous State Manager) who had now returned to Perth and was working as an independent consultant. However, according to Mr O'Rourke, the next thing he knew, Adams was fired after he gave O'Rourke a copy of a print out showing where the further payment of $500,000 came from. Mr O'Rourke later found out that Mr Adams was gaoled for 12 months for fraud on an unrelated matter.

263 Mr O'Rourke said that Mr Bonwick was then put in charge of the Dallas file. Mr Bonwick said that he would sort out the whole matter but nothing happened. O'Rourke supplied him with a copy of assets and liabilities for Dallas. As I indicated in earlier discussion, it was at about this time, in early 1990, that Dallas applied to Custom Credit for a loan of $2,950,000 to proceed with the development of the St Andrews land.

264 I will come to evidence concerning this further application in due course. It will be recalled that the 22 unit project originally proposed for the St Andrews land was altered to a 29 unit project. The budget as to the latter project, including construction costs of $2,900,000, was reflected in a letter dated 9 April 1990 from Woodhead Australia Architects to Dallas (P44 @ 10/73). There was evidence before me also that on 1 May 1990 Mr Bonwick arranged for a further mortgage to be executed by Dallas to cover all outstanding interest payments secured over the St Andrews land, the Irwin property and various units at St Michaels ("the fourth mortgage").

265 Mr O'Rourke said that in October 1990 he was called into Mr Bonwick's office and was told that Custom Credit had placed caveats on all of his properties. Mr O'Rourke responded that this was suicidal for Dallas as it would not be able to trade. He told Bonwick that there were offers on several properties including the shopping centre, the retirement village in Joondalup and several units in St Michaels. He said that the Dallas situation was Custom Credit's fault and that, as far as he was concerned, Dallas was not in default.

266 Mr O'Rourke went on to say that after the caveats were placed on the various properties, Custom Credit sold properties pursuant to its powers as mortgagee. The properties took up to 18 months to sell.

267 In his supplementary witness statement Mr O'Rourke commented on various assertions made in evidence by Mr Lewis and Mr Adams concerning the contentious events.

268 Mr O'Rourke asserted that the proposal for the sale of the Irwin property and the exchange of the West Coast Highway land was the direct proposal of Lewis. He asserted also (contrary to an assertion made by Adams) that the finance for St Andrews was required for the purchase and development of the property. Custom Credit advanced money for the purchase and for initial architect fees to commence development. At no time did Mr O'Rourke suggest or state to Adams that the sale of any blocks at St Michaels would be a pre-condition prior to any development of St Andrews. At no time was it suggested to Mr O'Rourke by Custom Credit that such sales were required.

269 Importantly, at par 3 of his supplementary statement, Mr O'Rourke said that he did not meet and never spoke to Mr Phillip Simcock either in person or on the telephone. It will be recalled that Mr Simcock was associated with Westminster Properties, the vendor of the Irwin property. This evidence was obviously intended to rebut any suggestion that it was Simcock, not Lewis, who proposed the swap transaction.

270 At an early stage of the cross-examination Mr O'Rourke confirmed that decisions made by Dallas were essentially made by him although he was not a director of the company. It would be fair to say that the acquisition of the Irwin property would not have happened unless he had been a party to and approved the decision. He agreed that it was he personally who made the first approach to Custom Credit for finance to pay out the Esanda debt and to provide funding for 12 units on the St Michaels land. Custom Credit was not owed any money by Dallas as at 1 June 1989.

271 He seemed to think that there might have been some form of discussion with Lewis about borrowing money for the West Coast Highway land and St Andrews land but the discussion at the Joondalup meeting was the first significant discussion about such matters.

272 For the moment, I will put to one side cross-examination concerning the date of the meeting and focus upon the cross-examiner's challenge to Mr O'Rourke concerning the alleged handing over of feasibility documents concerning the subject lands at the Joondalup meeting (whenever it was).

273 Mr O'Rourke said at the first hearing that the documents handed over were brought to the Joondalup Clubhouse by Suzanne Carruthers at his request. There was an undated document concerning the West Coast Highway land (D12 @ 10/107) and an undated document concerning the St Andrews land (D16 @ 10/180).

274 It was put to him that the construction costs of $2,870,000 in the West Coast Highway feasibility was a figure actually provided to the Dallas predecessor in title, St Ives Development Pty Ltd. It was put to him that Dallas had taken no active steps to advance the project and was minded to sell the land as evidenced by an instruction to that effect given to Nigel Satterley by Mr O'Rourke. It was put to him that the information on the D12 document was scant and not up to date. Nonetheless, Mr O'Rourke continued to affirm that the D12 feasibility had been prepared by him in-house and handed over as alleged.

275 At the first hearing Mr O'Rourke had said definitely that the feasibility concerning the St Andrews land was the undated D16 document (transcript P126). However, at the second hearing, under cross-examination, he appeared to be less certain. He said that it appeared to be the same document, although other answers given by him at that hearing were possibly open to the interpretation that what he handed over was a document resembling the D16 document (transcript P426 and following). He said that he himself had prepared the document in-house having regard to information provided by architects, quantity surveyors and prospective contractors.

276 It was put to him that the St Andrews project had originally been a proposal for 22 luxury units. There was evidence to this effect from the Dallas architect, Mr Howard, and further evidence to the effect that the proposed development was not converted to a 29 unit project until early 1990. Further, the Howard evidence indicated that the figure for professional fees of $113,031 and for building works of $2,784,000 appearing on the D16 document appeared to mirror the details set out in a letter dated 9 April 1990 written by Howard to Dallas in regard to the revised scheme (P44 @ 10/73). On its face, the undated D16 document was costed as a 29 unit project.

277 It was put to Mr O'Rourke that all these factors suggested that the D16 document did not exist as at early June 1989 and therefore could not have been handed over at the Joondalup meeting as alleged. Mr O'Rourke continued to affirm that the document in question, or at least a document like it, had been handed over, and that there had been discussion about West Coast Highway and St Andrews projects and the possibility of finance being provided by Custom Credit.

278 At a comparatively early stage of the cross-examination at the first hearing the cross-examiner drew out of Mr O'Rourke the acknowledgement that there was no reference to the swap transaction until he received a telephone call from Mr Lewis about five days or so after the Joondalup meeting (which, at that stage in the cross-examination, Mr O'Rourke said would be about 18 June, on the assumption that the Joondalup meeting was held on 13 June 1989). Mr O'Rourke's position did not appear to change in that regard. Accordingly, it is with that thought in mind that I must now turn to cross-examination concerning the sequence of events and the so-called "temporal paradox".

279 A good deal of the cross-examination was taken up with confronting Mr O'Rourke with the so-called "temporal paradox". The Dallas case as originally pleaded was that the swap transaction could not proceed until it was established by a valuation from Hillier Parker that the West Coast land and the Irwin property were of the same value. The written valuation concerning the Irwin property is dated 12 July 1989 (D19 at 2/652). The Dallas pleaded case and related evidence indicated that the representations made by Mr Lewis were made on or about 12 July 1989 in the office of Mr Adams at Custom Credit. Mr O'Rourke said in his evidence in chief that it was on that day, and as a consequences of the representations, that he on behalf of Dallas, in the presence of Mrs Carruthers, made a commitment to proceed with the swap transaction. This commitment was confirmed at a lunch attended by Mr O'Rourke and Mr Lewis at the Mediterranean Restaurant on that day.

280 It was put to Mr O'Rourke in the course of cross-examination that a case of this kind was fundamentally inconsistent with the fact that the offer and acceptances designed to carry into effect the swap transaction were dated 19 June 1989, that is to say, only a few days after the supposed meeting at the Joondalup golf course on 13 June and a fortnight or so prior to receipt of the Hillier Parker written valuation dated 12 July 1989. The tenor of the cross-examination was that Mr O'Rourke could not possibly have been influenced by representations made on or about 12 July 1989 because Dallas had committed itself to the swap transaction some weeks prior to that date.

281 This line of cross-examination was reinforced by reference to various copy letters subsequently discovered on the files of Dallas which indicated that throughout June and thereafter Dallas made approaches to financiers other than Custom Credit with a view to obtaining finance to complete the purchase and development of the St Andrews land. Finance of this kind would not have been required if, in fact, as a consequence of the alleged Lewis representations, Dallas had obtained a firm assurance of support from Custom Credit.

282 As I have indicated in earlier discussion, Mr O'Rourke conceded that, upon reflection, his memory might not have served him well in regard to the order in which certain events occurred. He acknowledged that he had probably been influenced by the date of the "golf buggy" video and the dates appearing on various documents while seeking to reconstruct the order in which events occurred. However, having thought about the matter further, he was of the view that the initial discussion with Mr Lewis had taken place at the Joondalup Golf Course prior to 13 June 1989. There had been a subsequent, and less consequential meeting at the golf course on 13 June 1989, being the date of the golf buggy news item filmed by the Channel 9. It was the date upon the video recording of that incident which had led him into error.

283 Counsel for Custom Credit put to Mr O'Rourke also that the St Andrews/Irwin funding of $1,440,000 actually obtained from Custom Credit was inconsistent with the case being advanced by Dallas. If the purpose of the swap transaction was to ensure that Dallas obtained funding of up to 85 per cent of the Irwin property that would suggest that the sum of $1,275,000 should have been advanced to Dallas on the security of the Irwin property alone. This sat inconsistently with the fact that an advance of $1,440,000 was made secured by the first and second mortgages over the St Andrews land and the Irwin property jointly. Further, and in any event, the contents of the loan approval letter dated 26 July 1989 (D3 at 3/782) suggested that no portion of the amount advanced had been specifically earmarked for development of the St Andrews land.

284 Counsel for Custom Credit put to Mr O'Rourke that Dallas did not appear to have made any convincing protest about a supposed inadequacy in the funding being provided by Custom Credit. Dallas certainly made no written protest. There was a protest of sorts reflected in the Dallas letter dated 10 November 1989 (D5 at 4/1107) concerning the advance of $500,000 but that protest seemed to be limited to a degree of confusion concerning the account through which the funds were provided to Dallas.

285 The cross-examiner went on to suggest that the representations had not been made as alleged. There was no promise of funding from Custom Credit of the kind contended for by Dallas. This was borne out not only by inconsistencies in the Dallas pleaded case and evidence as to the order in which certain events occurred. It was borne out also by the fact that in early 1990 Dallas applied to Custom Credit for funding to develop the St Andrews land.

286 It was put to Mr O'Rourke that the swap transaction simply arose out of arrangements made between Dallas and Westminster direct. It was put to Mr O'Rourke that the Dallas case was an elaborate reconstruction of the 1989 events prompted by the conviction of Mr Lewis for certain criminal offences and the prospect that Mr Lewis would therefore not make a convincing witness if the Dallas case were brought to trial.

287 For the most part, Mr O'Rourke disputed the matters put to him. He continued to affirm that Dallas had been misled by misrepresentations made by Mr Lewis in mid-1989 concerning the supposed benefits of the swap transaction and the availability of funding from Custom Credit for the St Andrews project. He said that he had not at any stage met with Mr Simcock of Westminster and had not made any arrangement direct with Westminster as to the swap transaction. He continued to affirm that he had entered into the swap transaction in reliance upon the representations made by Mr Lewis. He had protested the absence of development funds for St Andrews to Mr Lewis in person. He made the protest while signing the St Andrews/Irwin loan agreement at the Custom Credit office on or about 26 July 1989. This protest explained the further payment of $500,000 made two months later.

288 Notwithstanding the concessions he made when confronted with the so-called "temporal paradox", and the revision of his evidence as to the sequence of the key events, Mr O'Rourke continued to insist that the decision to proceed with the swap transaction was made at the Adams office/Mediterranean lunch meeting. This exchange occurred (transcript P223):

"Mr O'Rourke, the fact of the matter is that in terms of the swap regarding Irwin Street, the representations that you complain about don't happen, do they, on your case, until after you have received the Hillier Parker valuation for level 3 at $1.53 million?---No. I said to you earlier we are certainly having conversations, representations and discussing the whole matter for at least, by the looks of it, 4 weeks before that date.

Well, you don't mention that much of it in your witness statement, do you?---Well, if we actually go to the witness statement as it was done in the first place, where I mention two golf days and then it starts there, and I'm saying, yes, 12 July is when the actual official valuation is handed to me and so we've used that - I've used that as a date, because it's there in my mind, the same as I used the golf video date as being the golf video, but then when I read my own statement of the period, I have mentioned the two games or two meetings at the golf course.

But in terms of commitment by Dallas to proceed with the swap, you still say that that happened after the meeting in Simon Adams' office, the same day after which you went off for lunch at The Mediterranean?---Yes.

That did not happen, did it, until at least after 12 July 1989?---No, that's not true."

289 In summary, Mr O'Rourke appeared to accept that he would not have entered into the swap transaction without obtaining an assurance that the value of the Irwin property was the same as the West Coast land. However, encouraged by Mr Lewis, he met with a valuer from Hillier Parker, Mr Collins, at the Irwin property, in the company of his estate agent, Mr Dempsey, and his daughter, and inspected the premises not long after the initial golf game. It was on the occasion of that inspection that he received verbal assurances from Mr Collins as to the value of the Irwin property. It was these figures which became the background against which Mr Lewis made the representations at the Adams office/Mediterranean lunch meeting that persuaded Mr O'Rourke to proceed with the swap transaction. That meeting preceded delivery of the formal written valuation on 12 July 1989, being an event which occurred later. Thus, when all these matters were put together, Mr O'Rourke asserted, it became apparent that the Lewis representations were made prior to the signing of the offer and acceptances dated 19 June 1989 which marked the Dallas commitment to the swap transaction.

290 Suzanne Carruthers gave evidence at the first hearing in 2003 and thus before the Dallas counterclaim was amended. She said that prior to working full-time for Dallas she had worked as a teller and in the credit card department of a bank. She started with Dallas on a full-time basis in April or May 1989. According to her, Mr O'Rourke stopped being a director of the company because he was travelling a lot. She and her husband, Gordon Carruthers, were directors of the company but her father, Barry O'Rourke, was the influential figure in the company.

291 She submitted a signed witness statement to the Court dated 23 January 2003 and supplemented that with testimony. She said under cross-examination that in the course of finalising her statement she looked at various documents including her father's witness statement but wrote most of her own statement before she saw her father's statement.

292 She said at par 3 of her witness statement that she first met Mr Lewis when she dropped off the Dallas feasibilities to the Joondalup Golf Course clubhouse. Lewis was having lunch with her father at the time and she only exchanged pleasantries with him. She confirmed that the feasibilities were for the St Andrews land and the West Coast Highway land (transcript P551) . She was cross-examined about this (at transcript P612). She said that, having been phoned by her father, she took the relevant file out of the filing cabinet. It contained drawings of the West Coast Highway land. The feasibilities were very brief being a description of the property and the costings. In the course of preparing for the trial she had not been asked to identify any documents on the file in question.

293 She went on to say that she recalled inspecting the Irwin property in mid-1989 with her father, her mother, Mr Dempsey and the valuer from Hillier Parker, Keith Collins. She said that the inspection took place on 19 June 1989, being a date she could fix by reference to her husband's birthday. There was discussion as to whether it was a viable proposition having regard to the figure of $1,500,000 that had been mentioned previously by Mr Lewis of Custom Credit. An offer to purchase the Irwin property was made on that day. The West Coast Highway land was to be swapped for the Irwin property. Keith Collins said that the Irwin property was worth about $1,500,000 and that the figure for the West Coast Highway land was the same. She said that she had taken the feasibilities to Lewis at the Golf Club "a few weeks" prior to the inspection (at transcript P558).

294 Suzanne Carruthers gave evidence also about being present at a meeting in Simon Adams' office at Custom Credit. Mr Lewis, Adams and her father were all present. It was not directly apparent from her witness statement when exactly this meeting is said to have taken place but the statement leaves the impression that it was after the inspection of the Irwin property on 19 June 1989. Her account of the meeting appears in her witness statement after the inspection and she goes on to say that "a couple of days after the meeting" she attended Custom Credit with O'Rourke and Gordon Carruthers in order to sign the loan agreements relating to the St Andrews/Irwin loan. This appears to be a reference to the signing of the 26 July D3 letter of approval on or about that date because she refers to some discussion about a problem with the amount being advanced. According to her, both Adams and Lewis said that the problem would be fixed and it was on this basis she signed the loan agreements.

295 As to the meeting in Adams' office at Custom Credit while the St Andrews/Irwin loan was still under discussion (which appears to be the Item 7 meeting in my summary of alleged events) she said (at transcript P558) that she was more of a witness than a participant. There was discussion about West Coast Highway and the Irwin property. Most of the discussion was between Lewis and her father about a swap between the Irwin property and the West Coast Highway land and it had to be for the same value. She could not remember any more details than that. When she was asked when that meeting was in relation to the inspection of the Irwin property on 19 June she said:

"As I recall, it was only a few weeks beforehand, because I had only met Lewis a couple of times and one of them was at the golf course and one of them was at the office that we are talking about, the meeting, and - so that was before we had inspected the office at Irwin Chambers."

296 She was then asked what happened when the meeting broke up. She responded to the effect that her father and Lewis were going to lunch at the Mediterranean Restaurant (transcript P560). She did not go with them and did not think that Simon Adams went either.

297 Suzanne Carruthers was cross-examined closely about the timing of the various events mentioned in her evidence and especially about the proximity of the Adams office/Mediterranean lunch meeting to the meeting when the St Andrews/Irwin property loan agreement was signed. She said that the latter "wasn't very long after" the Adams office/Mediterranean lunch meeting (at transcript P594).

298 When she was pressed about certain incongruities in her evidence concerning the timing of various events, she asserted, and continued to assert, that the Adams office/Mediterranean lunch meeting occurred before the inspection on 19 June 1989 on which occasion Lewis and her father discussed the swap transaction. She agreed that the swap proposal was not put to her directly by Mr Lewis. She acknowledged that in terms of the decision to go ahead with the swap the driving force in that regard was her father (at transcript P626).

299 It was then put to her in cross-examination that Dallas was not really minded to develop the West Coast Highway land as by mid-1989 it had transferred its attention to the various Joondalup projects. It was put to her that Dallas was minded to enter into the swap transaction because the acquisition of a property such as the Irwin property (said to be worth $1,500,000) in exchange for the West Coast Highway land, which had been acquired by Dallas for $950,000, could be regarded as an attractive profit on the West Coast Highway land. This was denied.

300 She was cross-examined about a letter dated 29 June 1989 written by the Dallas Administration Manager/in-house Accountant, Mr Bob Arnold, to the Dallas solicitors. The letter concluded with the assertion that Dallas would be seeking financial assistance to complete the purchase of the Irwin property "but at this time we are unable to nominate the financial institution involved" (P15 @ 2/546). She was cross-examined also about various applications for finance made by Dallas after 19 June 1989 in regard to St Andrews. However, she resisted the cross-examiner's suggestion that all of these events indicated that Dallas had not obtained any commitment from Custom Credit to finance the development of the St Andrews land.

301 This line of cross-examination was designed to show that in the period after the 19 June swap transaction Dallas did not appear to be certain that it would be obtaining funds from Custom Credit in order to complete the swap transaction and to proceed with the purchase and development of the St Andrews land. Uncertainty about such matters might suggest that Dallas had entered the swap transaction without any firm assurance of funding along the lines reflected in the first, second and third representations. By mid-July, as appears from the 20 July P83 St Andrews/Irwin loan application, finance to complete the swap transaction and St Andrews purchase had been approved, but that approval did not expressly in its terms extend to finance for the development of the St Andrews land. The approval document simply noted that "an application for development funds will be forwarded in due course".

302 Against this background, the cross-examiner took Suzanne Carruthers to various documents bearing upon this aspect of the matter. As to the Arnold letter dated 29 June (P15 @ 2/546) she could not provide any specific explanation as to why the Dallas in-house accountant appeared to be in a state of doubt as to where the finance to acquire the Irwin property was coming from (that is, the finance to pay out the Perpetual Finance mortgage affecting the West Coast Highway land so that the swap transaction could proceed). She could say only that she believed Custom Credit was funding the acquisition of the Irwin property but Mr Arnold may or may not have known who was involved or may simply have been looking out for good interest rates.

303 She was taken also to various documents signed either by herself or her husband, Gordon Carruthers, indicating that at this time, in mid-1989, Dallas approached lending institutions other than Custom Credit with a view to obtaining finance to complete the swap transaction and to purchase and develop the St Andrews land. It was put to her that these documents were inconsistent with the Dallas case that prior to entering the swap transaction on 19 June Dallas had received a promise of financial support from Lewis at Custom Credit. She continued to assert that letters to other financiers were simply a means of obtaining information about interest rates.

304 More particularly, she was referred to an unsigned letter found on the Dallas file pursuant to the discovery process dated 29 June 1989 suggesting that Gordon Carruthers had in mind to apply to or had actually applied to the Challenge Bank for a loan of $1,000,000 for the purchase of the St Andrews land (P14 @ 2/544). She was referred to a further letter dated 5 July 1989 signed by Gordon Carruthers concerning the same matter (P16 @ 2/561). In addition, she was referred to a letter dated 6 July 1989 to Perpetual Finance, signed by herself, concerning the Irwin property, in which reference was made to a telephone conversation between herself and Mr Mark Davies of Perpetual Finance on that date (P17 @ 2/566).

305 This exchange with the cross-examiner then occurred (transcript P640):

"What I'm suggesting, I think, in broad summary, is at this point in time what Dallas was seeking was two lots of funding from different people, Challenge Bank and Perpetual Finance, one to settle on St Andrews and the other to settle on the acquisition of level 3, Irwin Chambers?---I wouldn't say necessarily seeking. I would be wary to say that. This was company policy for us, to obtain different loans - interest rates so that we could always choose the best one at the end of the day.

What I'm suggesting to you is that at this point in time, at the times the letters are written in early July 1989, you as a director of Dallas had no assurance to that point from Custom Credit that they were going to lend any money at all in regards to either St Andrews or level 3, Irwin Chambers?---I believe that Custom Credit was going to lend us the money. Whether we chose at the end of the day to put that through I guess was up to us, but, yes, that's right.

The real nub of what I'm putting to you is that Dallas entered the swap transaction without reference to Custom Credit and then afterwards, after 19 June, it fished around town for money to settle on that transaction. That's what happened really, isn't it?---I'm not quite sure what you're getting at.

What I'm suggesting is that the swap was worked out around 19 June with somebody on behalf of Westminster?---Yes.

That was committed to by the contracts that you've seen, and then afterwards Dallas started to think about getting money from places around town, approached a number of places that we've seen, and then finally ended up with Custom Credit?---We were always with Custom Credit. Whether we were just keeping everyone honest on interest rates, I'm not quite sure what the motivation was, but it was normal policy for us to know what interest rates were going around town and to be able to put these sort of feasibilities you could get a good answer on that."

306 It will be recalled that, unlike the St Michaels loan (see Item 1 on the summary of key events), there is no letter from Dallas to Custom Credit foreshadowing the St Andrews/Irwin loan which might provide a clear and dated reference point as to when the application for finance of that kind was first mooted. The Dallas case is based on verbal representations which are said to have been made between early June and 19 June 1989. The document approving the loan in question is the 20 July St Andrews/Irwin P83 loan application document.

307 Suzanne Carruthers could not point to any document that clearly refuted the cross-examiner's suggestion that as at early July 1989, two weeks or so after the swap transaction, Dallas was still casting round for a source of finance. As appears from her answers, Suzanne Carruthers could say only that she believed a promise of support had been obtained from Custom Credit. She said that the unsigned letters on the file were not conclusive because they might not have been sent. She agreed that the first payment made by Custom Credit, which was referable to the St Andrews/Irwin loan, was the payment of $390,000 to Joondalup Development Corporation on 21 July 1989 so that Dallas could complete the purchase of the St Andrews land.

The Suzanne Carruthers' evidence/post July events

308 Suzanne Carruthers said in evidence (at par 9 of her witness statement) that in August 1989 Mr O'Rourke went to Melbourne and she was left in charge of Dallas and Dynasty Constructions Pty Ltd. She understood that exchanges took place by telephone between her father in Melbourne and the Custom Credit office in Perth to do with some further payments to be made. She was then contacted by Mr Adams and told that a cheque for the sum of $500,000 was available for collection concerning the St Andrews land. She assumed that Mr O'Rourke had sorted out the problem.

309 According to Suzanne Carruthers, she collected a bank cheque for the amount in question and was told by Mr Adams that she did not have to sign anything in relation to the payment. She did not do so.

310 She was cross-examined about the various payments made to Dallas. She agreed that at about this time Dallas was in need of and looking for funds to advance its other projects. She denied that a portion of the advance of $500,000, namely, $85,000 was used to reimburse she and her husband for a payment in that amount made to Beneficial Finance as a form of security relevant to the acquisition of the Joondalup Retirement Village. She said that the $500,000 "was supposed to be for St Andrews in getting the drawings and so forth going and quantity surveying so that St Andrews could be developed" (transcript P683). However, when she was asked how it was spent she said that she did not know. It was put into the account but she could not give a detailed description of how it was spent (transcript P683). When pressed, she responded "I don't know exactly how it was spent" (transcript P683).

311 Suzanne Carruthers agreed that she wrote a letter dated 10 November 1989 to Custom Credit asking for the sum of $500,000 "to be taken over to the St Andrews and Irwin Chambers loan with a second mortgage on Irwin Chambers" (D5 @ 4/1107). This was because it had been debited to the St Michaels account. She agreed that prior to the making of the payment the St Michaels loan account had been reduced by a payment into the account of $582,000 made by Citibank as part of a refinancing arrangement which had the effect of reducing the Dallas liability to Custom Credit in respect of the St Michaels loan. Nonetheless, she continued to assert that her letter was written to protest the error whereby funds intended for the development of the St Andrews land had been debited to the St Michaels account.

312 It emerged from the evidence of Suzanne Carruthers (at pars 22 - 23 of her witness statement and related cross-examination) that when new mortgage documents to secure the payment of $500,000 were presented by Adams to Dallas under cover of his letter dated 11 December 1989 (D7 @ 4/1137) she refused to sign the mortgage documents. These were documents designed to create a second mortgage over the St Andrews land and the Irwin property. She said that she refused to sign the documents because they were incorrect. Under cross-examination she said "I just remember that the figures were wrong and that Dad was saying that these were all wrong" (transcript P701). She added "It wasn't enough. There should have been more funds to come for the development if the development was to keep going" (transcript P701).

313 Cross-examination was then directed to a document bearing the title "Proposed Funding of St Andrews Residential Development" (D34 @ 8/2992). Broadly described, this was a feasibility study which envisaged Dallas obtaining loan funds of $2,950,000 "progressively drawn" with provision for a registered first mortgage over a two stage 29 unit residential development situated at St Andrews. In its terms it was accompanied by Dallas financial statements including "up to date trading figures to 31 March 1990" (D34 @ 8/2996). The purpose of the advance was to assist with a two stage unit development comprising 29 units with provision for capitalisation of interest. Dallas was looking for support from Custom Credit in funding the construction phase on the St Andrews project. The document in its terms does not suggest that development work on the project had already been undertaken.

314 Suzanne Carruthers agreed that the D34 feasibility document was the submission made by Dallas to Custom Credit for the construction phase finance in respect of St Andrews. However, she did not remember the document. She seemed to think that the D34 feasibility document may have been prepared by Mr Exton in April 1990 (the former State Manager of Custom Credit who, by then, was working as an independent consultant). She was not prepared to accept that this was the only application ever made to Custom Credit for funding in respect of the construction phase of St Andrews (transcript P703). She agreed that there was never a sod of soil turned by Dallas in respect of the St Andrews site, although preliminary work was undertaken by quantity surveyors and the like. The land was eventually sold at a mortgagee's auction (transcript P705). She contended that even as late as October 1990 it would have been possible to proceed with and complete the St Andrews project if the finance sought for the project had been obtained.

315 Suzanne Carruthers gave evidence to the effect also that in October 1990 she attended a meeting with her father and Mr Bonwick and Brad Hubbard of Custom Credit at which Bonwick said that Custom Credit would be putting caveats on all the Dallas properties (at par 26 of the witness statement). O'Rourke told Bonwick that this would end Dallas. She and Mr O'Rourke showed Bonwick offers that Dallas had on a number of properties. She herself repeated that the caveat would ruin Dallas as Dallas would not be able to trade, but Bonwick informed she and her father that the caveats would be placed. Until that meeting she still believed that the finance would be sorted out.

316 Malcolm Dempsey said that during the 1980s he was employed as a real estate agent with Satterley Real Estate and was one of the real estate agents acting for Dallas. He had prepared a market appraisal for the West Coast Highway land and listed the same for sale by Dallas at $1,595,000.

317 He said (at par 7 and following of his witness statement) that during early to mid-1989 he received a telephone call from Phil Lewis. Mr Lewis suggested a swap of the West Coast Highway land with the Irwin property. He told Dempsey that Westminster Properties would become the registered proprietor of the West Coast Highway land and in exchange Dallas would become the registered proprietor of the Irwin property. Dempsey said that he would contact Barry O'Rourke to present the offer to Dallas. Dempsey recalled that Phil Simcock was involved with the strata titling of Irwin Chambers and the third floor of the building.

318 According to Mr Dempsey, he telephoned O'Rourke and told him that he had received an offer that was a straight swap involving the West Coast Highway land and the Irwin property. He suggested to Mr O'Rourke that it was worth inspecting the property and Mr O'Rourke agreed.

319 Mr Dempsey went on to say in his witness statement that Jones Lang were the real estate agents for Westminster Properties. Shortly after his conversation with O'Rourke he inspected the Irwin property (the third floor of Irwin Chambers) with O'Rourke, his wife and daughter and a valuer from Hillier Parker. After the inspection the offer and acceptances to effect the swap were completed and signed.

320 During the course of his evidence-in-chief Mr Dempsey gave further evidence concerning these matters. He said that he knew Phil Simcock was involved because he was told this initially by Lewis. However, on his account, he (Dempsey) was phoned by Phil Simcock in due course "and went to his offices in Subiaco where we prepared offers on property to go to Dallas and also a conjunctional offer with Jones Lang" (transcript P1017). He confirmed that it was his (Dempsey's) handwriting on the offer and acceptance forms effecting the swap transaction (D20 @ 2/503) and (D21 @ 2/505) and his notation on the D20 Irwin property offer and acceptance "all carpets and lightings as inspected 19 June 1989". He was sure the documents were prepared at Simcock's office in Rokeby Road, Subiaco.

321 Under cross-examination, Mr Dempsey acknowledged that he had no notes documenting the telephone call he allegedly received from Lewis. He agreed that there was no independent basis to verify his evidence concerning the call and he was speaking from memory fifteen years after the event. He added "most of the dealings were obviously with Phil Simcock but the original call, I am sure, was from Phil Lewis" (transcript P1025). When pressed, he said that he was "not 100%" sure that there was a call from Lewis.

322 Mr Dempsey was then cross-examined about a telephone call he had received many years later from Mr Ainslie, a solicitor involved in the preparation of the Custom Credit case for trial. Mr Dempsey agreed that in speaking to Mr Ainslie about the relevant events he made no reference to Philip Lewis being the initiator of discussion about the swap transaction (transcript P1027). He agreed that he told Mr Ainslie that he (Dempsey) was selling agent in conjunction with Jones Lang in respect of the Irwin property sale. He agreed that he informed Ainslie that most of the dealings were with Phil Simcock. He agreed that he did not mention Lewis to Ainslie (transcript P1027).

323 When Mr Dempsey was asked whether somebody had suggested to him that Phil Lewis initiated discussion about the swap transaction, he answered in the negative. He said that his evidence-in-chief nominating Lewis as the initiator probably came about because he gave further thought to the circumstances of the transaction when he knew he would have to come to court, although he had no notes or records to set his mind straight about the order of events. He said that the Westminster Properties offer to acquire the West Coast Highway land was probably accepted by Mr O'Rourke straight after the inspection of the Irwin property, but he could not recall exactly where it happened. His recollection was that O'Rourke would have seen the offers before the visit to the Irwin property. He said in re-examination that, notwithstanding the questions put to him, he was still sure that he got a call originally from Lewis, followed up by subsequent calls - virtually straight afterwards - from Phil Simcock to request that the proposed transaction be put in writing.

324 In the course of his cross-examination he confirmed that prior to the swap transaction he had been under instruction from Dallas to sell the West Coast Highway land. An offer made by Adam Zencich was received and led to a counter offer being made by Dallas on 6 April 1989 at the proposed price of $1,300,000 subject to finance. He was aware that the proposed transaction did not proceed but the offer and counter offer in question occurred shortly after Dallas acquired the land for $950,000.

325 I digress briefly to note that Mr Ainslie gave evidence on behalf of Custom Credit. He said that when he spoke to Mr Dempsey about the matter on 21 March 2003 he asked Mr Dempsey whether he recalled how the transaction and property swap came about, Mr Dempsey stated that he had been approached by Philip Simcock in relation to the deal. Under cross-examination Mr Ainslie could not recall specifically whether he asked Mr Dempsey if Mr Lewis had rung him about the transaction. He did not ask Mr Dempsey how Mr Simcock came to approach Mr Dempsey.

326 I note in passing that the Custom Credit case in closing was that Mr Ainslie had approached the conversation in the proper way in that, rather than asking leading questions that might suggest an answer, he had simply, and correctly, asked Dempsey, as a prospective witness to recall what he knew of the transaction. On the Custom Credit case, it was apparent from the file note made by Mr Ainslie at the time of his conversation that, having been invited to recall what happened, Dempsey had said that he was approached by Simcock.

327 Dallas led evidence from the Hillier Parker valuer who was present at the inspection of the Irwin property on 19 June 1989, Mr Collins. Mr Collins gave evidence also in his capacity as an expert witness concerning the valuation of various properties involved in the proceedings. However, for the moment, I will put evidence of that kind to one side and turn to what Mr Collins had to say about the inspection of the Irwin property and the negotiation of the swap transaction.

328 Mr Collins said that he knew the building known as Irwin Chambers but did not really have any recollection of having visited the third floor (the Irwin property) in 1989 in the company of Mr O'Rourke (transcript P921). This was due to the sheer volume of valuations that he had to perform. He was unlikely to remember a particular valuation unless there was something significant about it.

329 Mr Collins was cross-examined about his working methods as a valuer in 1989. He was asked whether it would be contrary to good and proper valuation practice to express a view verbally, on the spot as it were, while walking around a property such as the Irwin property. He said that an opinion might be expressed but it would be normally backed up with the comment "but this would depend upon a look at the sales evidence". Anything he said would be premised by the need to do some work to verify the figure mentioned. In a case of vacant office premises, it would be necessary to look at other rents and the characteristics of the property.

330 I pause to say that there did not appear to be much in the evidence of Mr Collins to support an assertion (as part of the Dallas case) that, prior to receipt of the formal valuations concerning the West Coast Highway land (27 June 1989) and the Irwin property (12 July 1989), figures had been foreshadowed or values put to Mr O'Rourke verbally. Mr Collins was not prepared to give evidence to that effect as he had no recollection of the inspection. The description of his working methods indicated only that if figures were mentioned they would have been subject to various qualifications which, viewed objectively, would make it unwise to rely upon them.

331 I note in passing that, in the event, the Hillier Parker valuation concerning the Irwin property (D19 @ 2/652), which was dated 12 July 1989, was prepared and signed by Mr Loughnan.

332 It emerged from the evidence at trial of the three Hillier Parker witnesses that as at mid-1989 the senior figure was Mr Marr. He was the Director of Valuation at the firm. It was a requirement of the firm that where a valuation was commissioned by Custom Credit bearing upon an application for finance then the valuation report was to be signed by the relevant valuer and counter-signed by the director. It was for this reason that Mr Marr had counter-signed the report dated 19 June 1989 valuing the St Michaels land at $1,878,250 (D22 @ 2/453). This procedure did not necessarily apply where the report was commissioned by a client such as Dallas. Hence, the Hillier Parker report dated 27 June 1989 (P7 @ 2/528) valuing St Andrews at $1,500,000 was signed by Collins only; the report dated 12 July 1989 (D19 @ 2/652) valuing the Irwin property at $1,530,000 was signed by Mr Loughnan only.

333 Like Mr Collins, Mr Loughnan had no recollection of visiting the Irwin property or of doing the valuation. There was nothing to indicate that Marr or Collins made any contribution to the valuation figure he arrived at. Under cross-examination, he agreed that the valuation date of 6 July 1989 mentioned in his report probably meant that he visited the premises on that date.

334 It was not made clear to me as to how it came about that the Irwin property, which (on the Dallas case at trial) had been visited by Collins on 19 June with a view to arriving at values that would be utilised by Dallas, Westminster Properties and Custom Credit for the swap transaction, was valued ultimately by Mr Loughnan. The latter's report, and his evidence at trial, did not in any way suggest that his valuation figure was referable to a transaction that had already been effected by the execution of offer and acceptance forms on 19 June. His evidence is consistent with the Custom Credit case at trial, namely, that prior to 19 June neither Lewis nor Collins played any part in causing Mr O'Rourke to believe that the West Coast Highway land and the Irwin property was of equal value; and that, having entered the swap transaction on 19 June of its own volition, without any promise of financial support from Custom Credit, Dallas then set about commissioning the two valuation reports that would assist it to obtain finance from Custom Credit or some other financier.

335 Before leaving the Collins and Loughnan reports, I have to say that they were not impressive documents. This gives rise to a doubt as to how much reliance was placed upon them by the parties to the swap transaction. The St Andrews report purports to value the site at 23 June 1989 pursuant to a comparable sales method, but fails to identify any comparable sales evidence. Further, Mr Collins makes no mention of the price paid for the land by Dallas ($400,000) pursuant to a contract entered into twelve months earlier (15 June 1988). As to the Irwin property, Mr Loughnan purported to have utilised two methods of assessment. However, as to his capitalisation method, his selection of a rental rate of $185 sqm appeared to be somewhat arbitrary. The sales evidence which was said to underpin his strata method was drawn from a range of properties and transactions that did not appear to be directly comparable.

336 In addition to the three Hillier Parker valuers, Dallas called some additional witnesses whose evidence, like that of the valuers, had a bearing upon not only the calculation of the loss allegedly suffered by Dallas but also upon the question of whether the representations complained of were made as alleged. In regard to liability, the issue of these further witnesses was principally concerned with the question of whether the feasibility documents were in existence and handed over to Custom Credit in June 1989 as alleged by Mr O'Rourke. It will be recalled that, according to Mr O'Rourke, the documents allegedly handed over at the Joondalup lunch were an undated feasibility document concerning the West Coast Highway land (D12 @ 10/107) and an undated feasibility document concerning the St Andrews land (D16 @ 10/180).

337 The D12 West Coast Highway feasibility document portrayed a total project cost of $4,546,000 which included land acquisition $980,000 and construction costs $2,870,000. The projected return on sales was given as $5,400,000 and the expected net return as $854,000. David Pringle gave evidence to the effect that his company, Pindan Constructions Pty Ltd, provided the figure for construction costs of $2,870,000 by letter dated 13 January 1989 to Oldfield Nott, being the architects who had designed the project proposed by the Dallas predecessor in title, St Ives Development Pty Ltd (D12 @ 10/107). Mr Pringle was not sure whether the Pindan figure for construction costs was provided for St Ives or Dallas and was not sure whether it was a quotation or a "preliminary estimate".

338 The figure in question appears also in a fax dated 13 January 1989 written by Mr Danny Jones of Oldfield Nott to Mr Ray Fitzgerald of St Ives Development (D12 @ 10/108). Mr Jones said in evidence that this represented a "firm price" for the construction costs of the proposed project, being a project in respect to which planning approvals had been obtained and working drawings prepared. As far as he was aware, a building licence was never applied for or obtained. He said in evidence that he did not have any dealings with Mr O'Rourke of Dallas. His evidence left an impression, which was consistent with evidence given by others, that the project was stalled by later events.

339 The undated D16 St Andrews feasibility document presented a figure of $4,513,000 as the total project costs. This figure included land at valuation $1,500,000, professional fees $113,031 and a figure for building works $2,784,000 (arrived at by the calculation $800 per/sqm x 190 sqm x 29). The manner in which the figure for building works was calculated and a later reference in the document to "29 units" suggested that the feasibility related to a 29 unit project.

340 Dallas led evidence from Mr Ian Howard, an architect associated with Woodhead Australia, being the firm of architects engaged by Dallas to design the St Andrews development.

341 Mr Howard confirmed in evidence that the design for St Andrews was initially for 22 units. Detailed working drawings were prepared for the first scheme, planning approvals were obtained from the Joondalup Development Corporation and the Shire of Wanneroo and a quotation was obtained from Pindan Constructions. He said that the first scheme was devised during 1988 and was fully detailed and ready to go to tender in or about May 1989.

342 Mr Howard went on to say that the first scheme was designed for the upper end of the market rather than maximising the number of units on the site. However, in early 1990, the development was increased to 29 units. He recalled that as to the second scheme for the 29 units, there were advanced sketches prepared but he did not believe that the project proceeded to the working drawings stage. By increasing the number of units from 22 to 29 the land component cost for each unit was reduced which allowed individual units to be sold at a lower cost than those of the first scheme. In the course of his evidence, Mr Howard referred to a budget for the second scheme which was submitted to Dallas by letter dated 9 April 1990 (P44 @ 10/73). This disclosed a total project budget of $3,013,031. This was made up of a total construction budget of $2,900,000 as increased by professional fees of $113,031. A major item in the construction budget was $2,784,000 which was based on the assumption that building works were being performed at the rate of $800 per/sqm. Mr Howard said that this latter figure was a generalised figure prevailing in the industry at the time. It would be adjusted to the particular project in light of the tender received and contract awarded.

343 I will return to the evidence of these witnesses in due course when the time comes to make findings and to look at the manner in which Dallas presented its claim for damages and calculation of loss.

344 Counsel for Custom Credit opened his client's case upon the basis that the formalities of the claim for debt referable to the various mortgages would be established by the witness statements of Lianne Noonan, Bradley Hubbard and Ronald Cook (being exhibits 67, 68 and 69 not in the agreed bundle). He submitted that, subject to resolution of the issues raised by the Dallas counterclaim, the issue of default under the various mortgages did not appear to have been contradicted. Dallas had admitted receipt of all funds loaned to it by Custom Credit.

345 Counsel went on to submit that Dallas could not properly invoke the principles of legal or equitable set-off as there was insufficient mutuality between Custom Credit's claim in debt and the unliquidated damages grievance of Dallas which appeared to be referable entirely to the swap transaction. The counterclaim was confined to the swap transaction also. This meant that, on any view of the matter, the amount of the St Michaels' debt pursuant to the third mortgage was not the subject of any alleged misconduct by Mr Lewis and was therefore not effected by the relief sought.

346 I pause here to say briefly that all of this was contested by Dallas. As to the St Michaels loan, Dallas said that the misrepresentations complained of led eventually to the further payment of $500,000 being wrongly debited to the St Michaels account in late September 1989 and this undermined the financial position of Dallas generally. Thus, Dallas was entitled to be relieved against all Custom Credit claims pursuant to the broad powers in s 87 of the Trade Practices Act.

347 For the time being, I will put to one side the various submissions made by counsel for Custom Credit concerning the basis upon which the Dallas counterclaim for damages and computation of loss was presented. Issues of this kind will be dealt with later. However, I note in passing that as to the issue of causation, counsel doubted that any link could be established between the allegedly misleading conduct complained of and the lodgement of caveats by Custom Credit as a source of loss. Counsel submitted that it was hard to envisage what might have been the external consequence of the lodgement of caveats over properties already heavily secured to Custom Credit, bearing in mind that there was no evidence before the Court as to how external lenders or other third parties had responded to the lodgement. Further, there did not appear to be any challenge to the entitlement of Custom Credit to lodge the caveats in question.

348 As to the representations complained of, counsel adverted to the so-called "temporal paradox" which was said to have demonstrated the impossibility of Dallas sustaining its counterclaim as originally pleaded in that conduct of Mr Lewis on or about 12 July 1989 could not have influenced an earlier decision by Dallas on 19 June 1989 to commit to the swap transaction. Counsel went on to contend that even on the Dallas case as repleaded the cross-examination of Mr O'Rourke and Suzanne Carruthers revealed so many vagaries in the Dallas case that it would be impossible to accept their evidence, unless it was independently corroborated by a reliable external source.

349 Counsel submitted that the evidence of Mr O'Rourke and Suzanne Carruthers was not reliably corroborated by documents or by testimony and would be refuted by the Custom Credit witnesses.

350 In earlier discussion, I described the evidence given by two of the witnesses for Custom Credit, namely, Mr Bonwick and Mr Ainslie. Accordingly, it will now be useful to proceed to the evidence of Mr Lewis and the evidence of Mr Adams. Again, for the reasons I have given previously, I will focus initially upon the Dallas plea concerning the alleged making of the first, second and third representations.

351 Mr Lewis said at par 4 of his witness statement (P89 not in the agreed bundle) that by mid-1989 he had been promoted to the position of Business Development Manager with Custom Credit, being second-in-charge to the State Manager. In July 1989, for a period of about two weeks, he was Acting State Manager of the Property Finance Division while Mr Richards was away. His account of the internal procedures was generally consistent with the evidence given by Mr Bonwick. If a new client approached Custom Credit for finance they would be directed to a Lending Officer who would handle their portfolio. A written application seeking finance would be prepared by the Lending Officer and, if appropriate, the loan would be recommended to the State Manager for approval. If the application exceeded the cap of $3,000,000 it would be forwarded to the national office in Sydney for approval.

352 Mr Lewis went on to say that if the application was approved the Lending Officer would prepare an offer letter to the borrower setting out the terms on which finance was offered. As Business Development Manager, Mr Lewis had authority to negotiate with prospective borrowers concerning their proposals, but he had no capacity to approve financial applications by himself.

353 According to Mr Lewis, Simon Adams handled the Dallas loan requirements. It is material to note that Adams was the Lending Officer who recommended the 16 June St Michaels P71 loan application as Lending Officer. Lewis was a signatory to the application but on his evidence had no direct dealings with Dallas concerning that matter. Mr Lewis said that his handwritten notations upon the Dallas 18 May letter concerning St Michaels (D10 @ 1/355) were made at a later stage when he was assessing the St Andrews/Irwin loan application and needed information about the assets and liabilities of the company.

354 As to the alleged Joondalup meeting in or about early June 1989, Mr Lewis said that he had ever only played golf once at Joondalup Golf Course, for a client function. He recalled that Mr Exton and Mr O'Rourke were at that client function but he did not specifically recall playing a round of golf or discussing business with either of them. He said that Mr O'Rourke never approached him as to the financing of St Andrews or the development of the West Coast Highway land. He acknowledged, as appears from the video, that he was briefly in the presence of Mr Exton and Mr O'Rourke while the golf buggy was being displayed. However, he denied being present at any meeting on that day, or on any prior day in June, at which finance for St Andrews and the West Coast Highway land was discussed at lunch, with feasibility documents being handed over by Mr O'Rourke.

355 He denied that there was a telephone conversation subsequent to any such meeting in which he informed Mr O'Rourke that he (Lewis) was aware of a purchaser who would like to acquire the West Cost Highway land on the basis that it be exchanged for a commercial property in the Perth Central Business District. He said that to the best of his recollection he did not speak to Mr O'Rourke by telephone about that matter (transcript P1528).

356 Mr Lewis said further (at par 72 of his witness statement) that he never suggested to Dallas that a potential purchaser of the West Coast Highway land would be Mr Simcock or his company Westminster Properties, or that Dallas should be involved in an exchange.

357 He went on to say (at par 73) that as far as he could recall the only contact he had with Mr O'Rourke regarding the Irwin property was when O'Rourke visited Custom Credit's offices in July 1989. He recalled Mr O'Rourke having a meeting with Simon Adams in the interview office. Adams called him in as he was walking by. O'Rourke then asked him some questions about Irwin Chambers as an investment. According to Lewis, he responded that he thought it could be a good investment as it was located close to the Central Law Courts and because of that it could attract solicitors as tenants of the building. He said also that the Irwin property could provide a decent rental income.

358 Mr Lewis said that this exchange took place in approximately five minutes and he did not take a seat at that meeting (transcript P1529). He denied making the first, second and third representations as alleged by Mr O'Rourke at this or any other meeting. Further, he denied making a telephone call at about this time to discuss the swap transaction with particular reference to an inspection of the Irwin property and with a request to O'Rourke to obtain valuations from Hillier Parker.

359 According to Mr Lewis, he did not at the time receive a Hillier Parker valuation for the Irwin property. Having observed the relevant document (D19 @ 2/653) he observed that it had been signed on the front page by Adams and dated 19 July 1989. Such a notation would indicate to him, based on his knowledge of the Custom Credit practice at the time, that Adams received the Hillier Parker valuation. He doubted that he would have seen the valuation until the time that it was attached to the 20 July St Andrews/Irwin P83 loan application. That application was prepared by Adams, albeit signed later by Lewis as Acting State Manager in order to approve the loan.

360 Mr Lewis said that the St Andrews/Irwin loan was for twelve months at an interest rate of 21.5 per cent variable at the discretion of Custom Credit. This was not an unusual rate because the interest rates were high at that time due to various factors: the property boom, Custom Credit was known as a flexible lender and as a lender of last resort, Custom Credit financed property developments providing short-term loans with interest repayments being usually incorporated into the amount loaned.

361 Mr Lewis acknowledged that if Dallas borrowed from Custom Credit then, given the nature of the era and Custom Credit's flexibility in lending, it was likely Dallas would, other things being equal, have been able to borrow money to finance the St Andrews project from Custom Credit. However, he was not aware of any proposal being submitted by Dallas at the time for that purpose. He was aware that Custom Credit replaced the Irwin property with the West Coast Highway land as security for the loan to Telbe. There was no need for Custom Credit to make enquiries as to the likelihood of a tenant being found who would rent the Irwin property for $122,400 per annum because the loan application was accompanied by a valuation from Hillier Parker which included estimated rental figures. It was usual practice for Custom Credit to rely on a valuation without doing any further investigation.

362 Mr Lewis said that when he left Custom Credit in November 1989, he had no knowledge that Dallas was defaulting on any of its loans. He acknowledged that in November 1989, he was dismissed from his employment at Custom Credit by Mr Bonwick. Later, in 1993, he was charged with 13 criminal offences, to which he pleaded not guilty, and was eventually found guilty on eight of the 13 counts in 1997. In particular, on one count the jury found that he, with intent to defraud being a servant of Custom Credit, omitted certain material particulars from an application for advance by Telbe for a loan of $11,000,000 to acquire the Irwin property and Meadowvale Avenue, South Perth. His appeal to the Court of Criminal Appeal against his conviction was dismissed. However, he said that he did not steal any money from Custom Credit or use his position with Custom Credit for his own financial gain.

363 Mr Lewis said that, throughout his trial, and at all subsequent times, he maintained that he did not have a financial interest in Telbe. He said that he became a director and shareholder of Telbe after he had left Custom Credit. His wife's role as a director of Telbe was not for financial gain. The company was managed by Mr Conway and operated for his benefit.

364 In a supplementary statement, prepared after the counterclaim was amended, Mr Lewis said that to the best of his recollection, the 13 June "golf buggy day" was the first and only time that he visited the Joondalup Golf Course. He did not attend any other meeting with Mr O'Rourke at the Joondalup Golf Course. He never requested feasibilities for the St Andrews land or the West Coast Highway land from O'Rourke.

365 He said that he could not remember seeing or speaking to Mr O'Rourke at the Burswood function to farewell Mr Exton. However, he was certain that he did not talk to Mr O'Rourke about any proposed exchange of the West Coast Highway land for the Irwin property. The first time he heard of such an exchange was from Mr Philip Simcock, a director of Westminster Properties. By that time, contracts for the swap transaction had already been signed. He denied telephoning Mr Dempsey in relation to the proposed exchange and said to the best of his recollection he had never telephoned Mr Dempsey at all.

366 Under cross-examination, Mr Lewis said that he could not recall being faxed a feasibility document concerning the West Coast Highway land on 8 June 1989 (D17 @ T/399/400). Mr Lewis said that he did not request that a feasibility document be faxed to him and he insisted again that there was no discussion at the Joondalup Golf Course about such matters. He had no memory of seeing the D17 faxed document.

367 Under cross-examination, Mr Lewis agreed that as at July 1989 he was aware that the swap transaction was taking place and knew that the Westminster Properties' mortgage affecting the Irwin property would have to be transferred to the West Coast Highway land. However, he could not recall any direct negotiations with Mr O'Rourke concerning those matters. According to him, the amount of the St Andrews/Irwin loan application was determined by what Dallas needed and not by any need to ensure that the loan cap of $3,000,000 per client was not exceeded. He had visited Irwin Chambers but could not say specifically whether he had visited the Irwin property (the third floor).

368 Mr Lewis acknowledged under cross-examination that at this time he held the belief that the Irwin property could be tenanted. He had expressed a view to this effect on one occasion only being the occasion he had described when he was briefly in the Adams office while Mr O'Rourke was there. Mr Lewis did not have any informed or precise view as to what rental could possibly be obtained for the premises.

369 The cross-examiner took Mr Lewis to the 20 July St Andrews/Irwin P83 loan application (P83 @ 2/739). Mr Lewis continued to assert that this document was prepared essentially by Mr Adams. He acknowledged that at page 2 of the P83 document the purchase price of St Andrews (described as "Connolly") is given as $500,000 and the purchase price of the Irwin property as $1,200,000, although, in fact, the amount required to complete the purchase of St Andrews from the Joondalup Corporation was $530,000 and the purchase price of the Irwin property under the swap transaction was $1,475,000 (as appears from the 26 July D3 loan approval letter (D3 @ 3/782)).

370 He agreed also that at page 2 of the P83 document it is said that an application for developments in respect of St Andrews will be forwarded in due course; at page 3 it is said that the Irwin property premises "will be held as a long term investment". He could not explain how this information came to be included in the form other than by saying that Adams was essentially the author of the document. Mr Lewis disclaimed responsibility for some of the descriptive language appearing in the form. He could not recall providing information about the premises to Adams including an assertion at page 7 that debt level would be reduced by $650,000 through the sale of a development site at Scarborough. He took that to mean that the Dallas debt level was to be reduced by a reduction of moneys owed to Esanda.

371 Mr Lewis denied that the P83 loan application document was prepared by Adams and himself with false particulars in order to benefit Westminster Properties. He said that the Dallas application for a loan was simply a normal business transaction. He could not recall any discussion about Dallas being provided with loan funds for the development of St Andrews, but it would not be unusual for a party that had to borrow funds to acquire a development site to obtain funding for development in due course. He was not prepared to accept that he had dealings with O'Rourke in regard to the St Michaels loan application and continued to handle the Dallas business. He continued to assert that he did not know Mr O'Rourke well although it was possible that he had arranged for delivery of a book to Mr O'Rourke as a gift.

372 Mr Lewis was cross-examined at some length about a newspaper article that was published in the finance section of The West Australian newspaper on 15 July 1991 under the heading "Fraud Squad Probes Custom Credit Deals". Mr Lewis was quoted to the effect that Custom Credit threw out the rule book on standard finance company lending practices during the 1980s in its dealing with property developers. He was quoted as saying that Custom Credit made extraordinary profits on many Perth high risk property deals, several of which involved financing 100 per cent of the project's cost. Loans were characterised by interest rates jacked up to cover up projects risk and capitalised interest. Part of the deal often required Custom Credit being paid a slice of the profits when the development was on-sold. The article indicated that Mr Lewis' duties included preparing funding applications for authorisation by the State Manager, authorising progress drawings, acting as a cheque signatory, monitoring the portfolio and writing new business. He is quoted as saying that his eight years at Custom Credit were exhilarating. He worked autonomously and was given free rein on his property loan portfolio of $180,000,000.

373 Mr Lewis agreed that some of the assertions attributed to him were correct. He agreed that his role included the seeking of new business and he spoke of working autonomously and finding the experience exhilarating. However, essentially, his role was to attract clients into the business and then to pass them on to other officers. Dallas did not become part of his portfolio but was passed onto Adams.

374 Under cross-examination, Mr Lewis was of the belief that his brief conversation with Mr O'Rourke in the Adams office might have occurred prior to the swap transaction. He believed he said that the Irwin property was a good investment but close to 16 years after the event could not recall whether he said it was an excellent investment. At the time, he knew that Mr Simcock was trying to market the Irwin Chambers property to solicitors. He understood that the law firm Godfrey Virtue had purchased a floor of the building and another firm, Mazza McCallum was interested in the property. He believed he said that it could provided a decent rental income. However, it was improbable that he would have nominated a precise figure as he had not discussed figures with Mr Simcock. At the time he did think that there would be no difficulty in getting tenants and it was possible that he communicated his thinking in that regard to Mr O'Rourke.

375 As to his brief encounter with O'Rourke at the Adams office, Mr Lewis could not recall whether O'Rourke said he was purchasing the Irwin property from Westminster Properties. Mr Lewis agreed that he did not tell Mr O'Rourke that Telbe had obtained a loan from Custom Credit which was secured by a mortgage over the building known as Irwin Chambers (and thus over the third floor known in these proceedings as the Irwin property). He denied that at the time he was acting as a dealmaker for Simcock of Westminster Properties.

376 In what seemed to be an unguarded aside, Lewis added that if he had effected the introduction of O'Rourke and Simcock he would have asked for an introduction fee payable to him personally. He had no knowledge of Mr O'Rourke insisting that the proposed transaction be put through Mr Dempsey. He was aware that Jones Lang Wootton were agents for Mr Simcock. He had no memory of providing Mr Adams with a brochure about Irwin Chambers or of giving wording from such a brochure to Adams to be used in the P83 loan application.

377 The cross-examiner referred Mr Lewis to the 26 July St Andrews/Irwin D3 loan agreement (D3 @ 3/782). Mr Lewis denied that any protest had been made by Mr O'Rourke at the time this document was signed to the effect that Custom Credit had failed to provide development funds for St Andrews. He agreed that no development funds were provided by Custom Credit but said that he had no memory of any such funds being promised to Dallas. He denied dealing with Mr O'Rourke's alleged protest by assuring him that development funds would be provided.

378 The cross-examiner focused also upon the further payment of $500,000 made after settlement of the swap transaction. Mr Lewis had no knowledge of this amount being provided as development funds for St Andrews. Mr Lewis could not recall exactly why $500,000 was required by Dallas. As to the in-house Custom Credit memo dated 29 September 1989 (P78 @ 3/1021), he could not recall the document, although it was signed by him as Business Development Manager to signify that he had recommended it for approval. He said that, in effect, this was a new advance, but on an existing security, and it was therefore not necessarily unusual for it to be evidenced by a short form of application.

379 Before leaving the evidence of Mr Lewis, I note that he was not cross-examined about the alleged lunch at the Mediterranean Restaurant which figured prominently at an early stage in the evidence-in-chief given by Mr O'Rourke. Counsel acknowledged that this was due to an oversight and I accept his assurance in that regard. It will be apparent from earlier discussion that, on Mr O'Rourke's account, discussion at the restaurant for the most part echoed the discussion which was said to have taken place at the Adams office on that day and the decision by O'Rourke to proceed with the swap transaction. However, it does have a part to play in assessing the credibility of the two main witnesses.

381 Mr Adams said that in March 1988 he was employed as a Lending Officer with Custom Credit. It was his first job after graduating from university. He was involved in the preparation of applications for finance. Around July 1989, he was promoted to Property Finance Manager. He had worked on the Dallas files concerning the St Michaels project. One of his first clients in his new role as Property Finance Manager was Dallas which had applied for finance for two new projects, being the St Andrews land and the Irwin property.

382 Mr Adams provided further details as to his involvement with the St Michaels loan. He said that in early June he visited the development with Mr O'Rourke and Gordon Carruthers. He remembered walking around the golf course and looking at the units already constructed. He drafted the application for finance and signed it on 15 June 1989, that is, he recommended that a loan be made to Dallas for $1,460,000 to refinance the St Michaels project. The loan offer letter to Dallas dated 6 June 1989 (D47 @ 1/380) preceded the formal approval by Mr Exton on 16 June 1989, and preceded the provision of the Hillier Parker valuation dated 19 June 1989 concerning the St Michaels units. However, in his experience such a sequence of events was not unusual at Custom Credit at that time. The terms of the third mortgage secured the obligations of Dallas up to $1,460,000.

383 Mr Adams said (at par 49 of his witness statement) that Mr O'Rourke first mentioned a proposal for further finance to him in or about late June 1989. Dallas proposed exchanging the West Coast Highway land for the Irwin property which was owned by Westminster Properties. Mr Lewis was aware that Westminster was Simcock's company and Simcock was an existing customer of Custom Credit.

384 Mr Adams said that he prepared an application for finance by Dallas for $1,540,000. He discussed the advance with other Custom Credit staff, specifically Lewis and Richards. He did not tell or promise O'Rourke that Custom Credit would provide all finance required to develop St Andrews. He was under the impression that the sales from the St Michaels project would be completed before Custom Credit looked at financing the development of the St Andrews land.

385 On 20 July 1989 he finalised the application and recommended it for approval to allow the swap transaction to proceed. He was not influenced by anyone else in that regard although he was aware that Lewis, his immediate superior, was also recommending the loan. Again, it was not unusual to finalise an in-house loan application after the approval letter was prepared. In this case the application did not have to be approved by the Sydney office as the Dallas total indebtedness, as appears from the 20 July P83 loan application form, did not exceed $3,000,000.

386 Mr Adams could not recall specific conversations about this loan with Mr Lewis, but as Lewis was his immediate supervisor and the person who introduced him to Dallas, he was certain that Lewis was fully aware of the details at every stage. Finance for the loan was to be secured by mortgages over the St Andrews land (valued at $1,500,000 by Mr Collins of Hillier Parker on 27 June 1989) and over the Irwin property (valued at $1,530,000 by Mr Loughnan of Hillier Parker on 12 July 1989). The parties executed the relevant mortgages, which were both dated 20 July 1989 with Mr Adams witnessing the relevant signatures. On or about 20 July 1989 Custom Credit made the first advance pursuant to these mortgages (so that Dallas could settle on the purchase of the St Andrews land).

387 The St Andrews/Irwin loan agreement for $1,440,000 is reflected in a letter dated 26 July 1989 from Adams to Dallas (D3 @ 3/782). Mr Adams said that on or about 27 July 1989 he wrote to Suzanne Carruthers at Dallas enclosing approval letters in respect of the St Michaels loan and the St Andrews/Irwin loan (P75 @ 3/791). From the St Michaels loan, $1,000,000 had already been distributed to Esanda and $300,000 to Dallas. From the St Andrews/Irwin loan, $390,000 had already been advanced to the Joondalup Development Corporation (on the settlement of the St Andrews purchase), $130,666 had been paid to Dallas and some lesser amounts had been outlaid for legal costs and so forth.

388 Mr Adams said that on or about 11 August 1989 Dallas wrote to Custom Credit asking to draw $100,000 in funds from the St Andrews loan account for settlement. This was done on or about 16 August 1989. The solicitors Frichot & Frichot sent a fax attaching the settlement statements for the settlement of the two properties involved in the swap transaction, the West Coast Highway land and the Irwin property. The settlement took place at the end of August.

389 Mr Adams said that an internal Custom Credit memorandum dated 29 September 1989 records that Dallas had arranged refinancing of six units at St Michaels with Citibank for $714,000. According to the memorandum, Dallas requested $500,000 of those funds be released to purchase a duplex site at Joondalup, provide working capital to the planning stage of a proposed retail centre and retirement village and to provide an interest capitalisation facility to support these borrowings. I pause to note that the proposed retail centre was the Shenton Shopping Centre and the retirement village was the Joondalup Retirement Village, being other properties listed in the Dallas financial statements and related inventory.

390 Mr Adams said that he and Lewis recommended the release of funds and Mr Richards approved it, as appears from the three signatures on the memorandum dated 29 September 1989 (P78 @ 3/1020). Dallas' debt to Custom Credit was $2,345,572 secured by registered first mortgages over four units at St Michaels, the St Andrews land and the Irwin property. He wrote to Dallas on or about 27 October 1989 informing it that the interest rate on their loan account for St Michaels was being increased to 25 per cent.

391 Mr Adams said that he did not have any idea whether Mr Lewis made the first, second and third representations to Mr O'Rourke as alleged by Dallas or not. He certainly did not ever see or hear any thing done by Lewis of this nature. He did not know until a later stage that Mr Lewis might have had some direct interest in Telbe, and he could not assist with any issue as to whether Lewis may not have disclosed his interest to O'Rourke. The latter presented as an experienced and knowledgeable property developer.

392 Mr Adams said that towards the end of 1989 he learned that Dallas had begun to fail to make interest repayments as and when they became due. On 28 February 1990 he recommended approval for a further small advance of $115,000 to Dallas to cover a further interest payments deficit. This further advance was to be secured by the fourth mortgage. The principal was due on 28 May 1990 or on demand and attracted interest at 23.5 per cent.

393 Mr Adams said that he was asked to leave Custom Credit in about May/June 1990 because of his association with certain files that became the subject of an investigation by Mr Bonwick. He was later charged with seven offences concerning his involvement concerning certain files that are not related to Dallas matters. He stood trial in June 1994 and was acquitted of five fraudulent false accounting charges concerning the T transactions. He was found guilty by a jury of two forgery charges concerning the M transactions. The circumstances of those charges had no association with the circumstances, the subject of his evidence in this case. He said that he could not recall the status of the Dallas accounts when he left Custom Credit.

394 In the course of re-examination Mr Adams said that his sources of information in regard to preparation of the 20 July St Andrews/Irwin P83 loan application document included the two Hillier Parker valuations mentioned in the document which by then were in his possession. There might have been a degree of joint work or collaboration with Lewis and other Custom Credit officers in regard to preparation of the documents. However, as he was the Property Finance Manager for that particular transaction, at the end of the day it was his responsibility to prepare the submission and recommend it on its merits.

395 He said further under re-examination that it was not open to him to authorise any extra drawings on the mortgage to secure the St Andrews/Irwin loan without further documentation because that loan was fully drawn by the end of August and stamped to secure only $1,440,000 the subject of the loan application. He was not prepared to accept that the 29 September P78 memorandum approving a further advance of $500,000 was generated in an improper manner or to provide funds for any improper purpose. He could not recall anyone on behalf of Dallas making any complaint to him or to any of his superiors as to the receipt of $500,000 after the end of September.

396 Let me now turn to the cross-examination of Mr Adams.

397 Mr Adams was taken first to the St Michaels loan. He was aware that Esanda already had finance in place for the St Michaels land. At that time he was the most junior of the lending personnel and was acting mainly under Mr Richards but also assisted Mr Lewis from time to time. He understood that someone from Dallas, presumably Mr O'Rourke, had approached one of his superiors at Custom Credit about the matter before he became involved. This was probably Mr Lewis because he understood that Dallas was initially a Lewis client. He understood this because it appeared to be Lewis who was dealing with Dallas and his instructions in regard to finance for the St Michaels land came from Lewis. He took over Dallas as a client from Mr Lewis when he was moved up to his new role as Property Finance Manager and Lewis was promoted.

398 Mr Adams acknowledged that in early June 1989, after he had learned from Lewis that Custom Credit was going to provide finance for the St Michaels land, he went to see that development with Mr O'Rourke and Mr Carruthers. It was at about that time that he played a game of golf with Mr Carruthers and attended a charity function, perhaps in aid of a Telethon Appeal, at the golf course. Mr Lewis was at the function. On a separate occasion to the day he played golf, he inspected the St Michaels development in the company of Mr Lewis, Mr O'Rourke and Mr Carruthers.

399 Mr Adams agreed that the St Michaels P71 loan application contained (at page 4) a feasibility statement but this was not provided to him by Mr Lewis. He had a recollection of obtaining the information from a brochure of some sort depicting the units in question and other documents concerning sales and pre-sales. He believed that he had also received an asset statement from either Mr O'Rourke or Mr Carruthers. He was satisfied that Dallas had the capacity to service the debt from sales as only eight of the twelve units had to be sold in order to clear the debt.

400 Mr Adams recommended the St Michaels loan application for approval on 15 June 1989 but believed that approval was a foregone conclusion. However, he was not aware of and was not prepared to say that approval of the lending to Dallas had already been given by Mr Lewis prior to the formal approval. However, it was correct that the loan application was prepared and approved by Mr Exton on 16 June 1989 before a formal valuation was received from Hillier Parker on 19 June 1989. The relevant mortgage was dated 26 June but he could not say exactly when the document was signed.

401 Mr Adams could not recall why the St Michaels loan was reduced from the figure of $1,560,000 typed on the form to the handwritten figure of $1,460,000. It might possibly be related in some way to the St Andrews/Irwin loan transaction, but he could not verify that. It may or may not have been a coincidence that the combined amount of the two loans did not exceed the State limit of $3,000,000.

402 As to the St Andrews/Irwin loan, Mr Adams could not recall how advanced the application for finance was at the time he took over as Property Finance Manager and assumed responsibility for the application. He was aware that Dallas was intending to build units on the St Andrews land. He knew also that Custom Credit was in the business of providing construction finance and sometimes became involved in profit sharing arrangements with the developer. He agreed that some proposals for borrowing by a client were never reduced to writing by the client, and could result from discussion between the borrower and the Property Finance Manager. The discussions would lead to supporting documentation. However, there could be discussion along the lines that Custom Credit would approve the proposal subject to it coming up to scratch with a valuation. Thus, the valuation became a critical part of the final approval and provision of finance.

403 Mr Adams said that the valuation that Custom Credit would be looking for was the end or completed value of the project. He agreed that, with project development, the finance to be provided might include both finance for the purchase of the land to be developed and for the construction of the project. However, because Custom Credit was a lender that took high risks, there were occasions where a developer might need to borrow funds as a temporary measure in order to acquire the land before they proceeded with development.

404 Mr Adams said that he became aware that the St Andrews/Irwin loan was required to effect an exchange or swap of real estate by Dallas when he was putting together the loan application. He did not know and therefore could not say whether finance had been approved at that time, but he understood that there had been discussions between Mr Lewis and Mr O'Rourke because Mr Lewis gave him details concerning the transaction. His recollection was that there was already information on the Custom Credit files concerning Irwin Chambers which facilitated preparation of the application. He could not be sure about who he spoke to in completing the details but believed that at some stage during the process he would have spoken to Mr O'Rourke or to the directors of Dallas, Mr Carruthers or Mrs Carruthers.

405 According to Mr Adams, his memory of the swap transaction was "quite vague" (transcript P1440) but he presumed that he became aware of it "after Mr Lewis had spoken to Mr O'Rourke, if that had been the case" (transcript P1440). This exchange with the cross-examiner then occurred (transcript P1441):

"But you know that Mr Lewis at some time spoke to you about a proposal that Dallas exchange West Coast Highway land at Scarborough for Irwin Street property?---Yes. I don't have a clear recollection of the conversation that I had or when I had it or where I had it. I'm making the presumption that Mr Lewis spoke to me because he was involved in the Irwin Chambers property, the lending for Irwin Chambers, and therefore would have provided me with some information in relation to the Irwin Chambers side of the transaction. I would have needed to get information either from Mr O'Rourke or other members of the family for the Scarborough property.

So is this a fair summary of your evidence: in substance you recall that Mr Lewis gave you information about the Irwin Street property side of the exchange of West Coast Highway land for Irwin Street?---He would have given me some of the information that I required for the submission, yes.

And in substance do you recall that he explained to you what the exchange transaction was?---He may have given me details in relation to that, yes.

Did he inform you of the financing that Custom Credit was going to provide to Dallas for this exchange transaction?---Either he or Mr O'Rourke would have been through those details with me.

Can you recall if Mr Lewis informed you of what those details were?---No, I'm sorry. I don't recall precisely if it was Mr Lewis."

406 Mr Adams said that he became aware that the essence of the transaction was that Dallas was to acquire a strata title of a floor in the Irwin Chambers building. He may have become aware of this from Lewis. He could not recall whether it was Lewis or O'Rourke who informed him that Custom Credit was going to provide finance to Dallas for the purchase of the St Andrews land, for by this time Adams was the Property Finance Manager with responsibility for preparing the relevant loan application document. The St Andrews/Irwin loan was described on the P83 loan application for as a "progressive bridging" loan. This was because, as separate properties and settlements were involved, the total advance would not be made simultaneously, albeit that the financing proposal was essentially for one amount.

407 As to the figures in the St Andrews/Irwin P83 loan application, Mr Adams was not able to explain how the projected advance of $1,540,000 became $1,440,000 or how certain other figures on page 2, including a supposed purchase price for the Irwin property of $1,200,000, were put on the form. He said that Lewis might have given him those figures but he could not recall.

408 The cross-examiner referred him also to the note on page 2 to the effect that an application for development funds "will be forwarded in due course". Mr Adams agreed that he was aware that Dallas had that intention at the time he prepared the form. He was aware that the St Andrews land was to be a construction project.

409 Mr Adams agreed that the details on the form concerning the Irwin property could well have been obtained from Mr Lewis because Lewis was already dealing with the property as security for another loan and would have had an intimate knowledge of the negotiations with prospective tenants at that time. Nonetheless, Mr Adams was dealing also with Mr O'Rourke and Mr and Mrs Carruthers in regard to the application and may have received information from persons other than Mr Lewis. It was possible it came from Lewis but he could not say categorically where exactly the information on the form came from.

410 Mr Adams said that there was always a reasonable amount of collaboration between the various property managers in regard to forms of this kind. When pressed he was prepared to accept that there was in fact collaboration with Mr Lewis in regard to preparation of the P83 loan application form. Some of the information appeared to have come from the Hillier Parker valuations which in this case (unlike the St Michaels loan) had been received prior to preparation of the form.

411 The cross-examiner pressed Mr Adams as to whether he and Mr Lewis anticipated that Custom Credit would provide finance for the development of the St Andrews land. Mr Adams responded as follows: "Subject to a future submission, yes." (transcript P1457). He agreed it was possible that he simply prepared the application on Mr Lewis' instructions and in collaboration with him, including in it the figures that Mr Lewis wanted to go into justify the transaction (transcript P1460). However, he continued to affirm that he had a lot of dealings with Mr O'Rourke and his family in relation to the St Andrews land so he could have obtained information from that source.

412 Mr Adams agreed that the form was signed off on behalf of Custom Credit on 20 July 1989 by he and Mr Lewis only. He could not say definitely whether the relevant mortgage documents were executed prior to 20 July, although in this case there was a possibility that it was in order to have the formalities, including stamping, attended to by 20 July. He agreed that the processing and preparation of the loan application had been in progress for some time prior to 20 July 1989. He agreed also that the financing transaction with respect to both the St Michaels land and the St Andrews land was probably in progress between he and Mr Lewis some time before the relevant valuations were prepared.

413 The cross-examiner took Mr Adams to the letter dated 27 July 1989 in which he referred to St Andrews, St Michaels and Irwin Chambers, spoke of enclosing approval letters for the advances provided in respect of those projects, and requested that the approval letters be signed and returned by Dallas (P75 @ 3/791). The date on the P75 letter was subsequent to completion of all the internal application forms and the execution and stamping of the related mortgages save for the stamping of the Irwin property mortgage which took place on 25 August 1989.

414 Mr Adams said he had no recollection of a meeting at his office prior to 20 July at which Mr Lewis, Mr O'Rourke and Ms Carruthers were present, or of any other such meeting at which the swap transaction or the St Andrews development was discussed. He was not sure who exactly had informed him about the swap transaction. He could not recall Lewis making the first, second and third representations to O'Rourke in his presence. He said that it was possible that at about this time Mr Lewis and Mr O'Rourke dined at the Mediterranean Restaurant, because it was one of Mr Lewis' favourite restaurants, and a common meeting place for Perth businessmen. However, he could not remember a particular occasion that they dined together. He could not recall an occasion when Mr O'Rourke attended the Custom Credit office and then went off to lunch with Mr Lewis at the Mediterranean Restaurant.

415 Mr Adams said that he was unable to recall a meeting at which the 26 July D3 loan agreement letter was presented to Mr O'Rourke, Suzanne Carruthers and Gordon Carruthers for signature. He could not recall any protest by O'Rourke to the effect that the letter failed to reflect an arrangement to provide development funds for the St Andrews land.

416 The cross-examiner took Mr Adams to the 29 September P78 memo bearing his signature concerning a further advance of $500,000 to Dallas (P78 @ 3/1020). He agreed that it was prepared by him, although he could not clearly recall the events giving rise to it. He did not think that development funding approval had been given for the St Andrews land at that time and he presumed that this was a supplementary application based on the release of some of the equity that was in the St Michaels development. If it had been a submission for a totally new loan, a full loan application would have been prepared. He could not recall who told him that $500,000 was required, whether it was Lewis or O'Rourke or who provided the information reflected on the memo as to the three purposes for which the further advance of $500,000 was required (that is, purchase of a duplex site; working capital for the shopping centre and Joondalup Retirement Village; a further $100,000 for an interest capitalisation facility to support these borrowings).

417 Mr Adams presumed that the $500,000 mentioned in the P78 memo was advanced and acknowledged, having regard to the Custom Credit account documents, that the amount was debited to the St Michaels loan account. He presumed that this was because there were not sufficient undrawn funds available on the St Andrews loan and the mortgage for that loan was only stamped up to secure $1,440,000.

418 Mr Adams agreed that all the funds to be advanced in respect of St Michaels had been advanced, and in that sense there were no undrawn funds in respect of the St Michaels loan. However, there were no additional funds capable of being drawn down based on the security of completed units at St Michaels.

419 Mr Adams agreed that as at 28 September 1989 Dallas was in a position to service the borrowing and repay the St Michaels loan from the sales of units because it had four units to sell. However, the drawing down of $500,000 on that account on 29 September 1989 precluded such an outcome. He could not recall who instructed him to draw the $500,000 against the St Michaels account. He would not have taken such a step by himself, unilaterally. He would have obtained the approval of either Mr Lewis or Mr Richards.

420 When it was put to Mr Adams that the 29 September P78 memo was a made up or concocted document to facilitate the payment to Dallas of $500,000, Mr Adams said that he was not necessarily prepared to agree with such a description. However, he acknowledged that there was no evidence that the funds were specifically used for the purposes that were stated on the P78 memo. There was also no evidence that an application had been made by Dallas for the listed purposes. When it was put to him that either Mr Lewis or Mr Richards directed him to prepare the application (which was described by the cross-examiner as a false application) in order to authorise the payment of $500,000 to Dallas, Mr Adams responded: "That's quite possible" (transcript P1486).

421 Mr Adams was referred also to the Suzanne Carruthers letter dated 10 November 1989 in which she seemed to accept that it was "more convenient" to have taken $500,000 from the St Michaels loan account but made a request that the amount in question be taken over to the St Andrews/Irwin loan with a second mortgage on Irwin (D5 @ 4/1107). He said that he did not specifically recall discussing that matter with her. He accepted that by a later letter on 11 December (D27 @ 4/1137) reference was made to securing the return of $500,000 made from the Dallas facility for the St Michaels development by second mortgage over the St Andrews/Irwin properties, and that there was a capacity in a security sense in those properties for the sum to be secured in that way. He accepted that the proposed security documents were never executed with the result that $500,000 sat as a debit in the St Michaels account with security only over the four remaining St Michaels units. This was how the St Michaels account stood into 1990 when Custom Credit issued default notices and took action under the mortgages.

422 I observed in earlier discussion that Mr Bonwick was called as a witness for Custom Credit and, having regard to his role at the time as the National Manager, Property Finance, was able to give a coherent account of the internal practices and procedures followed by Custom Credit. However, for the sake of completeness, it is necessary to take account also of matters raised with him in the course of cross-examination.

423 He said under cross-examination that the 20 July St Andrews/Irwin P83 loan application was in a form that would usually be prepared jointly by the Lending Officer and the relevant Property Manager. He said that approval of finance on a document other than a loan application document in the format of the D71 and P83 loan application documents would be out of the ordinary. However, as to the 29 September P78 memo concerning a further advance of $500,000 he was not necessarily prepared to concede that this was out of the ordinary, as it appeared to be a variation to an existing facility. It appeared to be not a further advance but rather a discharge of part of the Custom Credit security having regard to some funding made available through Citibank. In other words, the relevant account (the St Michaels account) was credited with $582,000 as a result of arrangements with Citibank and that was followed by a payment out of $500,000.

424 However, subject to these observations, Mr Bonwick seemed to accept that, viewed in isolation, the P78 document would appear to be an irregular form of documentation in regard to advancing $500,000 to a borrower.

425 Mr Bonwick agreed that he commenced his investigation as to certain apprehended irregularities in the Custom Credit office in Perth in late 1989 and came back to Perth on numerous occasions during 1990. His investigation was largely concerned with loans that appeared to have been made outside the standard Custom Credit policy guidelines and conditions of approval.

426 He agreed that it would be consistent with usual practice for discussions to be held with potential borrowers as to the level Custom Credit might be expected to advance funds. It would depend on the circumstances as to whether it would be in order for a Custom Credit officer to indicate that there might be difficulties in obtaining finance for two construction projects being carried on simultaneously. He could not envisage any circumstances in which he as a Custom Credit officer would say or suggest to a client that a CBD property should be acquired as a basis for obtaining finance. It was not appropriate for a manager to tell a client what kind of property he should acquire. A view might be expressed as to the prospects of obtaining finance but any view would always be subject to approval. It would be permissible to describe what Custom Credit might be inclined to finance subject to approval.

427 Mr Bonwick said that he could not recall any protest being made by Mr O'Rourke as to the placement of caveats. The placement of the caveats on the Dallas properties would not mean that Dallas necessarily had to cease trading, for alternative finance might be obtained from other sources.

428 Mr Bonwick gave evidence also about the Telbe matter. He said that it was a matter of concern that Telbe was the borrower but not the registered proprietor of Irwin Chambers, being the property in respect of which the $11,000,000 loan had been advanced. He formed a view that this was done to mask the reality that funds would be advanced to Westminster to acquire the property. He was of the view that Lewis had a conflict of interest in regard to that matter because of his association with Telbe that ought to have been disclosed to Custom Credit, but was not disclosed.

429 Finally, Custom Credit led evidence from Mr Kennedy. He is a licensed valuer with a lengthy experience in valuing properties. He had prepared valuations of West Coast Highway, St Andrews and the Irwin property. As regards West Coast Highway, his valuation of $720,000 was said to be the only valuation of that land in evidence. Mr Marr's report (D63 @ 9/3271), was arguably not an attempt to value the West Coast Highway land. Rather, Mr Marr sought to derive a current open market value as at September 1989, for 36 units which at earliest might only have been finalised at September 1990. I digress briefly to say that Mr Marr acknowledged that his approach did not proceed along the lines of the Kennedy valuation as an attempt to value land. His figure of $5,359,350 was in the nature of an estimate as to what the project would be worth on completion; and likewise his estimate regarding the St Andrews units of $5,220,000 in 1989 (D64 @ 9/3321).

430 Mr Kennedy valued the St Andrews land at $580,000 as at mid-1989. He said that the Irwin property was worth $1,000,000 at that time. It was put to Mr Kennedy in cross-examination, especially with respect to the St Andrews land that he had not used suitably comparable properties to gauge the value of the land. Mr Kennedy answered this by referring to a property in Connolly (ie St Michaels) sold at the time which was only two streets away from the property being valued and was clearly a comparable sale.

431 The Kennedy evidence, which put the value of the West Coast Highway land at $720,000 and the value of the Irwin property at $1,000,000, set the scene for a closing submission by Custom Credit that Dallas did well out of the swap transaction, and this probably had a bearing upon its decision to enter the transaction. On the Custom Credit case, Dallas entered the swap transaction of its own volition.

432 Section 52(1) of the Trade Practices Act provides that a corporation shall not, in trade or commerce, engage in conduct which is misleading or deceptive or is likely to mislead or deceive. The Fair Trading Act 1987 (WA) replicates this provision and contains related provisions concerning relief and vicarious liability. Section 82 of the Trade Practices Act provides that a person who suffers loss or damage by misleading conduct from another person may recover the amount of the loss or damage. Section 87 confers broad powers upon the Court to make such orders as the Court thinks appropriate if the Court considers that the orders concerned will compensate the person who seeks relief.

433 Whether the particular conduct is misleading or deceptive is a question of fact to be answered in the context of the evidence as to the alleged conduct and to the relevant surrounding facts and circumstances. A financial institution can be liable for gratuitous advice concerning the availability of finance and the financial implications of the transaction. It is not necessary to establish that a financial institution's representations were the only cause of the loss. It is sufficient if they were one of the causes: Elders Trustee & Executor Co Ltd v EG Reeves Pty Ltd [1987] FCA 332; (1987) 78 ALR 193.

434 In Sutton v AJ Thompson Pty Ltd (In liq) (1987) 73 ALR 233 the Full Court of the Federal Court applied the following principles drawn from the judgment of Wilson J in Gould v Vaggelas [1984] HCA 68; (1985) 157 CLR 215 at 236. First, notwithstanding that a representation may breach s 52, if the representee does not rely on it he has no case; second, if a representation is made in breach of s 52 which is calculated to induce the representee to enter into a contract, and that person in fact enters the contract, there arises a fair inference that he was induced to enter the contract by the representations; third, the inference may be rebutted, for example, by showing that the representee, before he entered the contract, either had knowledge of the true facts and knew them to be true or alternatively made it plain that whether he knew the true facts or not he did not rely on the representations; fourth, the representation need not be the sole inducement, it is sufficient so long as it plays a part, even if only a minor part in contributing to the formation of the contract.

435 Intention is not a necessary ingredient of the statutory cause of action although the courts have indicated that conduct will not mislead or deceive a person having a conscious awareness of the true facts or correct information. Brown v The Jam Factory Pty Ltd [1981] FCA 35; (1981) 35 ALR 79.

436 These cases indicate that the claimant must show a causal connection between the conduct complained of and the loss for which compensation is sought. Actions based on s 52 are analogous to actions in tort and the remedy of damages applicable in an action in tort. That may involve a determination as to what the injured party would have done if he had not relied upon the false representations: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1.

437 It emerges, then, that recovery under s 52 is founded by the applicant's actual reliance upon the misleading or deceptive conduct, although that conduct was not the only factor in the applicant's decision to enter a particular agreement, and although the applicant did not seek to verify the representations or did so inadequately and so failed to discover their falsity.

438 In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 2) [1989] FCA 246; (1989) 40 FCR 76 Lee J observed that in assessing the extent of the pecuniary remedy available under s 82 of the Act, it may be unnecessary to define that measure by reference to the particular concepts of remoteness, causation, mitigation and contributory negligence. The enquiry as to the amount of loss or damage suffered by a person becomes an assessment of that which is reasonable having regard to the degree of connection between the loss suffered and the contravening conduct as well as to the extent to which the loss could have been mitigated. Therefore, if a person elects to affirm a contract induced by fraud when possessing information which would indicate to a person acting reasonably that the loss caused, and to be caused, by the tort is best mitigated by rescission of the contract, such further loss may be irrecoverable because it is not within the contemplation of s 82.

439 In Poseidon Ltd & Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 the High Court held that damages for deprivation of a commercial opportunity should be ascertained by reference to the Court's assessment of the prospects of success of that opportunity had it been pursued.

440 In Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 the appellants borrowed money under loan facilities which allowed GIO to vary the interest rate whereas GIO had represented that the rate would be fixed for the term of the loan. The appellants claimed the difference between the actual costs and the represented costs. The High Court held that no loss or damage had been suffered because no other loan available in the market at the relevant time would have given them a better rate than the actual rate provided by GIO.

441 As I noted in earlier discussion, the High Court indicated in that case that neither the amount recoverable under s 82, nor the orders that might be made under s 87, were limited by analogy with breach of contract, tort or equitable remedy. However, the remedial orders made pursuant to the wide discretionary power in s 87 should be designed to ensure a fair result. However, it seems from other previously decided cases (such as Henjo (supra)) that in exercising the discretionary power the Courts will take account of the subsequent conduct of the parties and the capacity of the complainant to be restored to its former position.

442 Where silence is relied on in order to show a breach of s 52 it will depend on the circumstances whether it constitutes conduct which is misleading or deceptive: Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477.

443 In Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (New York Deli case) [1988] FCA 40; (1988) 39 FCR 546 it was held that silence may be relied on in order to show a breach of s 52 when the circumstances give rise to an obligation to disclose relevant facts. Further, the duty is not negated by a failure by the person affected to make enquiries which, if made, would have revealed the true position. In that case there was thought to be a duty to disclose the existence of the seating limitation in the restaurant before any contract was signed.

444 Section 84 of the Trade Practices Act provides that where it is necessary to establish the state of mind of the body corporate, it is sufficient to show that a servant or agent of the body corporate had that state of mind provided he was acting within the scope of the person's actual or apparent authority.

445 Section 84(2) provides that any conduct engaged in on behalf of a body corporate by a servant or agent of the body corporate within the scope of the person's actual apparent authority shall be deemed for the purposes of the Act to have been engaged in also by the body corporate.

446 Various decided cases dealing with this provision and the statutory concept of vicarious liability are reviewed in "Miller's Annotated Trade Practices Act 1974" (24th ed) at par 1.84.5 and following. The decided cases suggest that the statutory provision is an enlarging provision of general application. The phrase "on behalf of" suggests some involvement by the person concerned with the activities of the corporation. It casts a much wider net than conduct by servants in the course of their employment. It is not necessary to show benefit to the corporation in order to prove that conduct was engaged in on its behalf. Something is done on behalf of a corporation if the actor engaged in the conduct acts either intending to do so as a representative for the corporation or in the course of the corporation's business, affairs or activities.

447 It will now be useful to stand back from the details of the evidence and make some general observations about the respective cases. These observations will be of assistance to me in weighing up the evidence and proceeding to specific findings concerning the central issue, namely, whether the first, second and third representations were made as alleged by Dallas in its counterclaim. I remind myself again that the burden of proof lies upon Dallas to establish the facts contended for upon the balance of probabilities. These observations will inevitably focus upon the events in mid-1989 set out in my summary of alleged events and upon any subsequent events which may cast light on the making of the swap transaction and related financial arrangements.

448 I am conscious also that a good deal of the evidence can only be properly assessed by keeping in mind that the Dallas counterclaim was amended after Mr O'Rourke and his daughter, Suzanne Carruthers, gave evidence at the first hearing in 2003. Mr O'Rourke gave some further evidence at the second hearing in 2004 and it was at this hearing, against the background of the amended counterclaim, that other witnesses gave evidence concerning the representations complained of and related events, namely, Mr Dempsey, Mr Collins, Mr Marr, Mr Howard, Mr Pringle and Mr Jones (for Dallas); Mr Bonwick, Mr Lewis, Mr Adams, Mr Ainslie and Mr Kennedy (for Custom Credit). The expert witness for Dallas, Mr Spence, gave evidence at both hearings but his evidence was essentially confined to the claim for damages.

449 Dallas contended originally that as a consequence of certain discussions commencing at the Joondalup Golf Course on or about 13 June 1989 Dallas was induced to enter the swap transaction. The crucial representations were said to have been made by Lewis of Custom Credit to O'Rourke of Dallas on or about 12 July 1989, being the date on which the Hillier Parker valuation concerning the Irwin property came to hand.

450 Put shortly, the first representation was that if Dallas entered the swap transaction, Custom Credit would provide the necessary finance, plus funds to purchase and develop the St Andrews land. The second representation was that the Irwin property constituted an excellent investment with a prospective net rental of $122,400. The third representation echoed the first representation in asserting that Dallas had to acquire the Irwin property in order to obtain finance for the St Andrews land. The nature of the representations allegedly made were not affected by the amendments to the counterclaim.

451 The amendments meant that Dallas continued to rely upon essentially the same facts and matters but within the framework of a different chronology. The repleaded case was that discussions between Lewis and O'Rourke concerning the provision of finance to Dallas commenced at the Joondalup meeting in or about early June (Item 2 on my summary of alleged events). These discussions were followed by an undated phone call from Lewis to O'Rourke (Item 4), a meeting at the golf course on 13 June (Item 5), the Burswood meeting at a golf course (Item 6), the undated Adams office/Mediterranean lunch meeting (Item 7), the inspection of the Irwin property on 19 June 1989 and the signing of the swap transaction contracts (Item 9). Dallas said that the representations complained of were made in the course of these encounters and as a consequence Dallas was induced to commit itself to the swap transaction and related financial arrangements.

452 The repleaded Dallas case appeared to accept that the Hillier Parker (Irwin) valuation was brought into existence in written form after 19 June, that is to say, on 12 July, being the date appearing on the document. However, the making of the representations complained of and the entry into the swap transaction was no longer linked to presentation of the Hillier Parker valuation. The amended counterclaim was designed to take account of evidence given by Mr O'Rourke under cross-examination and to address the so-called "temporal paradox", namely, that the representations complained of, upon a close analysis of the original Dallas case, could be seen to have post-dated the offer and acceptance forms dated 19 June whereby the swap transaction was effected. On the repleaded case, as appears from my summary of the alleged events contended for by Dallas, the representations complained of were made prior to the signing of the swap transaction contracts on 19 June 1989.

453 There were certain features of the surrounding circumstances that seemed to lend support to the Dallas case. The witnesses for Custom Credit affirmed that as at mid-1989 Custom Credit was a high risk lender with a keen interest in the profitability of land development ventures undertaken by its clients. It was eager to acquire new clients. The Perth office had a considerable degree of autonomy so long as loans to a particular client did not exceed $3,000,000.

454 There are indications in the evidence Custom Credit loans were often talked about, and figures mentioned, before the relevant paperwork was completed. For example, Adams gave evidence to the effect that once a client was known to Custom Credit the client was not necessarily obliged to write to Custom Credit about its requirements. Indeed, it appeared to be a matter of undisputed fact at the trial that the documentation concerning the St Andrews/Irwin loan consisted essentially of the loan application prepared in-house reflecting information obtained from the client (the St Andrews/Irwin P83 loan application approved 16 July 1989) followed by execution of the related mortgages dated 20 July 1989. The first payment was made on 21 July 1989 so that Dallas could settle with the Joondalup Corporation in regard to the purchase of the St Andrews land. The 26 July D3 loan approval letter was signed by Dallas a few days later. All of this indicates that verbal arrangements were proceeding in advance of or in conjunction with preparation of the relevant paperwork. However, there can be little doubt that funds would not be advanced until the relevant mortgage documents were executed.

455 Further, all of this suggests that Custom Credit was keen to do business with Dallas as a new client. The Dallas evidence establishes that its initial approach to Custom Credit by letter dated 18 May 1989 for a loan concerning the St Michaels land was attended to promptly. This adds to the impression that as at early June 1989 any discussion by Mr O'Rourke about his requirements was likely to be viewed favourably.

456 If it be held eventually that Mr O'Rourke's principal contact at Custom Credit was Mr Lewis, Dallas is entitled to argue that the likelihood of Custom Credit taking a robust view of its role as lender was thereby increased. Mr Lewis had connections to and some previous association with Mr Simcock and his brother-in-law, Mr Conway. Mr Lewis appeared to be willing to assist these other developers in carrying out their plans, possibly with a view to earning a commission for himself. This opens the door to a finding, it can be argued, that Lewis was the proponent of the swap transaction (as alleged by Dallas) acting in the belief that such a transaction would be beneficial to all concerned. It would win new business for Custom Credit and would be of assistance to his friends in helping them to dispose of a portion of the city property they had acquired and were trying to sell.

457 There are certain other matters which weigh in favour of the Dallas case also. It appears that the Dallas contact at Custom Credit initially was the Business Development Manager at that time, Mr Jim Richards, who approved the St Michaels loan. However, thereafter, it seems that the Dallas business was looked after either by Mr Lewis or by his subordinate, Mr Adams, for no other officer was identified by either side at the trial as the person involved. A finding will have to be made in due course as to whether Mr Lewis was indeed the principal point of contact as alleged by Dallas. However, for the time being, as a matter of general observation, it seems rather unlikely that the senior figures at the Perth office of Custom Credit would be inclined to let a comparatively junior officer such as Adams, who was 23 years of age at the time, handle the Dallas portfolio: a significant piece of new business for Custom Credit.

458 If Lewis was more closely involved with Dallas and O'Rourke than his evidence at trial suggested, then such a finding would lend support to the notion that the St Michaels P71 loan application, which was adjusted downwards by a handwritten note to $1,460,000, and the St Andrews/Irwin P83 loan application for $1,540,000, were configured to ensure that the State limit of $3,000,000 was not exceeded. In other words, they were configured to ensure that the Head Office of Custom Credit in Sydney did not take an interest in the subject loans, bearing in mind that the St Andrews/Irwin loan concerned a property which was already affected by a substantial mortgage to Custom Credit.

459 Mr Lewis conceded at trial that he was subsequently convicted for his role in failing to acquaint Head Office with the full details of the Westminster/Telbe transaction whereby Custom Credit advanced $11,000,000 which was secured by a loan over the whole of Irwin Chambers. I note in passing that annotations in the hand of Mr Lewis appear on the Dallas letter dated 18 May 1989 (D10 @ 1/355) concerning the St Michaels loan, which suggests that Lewis was conversant with that matter, although, on his account at trial, he made these annotations at a later stage while he was assessing the merits of the St Andrews/Irwin loan.

460 There are certain features of the St Andrews/Irwin P83 loan application which also invite comment and appear to weigh in favour of the Dallas case. The form was signed by Adams as Property Finance Manager and by Lewis as the Acting State Manager on 20 July 1989, that is, a month after the signing of the offer and acceptance forms effecting the swap transaction, and after receipt of the Hillier Parker valuations concerning the St Andrews land (27 June 1989) and the Irwin property (12 July 1989). However, Mr Adams conceded that "quite possibly" Mr Lewis played a part in providing him with the information required to prepare the P83 loan application document. Mr Adams acknowledged also that when a developer such as Dallas was funded to acquire vacant land there was generally an expectation that, subject to valuation and appropriate budgeting, further funding for development was likely to be made available in due course. Indeed, the P83 form at page 2 says expressly that "an application for development funds will be forwarded in due course".

461 These matters of evidence, plus the presence of related mortgages (which appear to have been prepared prior to formal approval of the P83 loan application document) could open the way to a finding in favour of Dallas that Lewis made the verbal representations as alleged prior to the making of the swap transaction on 19 June 1989. On this view, the development funds for St Andrews were promised but not specifically included in the P83 application form so that the State limit of $3,000,000 would not be exceeded.

462 The Dallas case is said to be corroborated also by certain facts and matters which do not depend upon the testimony of Mr O'Rourke and his daughter, Suzanne Carruthers. The video of the Channel 9 news item on 13 June 1989 is clear evidence that O'Rourke and Lewis were known to each other and on at least one occasion were in each others company at the Joondalup Golf Course. The exhibits include a two page document which purports to be a transmission sheet and related feasibility concerning the West Coast Highway land. This was allegedly faxed to Mr Lewis at Custom Credit on 8 June 1989 (D17 @ 2/399). The evidence of Mr Dempsey is said to confirm that Mr Lewis played an initiating role or at least an active part in bringing about the swap transaction. The evidence given by Lewis at trial contained an acknowledgement that on at least one occasion he was in Mr O'Rourke's presence at the Adams office and made some favourable comments about the Irwin property.

463 On the Dallas case, it is against this background, all of which is said to make it likely that the representations were made as alleged, that the evidence of Mr O'Rourke must be brought to account. He is said to have given evidence that the representations were made to him prior to 19 June 1989 with the result that Dallas was induced to enter the swap transaction. The evidence of Suzanne Carruthers is relied upon to back up her father's evidence that feasibilities were provided to Lewis at the Joondalup meeting in or about early June and that her father was in the presence of Lewis again on the occasion of the Adams office/Mediterranean lunch meeting prior to 19 June when discussion took place concerning the merits of the swap transaction.

464 A further constituent of the Dallas case concerns the payment of $500,000 debited to the St Michaels loan account on 29 September 1989. Dallas contended that this payment was made in response to Mr O'Rourke's demand that the Lewis promise to provide development funds for St Andrews be honoured. The payment suggested that the promise contended for had been given, prior to the swap transaction, and, again, in response to O'Rourke's protest upon the signing of the St Andrews/Irwin D3 loan agreement letter on or about 26 July 1989.

465 This line of argument was supported by cross-examination designed to show that the three purported purposes for the payment set out on the 29 September P78 internal memo signed by Adams, Lewis and Richards were spurious. It was put to Adams and Lewis that the three purposes, which had nothing to do with development of the St Andrews land, and the P78 memo itself were "concocted". The Dallas position was expressed in this way in its closing submission (at page 34):

"(iii) Exhibit P78 is contrived and false because:

(1) the stated purposes for the advance are false;

(2) the funds were not required or used for those purposes;

(3) the true purpose for which the funds were requested and advanced was for the St Andrews development;

(4) no written request for funds for these purposes was made by Dallas;

(5) no written confirmation of the advance was given by CCC;

(6) debiting the advance to the St Michaels account was false;

(7) it is inconceivable an authentic advance of $500,000 could have been made on St Michaels account secured by the St Michaels mortgage when only $406,964 was outstanding on that account on security valued at $600,000 (per Ex P78);

(8) an increase in the St Andrews/Irwin facility about the $1.44m already advanced could not be approved without exceeding the $3 million State cap requiring Head office approval;

(iv) The clear inference from Exhibit P78 and the circumstances in which the $500,000 was provided and internally documented is that Lewis contrived the advance because he had in fact promised O'Rourke to provide development funding for St Andrews but, by September 1989 had not done so; he, Lewis, had contrived the St Andrews/Irwin loan within the $3 million cap he was able to personally approve as Acting State Manager; he had to honour the promise he had made to O'Rourke but he could not do so without a new Application for Advance for St Andrews which would have required Head Office approval thereby exposing the swap transaction and Telbe's involvement to Head Office scrutiny."

466 However, it is at this point, as I proceed with my survey of the evidence in general terms, that it becomes necessary to test the validity of the Dallas stance by bringing to account some features of the opposing case.

467 As to the issue I have just mentioned, there is no documentary evidence to corroborate the O'Rourke evidence that at some stage prior to 29 September he asked Lewis for St Andrews development funds. Suzanne Carruthers collected the payment but was unable to say how the $500,000 was spent. There is no contemporary evidence that it was spent on the St Andrews land. There is evidence that some of it was spent for the purposes mentioned in the P78 memo, that is, a financial statement dated 30 April 1990 shows that a duplex block at Joondalup was acquired for $120,000 (D8 @ 10/135); the Spence cash flow sheet shows an outflow of $100,000 to Custom Credit in October 1989 (D53 not in the agreed bundle at sheet 1 page 2) which appears to be consistent with the "interest capitalisation" purpose (in the sum of $100,000) mentioned on the P78 memo.

468 In addition, it has to be kept in mind that at this time Dallas was in the process of converting St Andrews from a 22 unit project to a 29 unit project and it was therefore questionable whether it was in a position to proceed. The references in the P78 memo to expenditure on the Shenton Shopping Centre and the Joondalup Retirement Village are consistent with the chronology of contemporary events. Facts and matters of this kind indicate that care must be exercised in taking at face value what was said by the Dallas witnesses.

469 Indeed, the Custom Credit case could be said to proceed from the premise that if the evidence of Mr O'Rourke, Suzanne Carruthers and Mr Dempsey is removed from the equation the sequence of events is consistent with straightforward loan arrangements, unaffected by misrepresentations.

470 On this view, as at mid-1989 Dallas was overstretched financially. Mr O'Rourke recognised that he had no real prospects of developing the West Coast Highway land in conjunction with the various Dallas projects at Joondalup and that the borrowings from Perpetual Finance affecting the former land were a drain upon the company's resources. He wished to dispose of the West Coast Highway land as evidenced by the fact that he placed it on the market soon after it was acquired by Dallas in early 1989. Indeed, he had signed a counter offer to sell the land for $1,300,000 in April 1989 in response to an offer received from Mr Zencich.

471 On this view of the matter, Mr O'Rourke's desire to dispose of the West Coast Highway land was accentuated in mid-1989 when he found his way to the vendor of a city property known as Irwin Chambers who was prepared to swap a portion of the property for the West Coast Highway land at an agreed price for each parcel of $1,475,000. This represented not only a handsome markup on the price of $950,000 Dallas had paid for the West Coast Highway land a few months earlier but also an opportunity to apply for loan funds to complete the purchase and development of the St Andrews land. Accordingly, of his own volition, Mr O'Rourke committed Dallas to the swap transaction on 19 June 1989. He then looked around for finance (as evidenced by the letters written by his daughter and her husband to various institutions after the swap transaction) and eventually obtained finance from Custom Credit to complete the transaction and the purchase of the St Andrews land.

472 Further, both Dallas and Custom Credit recognised, as indicated by the note on page 2 of the St Andrews/Irwin P83 loan application, that when O'Rourke had finalised his plans and approvals concerning the St Andrews land he would make a separate application for further (development) funding in due course. Indeed, such an application was made in due course - in early 1990.

473 Thus, on this scenario, Dallas was not induced to proceed with the swap transaction and related loan arrangements by misrepresentations made by Lewis. The Dallas decision to proceed came about after a careful consideration of its own self-interest and as a result of its own enquiries. Lewis should be believed in asserting that he had very little to do with Mr O'Rourke and did not make the representations complained of.

474 A case of this kind leads immediately to the question of whether Dallas wished to and was in fact in a position to proceed with the development of the West Coast Highway land and the St Andrews land, for a central constituent of the Dallas case is that loan funds were promised for the development of the St Andrews land. Indeed, par 38 of the counterclaim speaks of a "financing agreement" whereby funds would be provided to complete the purchase and development of the St Andrews land "as proposed in the feasibility" (emphasis added), that is, the feasibility as defined in par 30, being that which O'Rourke presented to Lewis and Exton at the Joondalup meeting.

475 On the face of the pleading, the proposition is that as at mid-June 1989 the development scheme for the St Andrews land had been defined with such certainty that it was capable of giving rise to a concluded agreement. Not surprisingly, Custom Credit sought to rebut this proposition by relying not only upon the testimony of Lewis that he was not closely involved with O'Rourke but also upon evidence suggesting that it was unlikely the Joondalup meeting occurred as alleged in or about early June 1989 because feasibilities studies of the kind contended for were not in existence at that time.

476 It will be apparent from my earlier review of the evidence that the feasibility documents said to have been handed over at the alleged Joondalup meeting were the two undated documents concerning the West Coast Highway land (D12 @ 10/107) and the St Andrews land (D16 @ 10/80). In his initial evidence-in-chief Mr O'Rourke was adamant that the feasibility concerning the St Andrews land was the undated D16 document (transcript P126). At the second hearing, under cross-examination, he said that it certainly appeared to be the same document, although other answers given by him at that hearing were possibly open to the interpretation that what he handed over was a document resembling the D16 document (transcript P428 and transcript PP426-489). Both feasibilities were said to be documents prepared in-house at Dallas by Mr O'Rourke himself having regard to information provided by architects, quantity surveyors and prospective contractors.

477 The difficulty is that evidence given by Mr Jones at trial suggested that the figure for construction costs of $2,870,000 mentioned in the D12 West Coast Highway land feasibility was actually provided to the Dallas predecessor in title, St Ives Development Pty Ltd. Further, there was little evidence that Dallas had taken active steps to pursue the project.

478 The D16 St Andrews feasibility was even more problematic. The land valuation figure of $1,500,000 bore an uncanny resemblance to the valuation figure provided some weeks later by Mr Collins of Hillier Parker in his valuation dated 27 June 1989, some weeks after the Joondalup meeting. Moreover, the D16 document is clearly referring to a project for the construction of 29 units (not 22 units) which, on a document which was said to have been in existence at mid-1989, stood in stark contrast to evidence given at trial by the Dallas architect, Mr Howard. He said that the proposed development was not converted to a 29 unit project until early 1990. I remind myself also that the figure for professional fees of $113,031 and for building works of $2,784,000 appeared to mirror the particulars set out in a letter dated 9 April 1990 written by Howard to Dallas in regard to the revised St Andrews scheme.

479 Mr O'Rourke did not really manage to remove the doubts surrounding the D12 and D16 feasibility documents, and that in turn tended to cast doubt on his account of the Joondalup meeting. His stance was that these documents, or documents of that kind, were handed over, and the figures reflected in the Howard letter of 9 April 1990 (P44 @ 10/73) probably replicated figures prepared when St Andrews was a 22 unit project, notwithstanding the passage of time. Suzanne Carruthers had little to say about this aspect of the matter. She could say only that she brought the relevant file to the golf course at the request of her father and it seemed to contain feasibility figures. She did not, or was not able, to identify precisely what was handed over.

480 Difficulties with the Dallas case of this kind are arguably reinforced by the fact that the representations complained of are not directly reflected in any contemporary document. They depend essentially upon the evidence of Mr O'Rourke, and to a lesser extent, upon the evidence of certain supporting witnesses (Suzanne Carruthers, Mr Dempsey and Mr Collins) and circumstantial evidence. Counsel for Custom Credit argued forcefully that the changed story implicit in the amended counterclaim weighed heavily against the credibility of Mr O'Rourke. It was said that Mr O'Rourke changed his account of what happened (especially as to the Adams office/Mediterranean lunch meeting (Item 7) when confronted with the so-called "temporal paradox" that is, that representations made on or about 12 July in conjunction with receipt of the Hillier Parker valuation could not have induced the swap transaction (effected on 19 June 1989). Thus, Custom Credit contended, the Court was left with no clear picture, even on the amended pleadings, as to when exactly the alleged representations were made and as to what effect they had.

481 Further, and in any event, Custom Credit argued, the problem associated with the so-called "temporal paradox" had not been entirely overcome by Mr O'Rourke's reconsidered evidence as to the timing of certain events and by the amendments to the counterclaim. It seemed unlikely that Mr O'Rourke, as the person essentially representing Dallas, would make a decision to acquire the Irwin property without having inspected the premises. He had to obtain some indication of its worth from the valuer who would be supporting his application for loan funds. However, even on his reconsidered account, it seemed to follow that the decision to purchase was not likely to have been made until the day of the inspection, namely, 19 June 1989. If that were so, the graphic picture Mr O'Rourke had presented in his earlier evidence of being affected by the alleged representations, and deciding to proceed with the swap transaction and related loans at the Adams office/Mediterranean lunch meeting, did not sit comfortably with the undisputed fact that offer and acceptance forms dated 19 June 1989 were signed on the day of the inspection, that is, after the Adams office/Mediterranean lunch meeting. The evidence of Suzanne Carruthers, Mr Dempsey and Mr Collins was said to be not sufficiently credible to make good the deficiencies in the O'Rourke evidence.

482 Custom Credit contended also that events after the swap transaction tended to support its case. There were letters in evidence indicating that those associated with the management of Dallas did not understand that Custom Credit had agreed to fund the purchase and development of the St Andrews land. For example, by letter dated June 1989, the in-house accountant, Mr Arnold, wrote to the company's solicitors to say that at that time he was unable to nominate the financial institution that would be financing the purchase of the Irwin property (P15 @ 2/546). The directors of Dallas and Mr O'Rourke signed the 26 July D3 loan approval letter indicating their agreement for the loan advance of $1,440,000, notwithstanding that the letter contained no mention of development funds for the St Andrews land. No written protest was made. The lack of any written protest seemed surprising if loan funds of such a kind had been promised and Dallas was in a position to proceed with development work.

483 On the Dallas case, a further advance of $500,000 was made at the end of September in response to a request by O'Rourke for development funds. However, the relevant documentation does not suggest that the payment was made for that purpose. Suzanne Carruthers was unable to say in evidence how exactly the money was spent and her so-called letter of protest dated 10 November 1989 (D5 @ 4/1107) does not refer to a broken promise in respect of development funds. It speaks simply of correcting an error as to which account should be debited. The letter is hardly suggestive of any true grievance then being expressed about the $500,000 or the lack of development funds for St Andrews.

484 Custom Credit relied also upon evidence that Dallas was not ready to proceed with development of the St Andrews land until final costings were put together by the architect Howard and the prospective contractor between April and August 1990 in respect of the revised (29 unit) St Andrews project. The application for funding made by Dallas to Custom Credit after 31 March 1990 (D34 @ 8/2992) suggests that Dallas did not seriously contemplate proceeding with development work on the St Andrews land until about that time. This did not sit comfortably with the notion implicit in the Dallas case that O'Rourke was induced to proceed with the swap transaction and related loans in mid-1989 as a means of promptly funding the development of the St Andrews land.

485 I remind myself in passing that between mid-1989 and March 1990 Dallas had a number of other projects on foot. A contract to acquire the Joondalup Retirement Village land was effected on 2 June 1989. The St Michaels project was still proceeding. Mr O'Rourke gave evidence that the Shenton Shopping Centre project went to tender in September 1989 and the construction commenced in or about the October to November period (transcript P99).

486 It emerges, then, when one looks at the respective cases in overview, that on the Dallas side there are various circumstances which suggest that representations of the kind contended for could have been made. However, the evidence that they were actually made depends largely upon findings being made that the evidence of Mr O'Rourke should be believed as to what was said to him by Lewis on a few occasions between the alleged Joondalup meeting in or about early June 1989 and the alleged Adams office/Mediterranean lunch meeting which was held (on the Dallas case) shortly before 19 June 1989.

487 On the other side, Custom Credit points to various reasons why Mr O'Rourke's evidence should be viewed with caution, including especially the problematic nature of his evidence concerning the feasibility documents and the so-called "temporal paradox". Custom Credit contends that in the present case, the cross-examination of Mr O'Rourke and Ms Carruthers raised such serious illogicalities and vagaries in the case of Dallas, particularly as to 1989 times, places and dates, that it would be very difficult for any Court to accept the evidence from either of those witnesses as reliable, unless their evidence was independently corroborated by a reliable external source. In this case, there is no documentary evidence at all, to corroborate or even support any of the alleged oral representations of Mr Lewis to Mr O'Rourke. Indeed, such evidence as there is from documents, rests either inconsistently or uncomfortably, with the alleged oral representations.

488 I have to say that many of the submissions made by Custom Credit appear to be compelling. Putting it another way, they are matters giving rise to difficulties for Dallas that can only be disposed of it one accepts the version of events provided by Mr O'Rourke as the principal witness for the party bearing the burden of proof. This brings me to the credibility of the various witnesses.

489 It is against the background of these observations that I must now proceed to evaluate the credibility of the principal witnesses and to make specific findings.

490 In assessing the credibility of the various witnesses on both sides I am conscious immediately that the litigation has been in progress for many years and the trial commenced close to 14 years after the alleged representations were said to have been made. Thus, some allowance should be made for the vagaries of memory, and one should not be too hasty to impute to a witness an intention to mislead or embellish simply because his or her account is not entirely consistent with the contemporaneous documents. Nonetheless, as I indicated at the outset, the documents and the undisputed facts provide a useful framework within which to assess the credibility of the witnesses.

491 When I turn to the Custom Credit witnesses I have to say that I regarded Mr Bonwick as a straightforward and reliable witness and was generally inclined to give weight to what he said. However, he was not in a position to speak directly about the events giving rise to the representations complained of, being the evidentiary issue at the heart of the dispute between the parties. However, his evidence concerning the internal procedures of Custom Credit at the material time contributed to my understanding of the situation and had a bearing upon prospective findings of fact from which inferences could be drawn.

492 Mr Lewis and Mr Adams had both been convicted of criminal offences arising out of their period of employment with Custom Credit and both had left the company under a cloud. These circumstances, of themselves, do not prevent weight being given to their evidence. Indeed, both witnesses suggested that they had put their period of employment with Custom Credit behind them, and were able to speak objectively about the matters in issue, without any sense of grievance or self-interest. Nonetheless, I was naturally inclined to view their evidence with caution because the nature of their convictions suggested that at the relevant time they were capable of dissembling in dealing with clients and adding a gloss to documents that came before them. I am conscious also that Mr Adams was only 23 years of age at the relevant time.

493 Mr Adams presented as a reasonably straightforward witness and was apparently willing, perhaps too willing, to accept that documents put before him were open to various interpretations and the information they contained could have come from various sources. Under cross-examination, he answered many questions by accepting that what was put to him was "possible" or "quite possible". In re-examination he was asked about this and said that as to sources of information such an answer simply meant that he had no clear knowledge of exactly where the information came from, so he could not definitely answer yes or no as to what was put to him. At an earlier stage in his evidence he admitted that he did not have a clear recollection as to many matters and this was apparent from some of the answers he gave.

494 In the end, notwithstanding the reservations I have just voiced, I regarded him as a reasonably reliable witness as to those matters of which he had personal knowledge. He did not appear evasive and the fact is that his evidence was generally consistent with the contemporaneous documents and he was not tripped up in regard to matters of detail. It follows from this that I gave weight to that part of his evidence in which, in various ways, he suggested that Lewis was more actively involved in talking to O'Rourke, and in contributing to the final shape of the 20 July St Andrews/Irwin P83 loan application than Lewis himself had referred to. However, it follows from this also that I felt obliged to give weight to that part of the Adams evidence in which he said that the representations complained of were never made in his presence at a meeting comprising or resembling the Adams office/Mediterranean lunch meeting. I gave weight also to his inability to recall an occasion on or about 26 July 1989, when the 26 July St Andrews/Irwin D3 loan approval letter was being signed, and when a protest was allegedly made by Mr O'Rourke about the absence of development funds for St Andrews.

495 Put shortly, then, the Adams evidence was not entirely supportive of the Custom Credit case. However, it could not be regarded as direct corroboration for the allegations upon which the Dallas case depended. Further, as to those areas where there was a degree of difference between Adams and other witnesses, including Lewis, some of the answers given by Adams were open to the interpretation that his recollection was imperfect. As a person in the fringes of the transaction, and apparently without any direct financial interest in the outcome, these factors could explain why he differed from the other witnesses.

496 Mr Lewis spoke with ease and was obviously highly intelligent. He did not appear to be discomforted by any of the matters put to him and the evidence he gave was generally consistent with the documentation. There were no obvious flaws in what he said and he was not caught out by the matters put to him to any significant extent. However, as I have indicated, the evidence he gave, which had the effect of distancing him from any close association with Mr O'Rourke and the St Andrews/Irwin loan application, was somewhat inconsistent with the evidence given by his subordinate, Adams. In addition, it was difficult to accept that at a time when Custom Credit was keen to acquire new business that Mr Lewis would leave the new business in the hands of a 23 year old Lending Officer. Moreover, the uncontroverted evidence that Mr Lewis seemed eager to assist Mr Simcock and his brother-in-law, Mr Conway, in realising their ambitions made it difficult to accept the Lewis evidence at face value.

497 All of this meant that I was not minded to give a great deal of weight to the account of the relevant events presented by Mr Lewis and to his denials that the representations complained of were made as alleged. I was not inclined to view him as an entirely trustworthy witness and, for the reasons I have given, I was not prepared to accept his evidence at face value. In the end, it seemed to me that the central issue as to the making of the alleged representations might ultimately depend upon the evidence given by Mr O'Rourke and the question of whether Dallas had discharged the burden of proof that lay upon it.

498 This brings me to the main Dallas witnesses. I have to say that I found Suzanne Carruthers to be an unconvincing witness. I had a distinct impression that she did not have a clear recollection of those events in which she was said to have played a part such as the Joondalup meeting, the Adams office/Mediterranean lunch meeting and the inspection of the Irwin property on 19 June 1989. She did not speak with precision or emphatically about any of these matters. As to various subsidiary issues, such as whether Dallas sought financial support from financiers other than Custom Credit in the period after the signing of the swap transaction contracts, she was vague and unconvincing when confronted with documents that did not appear to be consistent with her evidence. Likewise, she could give no clear account as to how the further payment of $500,000 was actually spent or as to why she failed to protest about the absence of development funds for the St Andrews land if that were the true cause of the discontent she was attempting to express in her letter to Custom Credit dated 10 November 1989 (D5 @ 4/1107).

499 This summation meant that I could find little in the evidence given by Suzanne Carruthers which could be regarded as compelling corroboration for the evidence given by her father as to the making of the representations complained of.

500 This brings me to the evidence of Mr Dempsey. His evidence-in-chief was to the effect that he was contacted initially about the swap transaction by Mr Lewis. However, under cross-examination, when pressed, he did not appear to be fully sure that it was Mr Lewis who spoke to him. I gave weight to the evidence of Mr Ainslie for Custom Credit that when he questioned Mr Dempsey about the matter no mention was made of Mr Lewis. I found it significant also that Mr Dempsey, even on his own account, clearly had many exchanges with Mr Simcock in the period prior to the swap transaction, and prepared the offer and acceptance forms at the Simcock office.

501 In the end, I was not persuaded that Mr Dempsey had any clear recollection as to the order of events and as to the origins of the swap transaction. His evidence could not be regarded as a clear source of corroboration for the O'Rourke evidence. I note in passing that Mr Collins, the valuer, could provide no evidence bearing upon the day of the inspection or the manner in which offer and acceptance forms were signed on that day. He could not confirm that he told Mr O'Rourke verbally what the Irwin property was worth. The formal valuation of that property was prepared by Mr Loughnan.

502 It is against this background that I come finally to the evidence of Mr O'Rourke. It was apparent from the way Mr O'Rourke conducted himself in the witness box that he was a rather bluff and hearty man, and a person who was probably not inclined to linger over matters of detail or fine points of chronology. He was a man of action. It became apparent, in various ways, that many of the details, and the exact timing of events, had receded in his mind with the passage of time, and that he was inclined to reconstruct the order of events not by exploring his memory but by reference to that which was presented to him. Examples of this tendency can be seen in the weight he gave to the golf buggy video as a means of fixing the date of the Joondalup meeting at 13 June 1989 and of the weight he attached initially to the date upon the Hillier Parker (Irwin) valuation. However, as I have described in some detail, this gave rise to the so-called "temporal paradox" which meant that the story being told by Mr O'Rourke simply did not conform to the framework comprised of documents and undisputed facts.

503 He proceeded to adjust his story but, even so, for the reasons I have given previously, the adjusted story was not entirely compelling. As I have indicated, Mr O'Rourke, initially, gave a graphic and apparently convincing picture of a decision to proceed with the swap transaction being taken at the Adams office/Mediterranean lunch meeting. However, it then emerged, on his adjusted version of events, that all of this must have taken place prior to his inspection of the Irwin property. Other passages in his evidence suggested that the need to inspect the property, the subject of the swap transaction, was an important part of his thinking, and thus his final version was not compelling.

504 There are many cases in which, with the passage of time, certain factors bearing upon the disputed transaction slip out of sight, and are overlooked by witnesses such as Mr O'Rourke who, in their daily lives, are not accustomed to retracing the steps they took with exactitude. However, most complainants, whatever the limitations of their background or education, usually have a strong and vivid recollection of the decisive moment at which certain things were said to them which proved to be their undoing, or could be viewed as ill-fated. Mr O'Rourke attempted to place that moment initially at the Adams office/Mediterranean lunch meeting (and especially at the lunch) but then adjusted the timing of certain events which seemed to shift the focus away from that moment. For all these reasons, I was left with a sense of vacillation which made it difficult to accept the story he told. This underlined the need to find corroboration for his evidence about the making of the misrepresentations in the surrounding circumstances.

505 In that regard, his credibility was undermined also by the evidence he gave concerning the handover of the feasibility documents at the Joondalup meeting. On the Custom Credit case, there were various factors which weighed against the notion that the undated D12 (West Coast Highway land) and D16 (St Andrews land) documents were in existence as at June 1989 and handed over as alleged. I will not traverse the evidence concerning that issue again. However, in my view, certainly in the case of the D16 St Andrews feasibility, there was persuasive evidence before the Court that this document was not prepared until early 1990 when the project had been converted from a 22 unit to a 29 unit project and costed accordingly. I am not satisfied on the balance of probabilities that this document, or even one like it, was in existence as at June 1989, and I am not satisfied that it was handed over as alleged. This view, in turn, cast doubt upon the credibility of Mr O'Rourke in regard to his assertions in evidence that such a document was handed over.

506 In summary, then, I accept that some weight must be given to the evidence of Mr O'Rourke and to his account in general terms as to the projects he had in mind to complete as at June 1989 and the finance he wished to obtain. However, at the end of the day, I do not regard him as a reliable witness as to the central evidentiary issue concerning the making of the representations complained of.

507 Let me now proceed to a number of specific findings.

508 It will be convenient to begin by looking at the question of whether, having regard to s 84 of the Trade Practices Act, the representations complained of can be characterised as conduct engaged in on behalf of Custom Credit by Mr Lewis within the scope of his actual or apparent authority. In dealing with this issue, I shall, for the moment, assume (without deciding) that Dallas is able to make out its pleaded case that the representations were made as alleged. The linkage between the conduct of Mr Lewis and Custom Credit as the employer said to be responsible for his actions is pleaded in par 48 of the Dallas counterclaim.

509 Mr Lewis, as Property Finance Manager of Custom Credit, and at one stage for a few weeks in July as Acting State Manager, was clearly a servant and agent of Custom Credit. The evidence of Mr Bonwick shows that Custom Credit was active in the marketplace in 1989 as a high risk lender and was keen to acquire new business. Mr Lewis had a special responsibility in that regard.

510 The Bonwick evidence, and the manner in which the St Michaels loan and the St Andrews/Irwin loan were handled suggests that a Property Finance Manager such as Mr Lewis was at liberty to enter into discussions with clients and prospective clients about the likelihood of loan funds being obtained having regard to the Custom Credit policies. It seems that he was also at liberty to foreshadow the provision of loan funds in the course of any such discussions before the paperwork and related formalities were completed.

511 Mr Bonwick contended that in fact funds could only be approved by compliance with the internal procedures including especially the preparation of the in-house loan application or assessment form and the approval of the same by the State Manager. Evidence of this kind set the scene for a Custom Credit submission that Mr Lewis had no actual or apparent authority to go beyond general discussion about the provision of loan funds or to make representations of the kind alleged.

512 However, in the end, I am not persuaded to the Custom Credit position in regard to this issue. I am satisfied, having regard to the Bonwick evidence, and the way in which the advances to Dallas were made on various occasions, that Mr Lewis, in his role as Property Finance Manager, was clothed with apparent authority to make representations of the kind alleged. As at mid-1989 he was being encouraged by his superiors to look for new business. He was at liberty to describe the sort of finance that might be available. There were indications that if the proposal under discussion was satisfactory, and the valuation sufficient, then formal approval and related security documents were likely to follow as a matter of course. In these circumstances, a client of Custom Credit could reasonably suppose that a senior figure in the company such as Mr Lewis had authority to make representations that could lead to the provision of finance for the purchase and development of new or existing sites.

513 I will deal with this issue in relation to the fourth representation separately. However, in the meantime, I must proceed to make findings as to whether the first, second and third representations were in fact made as alleged and, if so, whether they brought about the loss complained of, for, as I observed in my review of the legal principles, a complainant cannot obtain relief unless he establishes that he acted on or was influenced by the misleading conduct complained of.

515 The first representation is fully defined at par 33 of the Dallas counterclaim. Mr Lewis is said to have orally represented to Mr O'Rourke that upon Dallas selling the West Coast Highway land in exchange for the Irwin property Custom Credit would lend to Dallas 85 per cent or thereabouts of the valuation by Hillier Parker of that property to finance the purchase of that property and the purchase and development of the St Andrews land.

516 In effect, the funds required to finance the swap transaction, as evidenced by the 26 July D3 loan approval letter were $760,000 to discharge the Perpetual Finance mortgage on the West Coast Highway land and $530,000 to settle immediately with the Joondalup Development Corporation on the purchase of the St Andrews land. On the Dallas case, the level of finance for the development of the St Andrews land was outlined by the D16 feasibility document which was said to have been handed to Mr Lewis by Mr O'Rourke at the Joondalup lunch meeting in or about early June 1989.

517 It is clear from this description of the Dallas case concerning the first representation that the provision of development funds for the St Andrews land was at the heart of the representation, and bound up with this facet of the representation was a subsidiary issue as to whether the St Andrews D3 feasibility was handed over as alleged. I have reviewed the evidence concerning the latter issue in earlier discussion. It will now be convenient to make a finding of fact in regard to that matter, as it has a bearing upon whatever finding is to be made as to the alleged making of the first representation.

518 Mr O'Rourke acknowledged that he could not prove that Mr Lewis or Custom Credit received either of the feasibilities, or the West Coast Highway land document allegedly faxed to Lewis on 8 June 1989, other than by weight being given to the evidence of he and his daughter. Receipt of the documents by Custom Credit is not corroborated by evidence from any other source.

519 For the reasons I have given previously, while weighing up the credibility of the various witnesses, I give little weight to the evidence of Mr Lewis that he did not attend a Joondalup lunch meeting of the kind alleged and did not receive the feasibilities as alleged. However, it follows from my earlier observations that I approach the evidence of Mr O'Rourke and his daughter in regard to this matter with caution. I am inclined to give greater weight to some of the other considerations that emerged from the evidence.

520 In my view, it emerged from the cross-examination of Mr O'Rourke and related evidence that the St Andrews feasibility allegedly given to Mr Lewis at the Joondalup meeting could not have been handed over as alleged. In mid-1989 the St Andrews project was a proposed 22 unit development. According to the architect Mr Howard, the decision to maximise the profit on the St Andrews land and use it to build 29 rather than 22 units was not made until early 1990. It follows that a feasibility in 1989 was not likely to have referred to a 29 unit development. However, the undated D16 document contains two explicit references to a 29 unit project.

521 Moreover, the D16 feasibility contain the following figures in regard to the cost of building works, namely, "800 x 190 x 29 = $2,784,000" which is mathematically incorrect. That calculation should result in an amount of $4,408,000. It appears that a person typing up the D16 document had copied the sum from the Howard (Woodhead Australia) letter to Dallas dated 9 April 1990 (D44 @ 2/697) which (correctly) contains the figures "800 x 120 x 29 = $2,784,000" and inadvertently inserted "190" in place of "120".

522 Further, the wording adjacent to the figure of $116,000 on the D16 feasibility mirrors almost verbatim the wording on the 9 April 1990 letter. In addition, the professional fees specified in the D16 feasibility are identical to those included in the 9 April 1990 letter which, according to Mr Howard's evidence, was a quotation brought into existence around the time of the letter (transcript P1229). Despite Mr Howard's evidence that his professional fees may not have changed much between the 1989 and 1990 versions of the proposed development, nothing in evidence emerged to indicate the precise figures included in the feasibility were brought into existence in 1989.

523 I notice also that the penultimate line of the D16 feasibility talks about money being "owed" on land. However, Dallas did not settle on the St Andrews purchase until 3 July 1989, and prior to that date had only paid a $10,000 deposit. The balance required to complete payment of the $400,000 purchase price was $390,000. Accordingly, it is difficult to match that situation with the suggestion in the D16 feasibility statement that moneys actually owed on the land were $1,196,000.

524 Accordingly, for all these reasons, I am not satisfied that the D16 feasibility concerning a 29 unit project was handed to Mr Lewis at the Joondalup meeting as alleged. This is not necessarily fatal to the Dallas claim because it is possible that some other document, or talk in a general sense, brought under notice the level of funds required to finance the development of the St Andrews land. However, the considerations I have just mentioned, and this finding, tends to diminish the credibility of Mr O'Rourke because, at the trial, he insisted that he did hand over the D16 document. I have already observed that there are various other factors which weigh against his credibility.

525 When I proceed to review other facts and matters bearing upon the question of whether the first representation was made as alleged, I remind myself that according to the plea in par 33, the first representation was made shortly after the Burswood meeting at a meeting at the Custom Credit office attended by Mr O'Rourke, Suzanne Carruthers, Mr Lewis and Mr Adams. In earlier discussion, having regard to the pleadings, and my summary of the alleged events and Mr O'Rourke's final position at trial on the evidence, it is clear that on the Dallas case this, in effect, meant that the first representation was said to have been made at the Adams office/Mediterranean lunch meeting a short time prior to the inspection of the Irwin property and the signing of the swap transaction contracts on 19 June 1989.

526 On the Dallas case at trial, the Adams office/Mediterranean lunch can be regarded as the culmination of the discussions concerning the swap transaction and funding for the purchase and development of the St Andrews land which are said to have occurred on some of the occasions mentioned in my summary of alleged events. After being confronted with questions concerning the so-called "temporal paradox" Mr O'Rourke resiled from his initial position that the representations complained of were made and a decision to proceed with the swap transaction was taken on or about 12 July 1989 when the Hillier Parker (Irwin) valuation was received. His final position at trial was that these events occurred at the Adams office/Mediterranean lunch meeting but that meeting occurred prior to 19 June 1989. Accordingly, in order to arrive at a satisfactory finding that the first representation was made as alleged I feel obliged to make some preliminary findings about related matters. In doing so, I draw upon my previous observations about the respective cases and my comments on the credibility of witnesses.

527 For the reasons I have just given, I am not prepared to hold that the D12 and D16 feasibility documents were handed over by Mr O'Rourke to Mr Lewis at the Joondalup lunch meeting as alleged, or that a different version of the West Coast Highway land feasibility was subsequently faxed to Mr Lewis as alleged, bearing in mind that a fax transmission sheet to verify the date has not been adduced in evidence. However, I am inclined to accept that there were discussions of a general kind taking place in June 1989 between Mr O'Rourke and Mr Lewis as to the Dallas projects, and that some of those discussions may have occurred at the Joondalup Golf Course. There can be little doubt that as at mid-1989 Mr O'Rourke had various projects in mind for which he required finance. The St Michaels project was underway, he had contracted to purchase the St Andrews land and other projects at Joondalup including the Shenton Shopping Centre and the Joondalup Retirement Village were beginning to take shape. There is clear evidence that on 18 May 1989 he had made a formal written approach to Custom Credit for finance in respect of the St Michaels loan and he was therefore obviously under notice as a new client.

528 For the reasons I have given previously, I give comparatively little weight to the Lewis assertion that he was not involved to any significant extent with O'Rourke. Mr Adams gave evidence to the contrary including reference to a visit made by Mr Lewis to the St Michaels land and some social contact at the Joondalup Golf Course. The golf buggy video verifies that they were in each others company at about this time. It is significant also that, for whatever reason, in due course Dallas did in fact apply for further finance in the form of the St Andrews/Irwin loan and the relevant P83 application form refers explicitly to the notion that an application for development funds will be made in due course.

529 However, it is more difficult to determine what they talked about. When I look at the evidence as a whole it suggests that the matters uppermost on Mr O'Rourke's mind as at June 1989 were his desire to proceed with his Joondalup projects and an awareness that the West Coast Highway land could prove to be an obstacle in that regard. I give weight to the fact that prior to June 1989 he had instructed his agent to sell the land and had himself been active in amending an offer received in respect of the land with a view to carrying into effect a more attractive counter offer. The swap transaction may have been proposed to him by Mr Lewis as he alleges. On the other hand, it is possible that the proposal was brought to his attention by Mr Dempsey or by Mr Simcock of Westminster Properties.

530 This brings me to the telephone conversation referred to at par 31 of the Dallas counterclaim in which Mr Lewis is supposed for the first time to have canvassed with Mr O'Rourke the notion of the swap transaction. Mr O'Rourke cannot point to any specific evidence corroborating that such a call was made. It is not referred to in any contemporary document. For the reasons I have given, I have grave reservations about the credibility of both Mr O'Rourke and Mr Lewis. In my observations about the respective cases I have drawn attention to many subsequent events relied upon by Custom Credit which weigh against the notion that the swap transaction originated in a telephone call made by Mr Lewis to Mr O'Rourke. In my view, the evidence given by Mr Dempsey bearing upon the swap transaction was equivocal and not convincing, and I am therefore not convinced by his evidence that Mr Lewis was actively involved in effecting the swap transaction and is therefore likely to have initiated a telephone call of the kind in question. Against this background, and having regard to my reservations about Mr O'Rourke's credibility, I have to say that I am not satisfied that the telephone call was made as alleged.

531 This brings me back to the Adams office/Mediterranean lunch meeting at which the first representation, and possibly the other representations, are said to have been made. I give some weight to the admission made by Mr Lewis in the course of his evidence that there was an occasion when he was briefly in the presence of Mr O'Rourke and his daughter at the Adams office. I am prepared to accept that there was an occasion on which Mr O'Rourke and his daughter were present at the offices of Custom Credit and were involved in a discussion with Adams, which included Mr Lewis to some extent, as to whether finance might be available to acquire the Irwin property as a means of disposing of the West Coast Highway land and opening the way to further progress with the St Andrews project. However, when I turn to the more particular question as to whether the representations complained of were made at such a meeting, the burden of proof requires that I be satisfied on the Dallas case that this occurred.

532 Again, I give comparatively little weight to the evidence of Mr O'Rourke, Suzanne Carruthers and Mr Lewis concerning that issue. I do not regard any of them as reliable witnesses about this aspect of the matter. However, I am inclined to give some weight to the evidence of Mr Adams that he had no recollection of any such meeting taking place or of the representations complained of being made in his presence.

533 In evaluating the evidence, I give weight also to events after the swap transaction. For the reasons I have described in earlier discussions, the relevant events do not suggest that Dallas was promised or had understood it had been promised funds for the development of St Andrews. There are no documents explicitly evidencing such an arrangement and, to my mind the P83 loan application document clearly envisages that a discrete application for development funds will be made at a later stage. A discrete application was made at a later stage (D34 @ 8/2992). I am not satisfied that the 29 September P78 memo concerning the payment of $500,000 to Dallas was concocted as alleged. Having regard to exhibits D8 and D53, I find that the payment was made for the purposes set out in the memo and not as development funds for St Andrews.

534 In the end, it comes down to a question of whether Mr O'Rourke is to be believed. As I have indicated, I found his evidence to be unconvincing in many respects when it was contrasted with the contemporary documentation. However, I found it to be particularly worrying, as I have indicated, that he changed his evidence so markedly about the timing of the crucial meeting when confronted with the so-called "temporal paradox" at the first hearing. This left me, as I have said, with a strong impression that he had no clear, personal recollection of the statements and events that caused him to enter into the swap transaction and related loan arrangements and was inclined to construct what he thought was a convincing narrative by reference to certain events and documents such as the golf buggy video and the Hiller Parker (Irwin) valuation dated 12 July 1989 which appeared to link his story to verifiable fact. However, in the event, his reasoning in that regard appeared to be flawed.

535 In summary, then, at the end of the day, I am simply not satisfied that the Adams office/Mediterranean lunch meeting occurred as alleged. I am not satisfied that there was a lunch at the Mediterranean Restaurant in June 1989 attended by Mr O'Rourke and Mr Lewis as alleged. Put shortly, as to this issue I have not been satisfied by Dallas that Mr O'Rourke should be believed or that the first representation was made at the time and in the manner alleged. I find against Dallas in regard to this issue.

536 The second representation is described at par 34 of the Dallas counterclaim. It is said that in the course of one or other of the relevant meetings and conversations (the Joondalup meeting, the alleged Lewis telephone call, the Burswood meeting or the Adams office/Mediterranean lunch meeting) Lewis further represented to O'Rourke that the Irwin property constituted an excellent investment, a net rental of $122,400 per annum could be expected, this would provide an excellent cash flow which would contribute to the payment of interest on the financing, and there would be no difficulty in obtaining a tenant.

537 As to the third representation, it is said Lewis further represented that Dallas had to be the owner of the Irwin property before Custom Credit would lend funds for the purchase and development of the St Andrews land, Custom Credit would not advance money for that purpose unless Dallas purchased the Irwin property, and Dallas had to exchange the West Coast Highway land for the Irwin property if Custom Credit was to advance moneys. Also, he is said to have informed Mr O'Rourke that he should obtain valuations from Hillier Parker for the purpose of the transactions in question.

538 In seeking to resolve the question as to whether these representations were made as alleged, I take account of the facts and matters mentioned in my observations about the respective cases which weigh against the Dallas case and appear to favour Custom Credit. I take account also of the observations I have made about the credibility of witnesses and the matters mentioned in my earlier finding concerning the first representation. To those considerations I add the following observations.

539 To my mind, it is significant that there is not any document in existence on the evidence which signifies that Dallas approached Custom Credit in regard to what became the St Andrews/Irwin loan prior to the swap transaction on 19 June 1989. As I have indicated, there are certain letters written by persons on the Dallas side which suggest that even after 19 June Dallas had not determined which lending institution would be providing the necessary funds. The 20 July P83 loan application was signed off almost one month after the crucial date and clearly presumes that a further application would be made in due course for development funds in respect of the St Andrews land (which in fact happened at a later date). It is significant that there is nothing in the Hillier Parker valuations dated 27 June (St Andrews) and 12 July (Irwin) which suggested that the valuations were related to a transaction and related funding arrangements which had already been effected. Mr O'Rourke's subsequent conduct does not suggest that representations of the kind alleged were made by Lewis and acted upon by him, for there is no written or other convincing evidence of a protest soon after the subject funds were advanced that they were not sufficient and did not conform to the promise made.

540 For all these reasons, then, I am not satisfied by the evidence adduced on behalf of Dallas that the representations were made as alleged. It is not necessary for me to determine why exactly Dallas did embark upon the swap transaction and related loan arrangements. However, as I indicated in my observations about the respective cases, alternative explanations are available which do not appear to be inconsistent with the conclusions I have arrived at, and that tends to reinforce the conclusions I have reached.

541 I must now proceed to the fourth representation.

542 I observed in earlier discussion that the facts and matters allegedly comprising the fourth representation were to be considered in conjunction with the other representations in the course of determining whether Dallas had suffered loss by reason of misleading and deceptive conduct on the part of Dallas. In addition, the facts and matters relied upon were said to give rise to a discrete course of action. However, when I turn to this matter, I am conscious that even if the fourth representation be viewed as a discrete cause of action, the Dallas plea, to a large extent depends on findings in its favour with respect to its case concerning the other representations. For example, the so-called duty to disclose which is said to underpin the Dallas case concerning the fourth representation depends upon findings being made that Lewis forged a close relationship with O'Rourke and played an active role in espousing the merits of the swap transaction, and thus the merits of the Irwin property.

543 This is apparent from my review of the pleadings. I noted that in par 44 of the Dallas counterclaim it is pleaded that Lewis had an interest in the Irwin property and in the swap transaction which he failed to disclose. I summarised the supporting particulars and evidence to the effect that Lewis was allegedly a shareholder of Telbe and a shareholder and director of Madella.

544 Dallas pleads in par 45 that by reason of Custom Credit's employment of Lewis, the agreement to lend money for the purchase of the Irwin property, and the conduct complained of, Lewis was under a duty to disclose his and the interest of Telbe and Madella in the swap transaction and in the mortgages granted by Westminster and Telbe in favour of Custom Credit.

545 Dallas pleads in par 46 that Lewis at all times remained silent about and failed to disclose his and the interest of Telbe and Madella in the exchange and the Telbe mortgage concerning Irwin Chambers which silence in the whole of the circumstances pleaded constituted misleading or deceptive conduct or conduct likely to mislead or deceive O'Rourke and Dallas into believing that the exchange was a bona fide requirement of Custom Credit if Custom Credit was to lend money for the development of the St Andrews land. It is said further that the exchange was not a bona fide requirement of Custom Credit but was intended by Lewis to benefit him or Telbe or Madella or Westminster or all of them to the detriment of Dallas.

546 Dallas goes on to plead that Custom Credit is deemed to have engaged in the misleading and deceptive conduct of Lewis, and by reason of such conduct Dallas suffered the loss and damage described in par 54 which, as adjusted at trial, was said to amount to $6,741,864 (being the Dallas claim for damages which is described in more detail later).

547 In my review of the relevant legal principles, I noted that where silence is relied on in order to show a breach of s 52 it will depend on the circumstances whether it constitutes conduct which is misleading or deceptive. Silence may be relied on in order to show a breach of s 52 when the circumstances give rise to a duty to disclose relevant facts. The duty to disclose is not confined to cases where there are particular relationships such as trustee and beneficiary or solicitor and client: Henjo (No 1) (supra) per Lockhart J at 557. However, to say this, is certainly not to impose any general duty of disclosure in regard to commercial dealings: Demagogue Pty Ltd v Ramensky [1992] FCA 557; (1992) 39 FCR 31 per Black CJ at 32.

548 It emerges from my summary of the issues that findings will be required in regard to this matter as to whether Lewis can be said to have had an interest of the kind alleged as a matter of fact. If so, did the presence of such an interest give rise to a duty to disclose? There is then the further question of whether the alleged failure to disclose in the circumstances of the present case can be characterised as misleading and deceptive conduct.

549 I have reviewed the allegations and evidence associated with this matter. I noted that Mr Lewis acknowledged in his evidence that he had made no mention of any association with Telbe or Madella. It follows from this that if there was a duty to disclose no disclosure was made. However, that does not necessarily mean that his failure to disclose amounted to misleading and deceptive conduct on his part, or conduct that could be attributed to Custom Credit.

550 Mr Lewis said in evidence that he was not a director of either company in any active sense and did not hold beneficial shares in the company. He was named on certain company documents simply as a means of complying with the requirements of the legislation. He said that the shares attributed to him were held in trust for Mr Conway. However, he was not able to produce documentation to support his position, and I have reservations about his credibility.

551 In the end, I am not satisfied by the evidence given by Mr Lewis that the position is that which he contended for. I consider that I should give weight to the Telbe annual return for 1989 signed by Lewis (D84A not in the agreed bundle) which records that Phillip and Judith Lewis were directors of the company and that Madella Holdings and Lewis each owned one share in Telbe as at 30 June 1989. It follows, and I so find, that he had an interest in the companies.

552 I am conscious that on the Dallas view of the circumstances in this case, the finding I have made could open the way to a further finding that Lewis was under a duty to disclose his interest on the grounds that, having presented information to Mr O'Rourke about the Irwin property, and the merits of and the need for the swap transaction, he was obliged to present the full picture, namely, that he had an interest in the outcome. There are various decided cases which suggest that if the circumstances are such that a person is entitled to believe that a relevant matter will be communicated, then the failure to communicate may amount to conduct which is misleading or deceptive. Thus, in the Henjo cases (supra), where the vendor was aware that the purchaser's representative had come to the restaurant premises to observe the seating arrangements, the vendor's failure to disclose the seating limitation provided a good cause of action.

553 I pause here to say that, on this view of the matter, I am not inclined to accept the Custom Credit contention that Mr Lewis could not be said to be acting on behalf of the company if he failed to disclose his interest. For the reasons I have given previously I consider that Custom Credit would be bound by conduct on the part of Lewis which was aimed essentially at securing business for Custom Credit, and which lay within the apparent scope of his authority.

554 However, as it turns out, the presence of the Lewis interest, and the nature of a duty to disclose, if any, have to be considered not within the framework of the Dallas case, but within the pattern of the findings I have made.

555 I have held that Mr Lewis did not make the first, second and third representations as alleged. I am of the view that Dallas entered the swap transaction of its own volition. There may have been some talk of obtaining funds from Custom Credit to finance the swap transaction and the purchase of the St Andrews land, bearing in mind that the parties had been communicating with each other concerning the St Michaels loan. However, for the reasons I have given, I do not accept that any promise of finance had been made prior to the swap transaction or that any promise of funding for development of the St Andrews land was ever made.

556 As to funding for the swap transaction, I am of the view that the 29 June P15 Arnold letter reflected the true position, namely, that Dallas did not know where exactly the funding would be coming from at the time the contracts were signed. As to development funds for St Andrews, the 20 July St Andrews/Irwin P83 loan application reflected the reality, that is, "an application for development funds will be forwarded in due course". In other words, there was an expectation that Custom Credit would give favourable consideration to such an application at some future stage, when Dallas was ready to proceed, but no commitment had been made.

557 Against this background, having regard to my findings as to the first, second and third misrepresentations, I am not satisfied that in the circumstances of this case Mr Lewis' failure to disclose his interest or his silence amounted to misleading conduct.

558 My review of the pleadings reveals that the critical question is whether there was misleading conduct on the part of Mr Lewis which had the effect of misleading Dallas and inducing it to proceed with the swap transaction and related loan arrangements. On the findings I have made, I am not satisfied that Mr Lewis played an active part in inducing Dallas to proceed as it did, or that he purported to communicate to Mr O'Rourke all that he knew about the Irwin property and the vendor company, with the result that any failure to speak of his own interest in the matter amounted to misleading and deceptive conduct. I am of the view that Dallas acted of its own volition. It entered the swap transaction as a consequence of its own enquiries. In the absence of any general duty of disclosure, I am not satisfied that Mr Lewis was obliged to speak of his interest in the Irwin property prior to the swap transaction being effected.

559 Was he obliged to disclose his interest after the swap transaction when Dallas submitted an application for finance to Custom Credit, on the basis that the Irwin property would be one of the two properties used to secure the loan?

560 As to this, I am not persuaded that a disclosure by Mr Lewis of his interest or former association with Irwin Chambers had or was likely to have any operative or causative effect upon the manner in which Dallas proceeded. By then, Dallas was obliged to proceed as it did, and it had no other means of providing security.

561 It follows that I am not satisfied that Dallas is entitled to relief in respect of the fourth representation. This brings me to the alternative causes of action.

562 A contractual cause of action against Custom Credit is presented at par 38 and par 39 of the counterclaim based upon the representation that funds for the development of the St Andrews land would be provided "as proposed" in the D16 feasibility document. It is said that in breach of the alleged financing agreement Custom Credit advanced only $760,000 on the security of the Irwin property (rather than the allegedly promised 85 per cent of the valuation of that property) and did not advance development funds for the St Andrews land.

563 A further breach of contract is alleged in par 40 and par 41 as to an alleged promise that Custom Credit would provide funds for development of the St Andrews land as proposed in the feasibility document. That allegation refers to a promise allegedly made by Lewis at the time the 26 July D3 loan agreement was signed.

564 Before resolving the issues raised by the Dallas counterclaim it will be useful to look briefly at some legal principles bearing upon this aspect of the matter. A convenient starting point is the decision of the High Court in Hoyts Pty Ltd v Spencer [1919] HCA 64; (1919) 27 CLR 133.

565 Isaacs J observed at 143 that if the parties agreed to commit their agreement to writing, then what is written is the conclusive record of the terms of their agreement. Unless it can be shown that the document was not intended as the complete record of their bargain, no oral evidence can be admitted to alter or qualify it. However, though complete in itself as a contract, a particular agreement might well play another part as consideration for another promise. The latter is collateral to the main contract, but each has an independent existence, and they do not differ in respect of their possessing to the full the character and status of a contract.

566 His Honour went on to observe at 147 that a collateral contract, which may be either antecedent or contemporaneous, being supplementary only to the main contract, cannot impinge on it, or alter its provisions or the rights created by it; consequently, where the main contract is relied on as the consideration in whole or part for the promise contained in the collateral contract it is a wholly inconsistent and impossible contention that the other party is not to have the full benefit of the main contract as made.

567 Put shortly, then, it emerges from a consideration of the Hoyt's case that there cannot be a collateral contract which is inconsistent with the terms of the principal contract.

568 Let me now turn to the circumstances of the present case.

569 I have made a finding in the course of earlier discussion that Mr O'Rourke did not hand over to Mr Lewis at the Joondalup meeting the D16 feasibility document concerning the St Andrews project as alleged. I was of the view that the document in question appears to have been created not in mid-1989 but in early 1990. In any event, it seemed unlikely, even in a risk-taking era, that a senior officer of Custom Credit would agree to development funds being advanced in response to an unsophisticated one page document. I have held also that the representations complained of by Dallas were not made as alleged from which it follows that the central representation underlying the so-called financing agreement was not made.

570 For all these reasons, I am not satisfied that the parties entered into a financing agreement of the kind contended for, whereby funds for development of the St Andrews land were to be provided as proposed in the D16 feasibility. It follows that the Dallas claim for breach of agreement falls away.

571 Similar considerations influence my approach to the alleged further agreement described in par 40 and par 41 of the counterclaim. I am not satisfied that firm arrangements were made in June and July 1989 for the provision of development funds for the St Andrews land, although it appears from the observation in the P83 loan application that there had been some discussion between the parties about the provision of development funds in due course. In addition, in the absence of any documentary evidence bearing on the point, I am not persuaded that Mr O'Rourke made a protest of the kind contended for at the time of signing the D3 loan agreement on or about 26 July 1989, or that any undertaking to provide development funds was given by Mr Lewis or Mr Adams on that occasion. Accordingly, I am not satisfied that Dallas is entitled to obtain relief in respect of this matter.

572 Further, and in any event, I am of the view that if agreements of the kind contended for were entered into they must be characterised as collateral agreements, that is, agreements collateral to the St Andrews/Irwin loan agreement whereby funds were to be provided for the purpose specified in the 26 July St Andrews/Irwin D3 loan agreement and related mortgage documents. The relevant documents make provision for certain advances but they do not make provision for development funds. In my view, it follows from the reasoning of Isaacs J in Hoyt's Pty Ltd v Spencer (supra) that a collateral agreement of the kind contended for (if made) cannot be enforced because the terms of the collateral agreements are inconsistent with the terms of the principal agreement.

573 Dallas alleged as a further plea in the alternative that the first, second and third representations and the statements referred to in par 40 of the counterclaim constituted mis-statements made by Custom Credit negligently. It is said that the mis-statements were made by Custom Credit when it possessed special skill or knowledge concerning the said representations and statements, or was otherwise in a special relationship with Dallas.

574 Dallas contended that the representations and statements were made with the intention of inducing Dallas to borrow money from Custom Credit and, in so doing, Custom Credit failed to use reasonable care to ensure the accuracy of the representations whereby Dallas was induced to enter into the swap transaction and related loan arrangements.

575 It is said further that Mr Lewis made the representations in circumstances in which he or Custom Credit never believed or alternatively never had reason to believe that the statements were in fact true and accurate, he made no or no sufficient enquiries to establish that the statements were reliable and well-informed and knew of no or no sufficient facts which justified the making of the statements.

576 Again, it will be useful to commence by looking at some of the legal principles bearing upon this aspect of the matter.

577 In L Shaddock & Associates Pty Ltd v Parramatta City Council (No 1) (Shaddock's case) [1981] HCA 59; (1981) 150 CLR 225 Gibbs J said at 230 that it is now settled by the decisions in Hedley Byrne & Co Ltd v Heller & Partners Ltd [1963] UKHL 4; [1964] AC 465 and Mutual Life & Citizens Assurance Co Ltd v Evatt [1968] HCA 74; (1968) 122 CLR 556 that a person can be liable for financial loss resulting from a negligent mis-statement of fact or opinion in non-contractual situations.

578 The Hedley Byrne principle permits recovery where the author of the statement claimed of has assumed responsibility by reason of his knowledge that his statements would be relied on, although, in some cases, a duty of care may be negatived by a suitable disclaimer of responsibility.

579 For a duty of care to arise in cases of pure economic loss, the law requires, in addition to the foreseeability of harm, a special relationship between the parties which has often been described as a relationship of proximity. This may arise because the maker of a statement responds to a request for information, or intends to induce the recipient to act in a particular way, or warrants the correctness of what he says or otherwise assumes responsibility for its correctness because he professes or is known to possess skill in the relevant area of knowledge: San Sebastian Pty Ltd v Minister Administering Environmental Planning Act [1986] HCA 68; (1986) 162 CLR 340 at 355 and 357.

580 In Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) [1997] HCA 8; (1997) 188 CLR 241 the High Court said in relation to an action against an auditor that what is required is an allegation and proof that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff for a purpose likely to lead the plaintiff to enter into a transaction of the kind entered into, such entry being likely to be due to reliance on the information or advice.

581 As to the causal connection between the mis-statements complained of and the resulting loss, the decided cases indicate that although in general the "but for" test will be sufficient to provide the necessary causal connection between the act complained of in the loss, that test is only a guide. Causation is essentially a question of fact to be answered by reference to commonsense and experience. The determination of a causal question involves a decision as to whether, for the purposes of a case, the precedent act for which the defendant is responsible should be seen as causal to the plaintiff's loss and that determination is made by a functional evaluation of the relationship for the purpose of the policy of the relevant parts of the law: March v E & MH Stramare Pty Ltd [1991] HCA 12; (1991) 171 CLR 506.

582 Gould v Vaggelas (supra) established that a plaintiff is entitled to recover the expenses and operating losses during the period while he was still under the influence of the misrepresentation. The claim will also extend to a loss in respect of interest.

583 Against this background, let me now return to the circumstances of the present case. I have found that as at mid-1989 Custom Credit was keen to acquire new business. I have held that Lewis was clothed with apparent authority to speak to clients such as Dallas about the policies of Custom Credit and to describe the circumstances in which finance could be obtained. It follows from this, in my view, that if Lewis spoke to Mr O'Rourke about such matters he was subject to a duty of care in regard to the statements made. The knowledge possessed by Lewis about the lending practices of his employer gave rise to a special relationship between the lender and the prospective borrower with the result that Lewis was obliged to speak with care.

584 However, as to this aspect of the Dallas counterclaim also, the Dallas case turns upon which of the representations complained of were made as alleged.

585 The short answer to this part of the Dallas counterclaim emerges from my earlier findings. I have held that the representations complained of were not made by Lewis as alleged from which it follows that the statements in question cannot be said to have been made negligently or to have influenced Dallas in regard to its entry into the swap transaction and related loan agreements. Hence, the basis of the claim in tort falls away.

586 I note in passing that in the absence of a broad power to provide relief, such as the power reflected in s 87 of the Trade Practices Act, it is doubtful whether a claim in tort of this kind would have provided a basis for Dallas to set aside the Custom Credit claim in debt arising under the various mortgages. This aspect of the matter was not fully argued but it is questionable whether common law principles concerning such a claim could open up such an avenue of relief. As to the Dallas claim in damages, for reasons I will come to in due course, I have reservations also as to whether there is a sufficient causal connection between the allegedly negligent mis-statements complained of and the compensation claimed.

587 This brings me to some further observations about the nature of the relief sought.

Further observations about the relief sought

588 It follows from the findings I have made that I am not satisfied that Dallas is entitled to relief pursuant to its counterclaim in respect of the various heads of claim reflected in its plea. In essence, the various claims fail because Dallas has not been able to satisfy the Court that the representations underlying its various claims were made as alleged. For the reasons I have given, I consider that Custom Credit is entitled to judgment pursuant to the causes of action reflected in its statement of claim. It emerges from the evidence, and especially the evidence of Ms Noonan, that the actual total debt owed by Dallas as at 30 April 2004 is $40,608,849.28 with additional amounts of total interest accruing each day thereafter at $26,120.21.

589 However, in a case of this kind, for the sake of completeness, and bearing in mind that the findings I have made might be reviewed elsewhere, it is necessary that I should proceed to examine the evidence bearing upon the Dallas counterclaim for damages and the relief sought.

590 It follows from the figures I have just mentioned that Dallas principally sought to obtain relief pursuant to orders which the Court has power to make under s 87 of the Trade Practices Act. The broad powers contained in the statutory provision were viewed as a way of relieving Dallas from liability under the mortgages sued upon. With regard to the advance of $500,000 debited to the St Michaels loan account, Dallas contended that the alleged default under the St Michaels mortgage was a further consequence of Lewis' misleading and deceptive conduct. The misconduct in question was said to have crippled the St Michaels loan account which had previously not been in default. This resulted in unauthorised excess debt in the St Michaels loan account which Adams, Lewis and Richards must have known could not be serviced by sales of the final four units.

591 This was said to be a graphic illustration of the way in which representations complained of and the alleged misleading and deceptive conduct of Lewis had tainted not only the swap transaction and related loan arrangements but subsequent conduct by Custom Credit with the result that the broad powers available to the Court under s 87 should be utilised in the event of it being held that Dallas was entitled to relief.

592 I am of the view that it will serve no useful purpose for me to express a view as to whether the powers available under s 87 of the Trade Practices Act should be exercised in the manner proposed by Dallas. It follows from my findings that a foundation for the exercise of the powers has not been established on the evidence. The way in which powers of this kind should be exercised is essentially a matter of law and must ultimately depend upon the findings made. I noted in my review of the relevant legal principles that the powers are to be exercised with a view to ensuring a fair result. That can only be determined having regard to the findings made on the evidence. One of the matters of law to be addressed is whether it is open to a party such as Dallas to obtain relief in the nature of compensation by seeking to invalidate an outstanding debt without bringing to account the liquidated amounts that Dallas has received and applied.

593 Accordingly, in the absence of specific findings, I do not intend to express any further views about s 87 of the Trade Practices Act and the way in which the discretionary powers might be exercised in the circumstances of the present case if the Dallas counterclaim had succeeded. However, it follows from what I said earlier about the need for completeness that I must now proceed to make findings in regard to the Dallas counterclaim for damages.

594 My review of the evidence proceeds from the hypothesis that Dallas was able to make out the case reflected in its counterclaim pursuant to provisions of the Trade Practices Act. However, as emerges from my summary of the issues, that is not the end of the matter. The decided cases establish that in order to recover damages the complainant must prove that loss or damage was suffered by conduct in breach of the Trade Practices Act. There must be a nexus between the conduct complained of and the loss or damage suffered.

595 Dallas pleaded at par 54 of its statement of defence and counterclaim that by reason of the misleading and deceptive conduct of Custom Credit, or alternatively, of Custom Credit's negligent mis-statements or, alternatively, its breaches of agreement, Dallas and O'Rourke suffered loss and damage. Particulars of loss and damage were provided but it became apparent at the trial that the figures appearing in the pleading were to be amended.

596 The case was opened by counsel for Dallas upon the basis that Dallas would advance a claim for damages amounting in total to $6,741,864 in accordance with a schedule of loss and damages dated 28 January 2003. This figure was derived from the secondary report of the principal expert witness for Dallas, namely, Mr Cathal Spence of Spence Consulting Group (D51 at 9/3405). For ease of reference, I will call Exhibit D51 the Spence Report.

597 The qualifications of Mr Spence were set out in his curriculum vitae (D48 at 9/3390). He obtained a Bachelor of Business from Curtin University in 1986 and was awarded a Post-Graduate Diploma in Business from the same university in 1988. He is a member of the Institute of Chartered Accountants, a member of the Taxation Institute of Australia and is a registered company auditor. He commenced his own firm, Spence Consulting Group, in June 1995 and operated the same as a chartered accounting practice until September 2002. In September 2002 he merged with Power Management Australasia Chartered Accountants to form Power Spence Chartered Accountants.

598 The Spence Report is undated. Mr Spence said in evidence that it was brought into existence towards the end of 1995 in response to instructions received from the Dallas solicitors. He was able to fix this date by reference to a further document being a statement of further and better particulars dated 18 March 1996 (D52 @ 9/3418). It emerged that many of the figures in his report were drawn from documents that became exhibits during the course of the trial. Mr Spence had also prepared four spreadsheets depicting actual and projected cash flow statements for Dallas in respect of the period 1 July 1989 to 30 June 1991. The cash flow statements became Exhibits D53 to D56 respectively (not being part of the agreed trial bundle of documents) and were said to have been prepared "in conjunction with" the Spence Report. I will come back to these documents in due course.

599 I pause to note that Mr Spence commenced giving his evidence-in-chief at the initial hearing of the trial in 2003. His evidence-in-chief was completed at the resumed hearing of the trial in early 2004 and he was then cross-examined. It emerged at an early stage of the cross-examination that most of his experience as a chartered accountant was in the field of taxation rather than in the field of company auditing and he was not able to point to specific experience in the field of financial modelling. He readily acknowledged that he was not and did not purport to be an expert in the field of land valuation with the result that the land values reflected in his report were derived from the valuations presented to him. Certain other figures were derived from information and instructions received from Dallas and its solicitors.

600 I am of the view that many of the assumptions underlying the Spence Report reflected a rather uncritical acceptance of the figures and matters presented to the author. Moreover, the nature of the reasoning and the source of many of the figures underpinning the conclusions arrived at in the Spence Report were not apparent from the report itself. Counsel for Custom Credit had to obtain these details by persistent questioning. Counsel was obliged on various occasions to refer to the transcript of Mr Spence's evidence-in-chief at the initial hearing which is contained at pages 714 to 795 of the trial transcript.

601 Broadly described, the total net claim for damages of $6,741,864 presented in the Spence Report consists of a first category of loss amounting to $3,341,097, being the total of losses allegedly linked to three specific properties, namely, the West Coast Highway land ($427,412), the Irwin property ($1,111,709) and the St Andrews land ($1,801,976).

602 The report refers also to a second category of losses, amounting to $3,401,567, being losses which are said to be linked to a loss of value in Dallas caused by the events complained of; that is, Dallas alleges that the events complained of meant that Dallas was unable to continue operating with the result that various losses were experienced upon the disposition of its other assets. In that regard, there is said to be a loss in respect of the St Michaels land ($914,102), a loss in respect of the Ocean Reef office ($27,866), a loss in respect of the Joondalup Retirement Village ($1,209,599) and a loss in respect of the Shenton Road Shopping Centre ($1,250,000).

603 I will look at the two broad categories of loss in turn. I note in passing that a summary of the overall claim amounting to $6,741,864 appears in section 3 of the Spence Report under the heading "Summary of Quantum of Claim". The summary provides a succinct overview of the amount claimed by Dallas and is set out as follows:

604 It was common ground at the trial that the figure of $1,801,176 mentioned in that summary (which I have marked with an asterisk) as a loss attributed to the St Andrews land should actually be the figure of $1,801,976. The latter figure appears at the end of a more detailed calculation in section 7.3 of the Spence Report (D51 @ 9/3416).

605 The reasoning and calculations underlying the figures set out in the Spence Summary of Quantum of Claim were keenly contested and it is therefore necessary to examine all aspects of the claim in detail. I note in passing that Custom Credit did not lead evidence from an expert of its own by way of answer to the Spence Report save for the evidence of a valuer, Mr Kennedy, which was directed to the values attributed to the relevant pieces of land. According to counsel for Custom Credit, the flaws in the Spence Report were sufficiently exposed by the cross-examination of witnesses and a close analysis of the figures in the Report.

The first category of loss - specific properties

606 It emerged during the course of cross-examination that there was a considerable degree of controversy as to certain conceptual issues underlying the Spence Report. Mr Spence proceeded from the premise that if Dallas had not been induced to enter into the swap transaction that is said to have undermined its prospects it would have retained and proceeded with the development of the West Coast Highway land and eventually derived a substantial net profit from that venture. Likewise, it is said that, but for the swap transaction, Dallas would have proceeded with the development of the St Andrews land and derived a net profit. Accordingly, the Spence Report and related evidence sought to demonstrate that these two projects could have been brought to fruition in accordance with the sales and costs figures reflected in the Spence Report. It followed from this line of reasoning that, in each case, Dallas was entitled to claim the loss of net profit that it would have made.

607 Counsel for Custom Credit therefore sought to demonstrate that in each case the hypothetical scenarios contended for by Mr Spence were not persuasive. I will return to this aspect of the matter shortly.

608 In addition, the Spence Report proceeds from the premise that Dallas was entitled to claim an alleged loss of $1,111,709 linked to the Irwin property. As to this head of claim, counsel for Custom Credit contended that it was subject to certain conceptual flaws. I will return to this issue in due course when the time comes to examine the Irwin property claim.

609 In the meantime, it will be useful to begin by looking at the claims for loss that are said to be referable to the West Coast Highway land and to the St Andrews land.

610 The Spence Report asserted that the loss referable to the loss of an opportunity to develop the West Coast Highway land was the sum of $427,412. This was arrived at by deducting from the net profit that might have been made by Dallas if the project had been completed successfully an amount representing the profit supposedly made on the swap transaction.

611 I must now look at the figures set out in the Spence Report in more detail.

612 The computation of the losses contended for are set out in section 5 of the Spence Report (D51 @ 9/3411). The source of the figures set out in the relevant calculation is not directly apparent from this section of the Report. However, the relevant details emerged in the course of Mr Spence's evidence at trial. It emerged also that he placed reliance on the cash flow spreadsheets mentioned earlier (D53 to D56) in order to bring to account a figure for interest (being part of the financing costs).

613 The Spence calculation commences with the assertion that Dallas had purchased the West Coast Highway land for the purposes of constructing and selling 36 luxury units. It is said the losses Dallas suffered with respect to this property consist of the loss of profit on development of the property as adjusted by any profit made on sale of the land to Westminster Properties. As the property was sold, and at the time of selling the property was not financed with Custom Credit, there was no requirement to take account of interest or loans with Custom Credit.

614 The Spence calculation presumes that the project was completed successfully within a comparatively short space of time. It is apparent from his projected cash flow statement in respect of the period 1 July 1989 to June 1990 (D55 and D56) that on this scenario the project would have been completed and the borrowings reduced to nil by the end of October 1991.

615 It will be recalled that in reality Dallas purchased the land with a financial loan obtained from Perpetual Finance. The projected cash flow statement presumes that further finance for development would have been obtained from Perpetual Finance with the result that a liability for additional interest is built into the Spence calculation.

616 Mr Spence was cross-examined vigorously about the likelihood of Dallas obtaining finance for the development costs bearing in mind that the land had been acquired by Dallas in early 1989 for $950,000. A loan of $675,000 had been obtained from Perpetual Finance in order to complete the purchase. The cross-examiner suggested that there was insufficient equity remaining for the land to be used as a security to fund development work including construction costs of $2,870,000. Mr Spence answered this by saying that he proceeded on the assumption that a "construction" loan would be available whereby funds were advanced as the value of the land increases in accordance with progressive valuations of the building work. I will return to this aspect of the matter later.

617 The Spence calculation presumes that total income of $5,400,193 would have been generated from sales of the 36 units comprised principally of a figure of $5,400,000 for gross sales. Mr Spence acknowledged that the gross sales figure of $5,400,000 was adopted from the D12 feasibility prepared (allegedly) by Dallas in 1989 upon the basis of an average price per unit within the range of $125,000 to $170,000 (D12 @ 10/107 and also at 9/3442). Mr Spence acknowledged under cross-examination that he had no independent verification from any other source that there were real prospects of such sales being achieved within the period depicted on his projected cash flow statement.

618 It appears from the calculation that various costs are then deducted from the total income figure in order to arrive at the net profit figure. Those costs include the land acquisition costs of $950,000, being a figure picked up from the offer and acceptance dated 14 January 1989 whereby the land was sold by St Ives Development Pty Ltd to Dallas (D13 @ 1/230).

619 The figure given for construction costs is $2,870,000. It emerged that this figure was drawn from the same Dallas D12 feasibility statement. Again, Mr Spence relied simply upon his instructions that this was a realistic figure. It appeared from the evidence of David Pringle that his company, Pindan Constructions Pty Ltd, provided the figure of $2,870,000 by letter dated 13 January 1989 to Oldfield Knott, being the architects who had designed the project proposed by the Dallas predecessor in title, St Ives (D12 @ 10/107). Mr Pringle was not sure whether the Pindan figure for construction costs was provided for St Ives or Dallas and was not sure whether it was a quotation or a "preliminary estimate" of the kind given to Dallas with respect to the St Andrews project.

620 The figure in question appears also in a fax dated 13 January 1989 written by Mr Danny Jones of Oldfield Knott, Architects to Mr Ray Fitzgerald of St Ives Development (D12 @ 10/108). Mr Jones said in evidence that this represented a "firm price" for the construction costs of the proposed project, being a project in respect of which planning approvals had been obtained and working drawings prepared. As far as he was aware, a building licence was never applied for or obtained. He did not have any dealings with Mr O'Rourke of Dallas. The Jones evidence was consistent with evidence given by others that the project was stalled by later events.

621 The financing costs included the sum of $419,543 in respect of interest, being a figure derived from the Spence projected cash flow statements (D55 and D56) on the assumption that borrowings from Perpetual Finance to finance the development work were at the level depicted on the cash flow statements.

622 I note in passing that the total overall figure for interest (accrued to the end of December 1990) given at sheet 1, page 6 of D56 concerning projected cash flow is $489,338. Mr Spence said in cross-examination that this figure was adjusted downwards to $419,543 in his calculation to allow for the supposition that the development costs would not have been financed wholly from the assumed further loan from Perpetual Finance but in part from Dallas cash in hand at its bank.

623 Various other costs are brought to account also, including selling expenses, to produce a figure for total costs of $4,588,083. This, deducted from the total income figure, produced a purported net profit of $812,110.

624 The further calculation in section 5.1 of the Spence Report then brings to account sale proceeds of $1,475,000 notionally received on the sale of the West Coast Highway land to Westminster Properties, being the figure attributed to the West Coast Highway land in the relevant offer and acceptance dated 19 June 1989 (D21 @ 2/505). After setting off certain costs in respect of that transaction, the net profit in respect of the sale to Westminster was said to be $384,698. When that was deducted from the projected profit on development of $812,110 mentioned a moment ago the net loss of profit was said to be $427,412. It is this latter figure which is said to constitute the loss suffered by Dallas referable to the West Coast Highway land as a consequence of the swap transaction and misrepresentations complained of by Dallas.

625 The hypothetical scenario contended for by Mr Spence was vigorously challenged by counsel for Custom Credit in cross-examination and in his closing submissions. It was put to Mr Spence that there was no real likelihood that further funding for development (creating a total debt of $4,000,000) would be available from Perpetual Finance. As to this, Mr Spence acknowledged that the assumed finance was based on his instructions from Dallas. He could not point to any document that validated such an assumption.

626 I pause here to note that at a later stage Custom Credit sought to support this line of cross-examination by reference to Mr Kennedy's valuation of the West Coast Highway land at the material time in the sum of $750,000. It could be inferred from this Custom Credit contended, that construction funding to the level envisaged by Mr Spence was not likely to be available.

627 Mr Spence agreed that it was an assumed fact also that sales of $5,400,000 could be achieved within a period of four months towards the end of 1990 so that the total debt could be paid off by the end of January 1991 as depicted in his projected cash flow statement.

628 In addition, the cross-examiner challenged the reliability of the figure of $2,870,000 provided by Pindan for construction costs, bearing in mind that no building licence had been applied for or obtained. Further, counsel for Custom Credit referred to the evidence (mentioned earlier) that Dallas had attempted to sell the land soon after acquiring it. The Dallas feasibility statement appeared to be based upon the work done by St Ives and arguably did not reflect any real intention to proceed with the project. All of this was said to reveal that there was no real prospect of the West Coast Highway land being successfully developed in the manner depicted in Mr Spence's report so as to generate a supposed net profit of $812,110 by the end of January 1991.

629 Mr Spence had to acknowledge that his figures formed part of a hypothetical scenario that was based on information and instructions received from Dallas.

630 The calculation in respect of the St Andrews land was set out in section 7 of the Spence Report (D51 @ 9/3415). The net claim for the St Andrews land was said to be $1,801,976.

631 Mr Spence's prefatory note with respect to this claim asserts that the St Andrews land was purchased with the intention of constructing 29 (originally 22) luxury units. The losses Dallas allegedly suffered with respect to this property comprised the loss of profit on the development adjusted for the profit made on sale of the property under the mortgagee sale. The figure of $1,801,976 contended for was arrived at by calculating a projected net profit on the assumption that the development costs would be funded by borrowings from Custom Credit on the security of the St Andrews land. From the projected net profit of $1,837,811 was deducted the funds received from the mortgagee's sale by Custom Credit in November 1992 as reduced by costs expended on the property including the land acquisition costs of $400,000. The net profit of $35,835 thus obtained was then added to the loss of profit on development to produce the overall net claim for the St Andrews land of $1,801,976.

632 It appears from the calculation reflecting the supposed loss of profit that the development was expected to generate sale proceeds revenue of $5,510,000. The projected cash flow statements for the period 1 July 1989 to 30 June 1991 suggest that the project would be completed and the borrowings reduced to nil by the end of June 1991. The cash flow statements recognise that the borrowings were bound to be substantial in order to complete a project of this size. It was assumed that Custom Credit would lend the necessary funds pursuant to a "construction loan" whereby funds were advanced as the development work proceeds and the land against which the loan funds are secured increases in value. One notices, for example, from the projected cash flow statements, that as at December 1989 the borrowings were projected to be at that time $1,107,119 rising to a peak of $1,449,195 in March 1990.

633 I pause here to observe that, again, Custom Credit challenged these assumptions by reference to the evidence of Mr Kennedy who said that the true value of the St Andrews land at the material time was $580,000. On the Custom Credit case, this suggested that construction finance at the level envisaged by Mr Spence was not likely to be available.

634 It is implicit in the Spence scenario that (consistently with the Dallas pleaded case) borrowings were obtained from Custom Credit for St Andrews shortly after mid-1989 and the development works were carried out promptly "as proposed by the St Andrews feasibility". That assumes that all the relevant planning and costings for a 29 unit project had been completed and approvals obtained at or shortly after mid-1989. I will turn to the evidence bearing on this aspect of the matter in due course.

635 Various costs and expenses are deducted from the sales proceeds figure in order to arrive at the net profit. Importantly, these costs are said to include on the Spence scenario $2,600,000 in respect of building costs. Mr Spence confirmed in evidence that this figure was obtained from a letter written by Pindan Construction to Parmex dated 2 August 1990 (D49 @ 4/1479) in which it was said that the figure represented "our preliminary estimate" for the construction of 29 units at St Andrews "utilising the drawings supplied, namely: Woodhead Australia sketch dated 22 June 1990".

636 I will return to the details concerning the projected construction costs of $2,600,000 in due course. I note in passing at this stage that Parmex was a company operated by Mr Graham Exton, the former State Manager of Custom Credit, which was engaged by Dallas to assist in the preparation of an application for finance. Mr Pringle from Pindan agreed that the figure was not a firm quotation.

637 The costs and expenses also include an item of $338,100 in respect of interest, being a figure derived from the Spence projected cash flow statements in respect of the hypothetical borrowings from Custom Credit. Various other costs and expenses were brought to account to produce a total cost figure of $3,672,189. That amount, deducted from the hypothetical sale proceeds of $5,510,000, produced a supposed net profit of $1,837,811. As I have indicated, the supposed net profit of $35,835 derived from the sale of the property was brought to account to produce the net claim contended for in respect of the St Andrews land of $1,801,976.

638 I pause to observe that the Pindan/Pringle figure for construction costs of $2,600,000 appearing in the Spence calculation was supported by evidence given on behalf of Dallas by Mr Ian Howard, an architect associated with Woodhead Australia at the relevant time. Woodhead was a firm of architects engaged by Dallas to design the development.

639 As I indicated in earlier discussion, Mr Howard said in evidence that the design for St Andrews was initially for 22 units. Detailed working drawings were prepared for the first scheme, planning approvals were obtained from the Joondalup Development Corporation and the Shire of Wanneroo and a quotation was obtained from Pindan Constructions. He said that the first scheme was devised during 1988 and was fully detailed and ready to go to tender in or about May 1989.

640 Mr Howard went on to say that the first scheme was designed for the upper end of the market rather than maximising the number of units on the site. However, in early 1990 the development was increased to 29 units. He recalled that as to the second scheme for the 29 units there were advanced sketches prepared but he did not believe that the project proceeded to the working drawings stage. By increasing the number of units from 22 to 29 the land component cost for each unit was reduced which allowed individual units to be sold at a lower cost than those of the first scheme.

641 In the course of his evidence Mr Howard referred to a budget for the second scheme which was submitted to Dallas by letter dated 9 April 1990 (P44 @ 10/73). This disclosed a total project budget of $3,013,031. This was made up of a total construction budget of $2,900,000 as increased by professional fees of $113,031. The major item in the construction budget is $2,784,000 which is based on the assumption of building works being performed at the rate of $800 per square metre. Mr Howard said that this latter figure was a generalised figure prevailing in the industry at that time. It would be adjusted to the particular project in light of the tender received and contract awarded.

642 The Spence calculation and related Howard evidence was contested in the course of the cross-examination of the witnesses called by Dallas.

643 An important issue raised with these witnesses concerned the timing of the hypothetical development. The Dallas case and the Spence cash flow projections proceed from the premise that if development funds had been provided by Custom Credit in mid to late 1989 (allegedly as promised) the development work could have proceeded forthwith. However, the cross-examiner drew attention to various facets of the evidence which suggested that plans, approvals and costings for a project of 29 units had not been finalised prior to the Pindan quote of 2 August 1990 (D49 @ 4/1479) by which time Dallas had ceased trading, and even then the construction cost figures were a "preliminary estimate" related to a Woodhead "sketch dated 22 June 1990".

644 The cross-examiner drew attention also to evidentiary matters that seemed to establish that the only feasibility study concerning the St Andrews land (D16 @ 10/80) was not brought into existence until mid-1990. The feasibility document is undated but it appears to pick up the figures set out in the Woodhead letter of 9 April 1990 (P44 @ 10/73), that is, the figure of $113,031 for professional fees mentioned in the letter is mirrored in the feasibility study; the figure of $2,784,000 for building works in the letter is reproduced in the feasibility study, notwithstanding that the latter cost per square metre figure of 29 units is given incorrectly as $190 m2 (rather than $120 m2 in the letter). The presence of this error was said to show that the feasibility study was simply reflecting calculations made by Woodhead in early April 1990. All of this was said to show that the hypothetical scenario in the Spence Report was flawed because the St Andrews project was not fully planned and costed until after mid-1990.

645 I digress briefly to remind myself that this issue concerning the time at which the undated feasibility study concerning St Andrews was brought into existence had a bearing upon the question of liability. Dallas relied upon a representation allegedly made in June 1989 by Mr Lewis that Custom Credit would provide development funds for St Andrews "as proposed in the St Andrews feasibility". That was denied by Custom Credit, partly upon the basis that the St Andrews feasibility study related to 29 units and was not created until after 9 April 1990, (having regard to the matters I have just mentioned). I dealt with this issue earlier in the judgment and will not repeat what I said then. Put shortly, I was not satisfied that the feasibility study was created in mid-1989 as alleged by Dallas. It follows that as to this further issue concerning damages I harbour reservations as to whether the undated St Andrews feasibility study substantiates the scenario depicted in the Spence Report, and in his projected cash flow statements, that the 29 unit project was fully costed and ready to proceed in 1989.

646 The answers given to questions concerning the claim in respect of the St Andrews land filled many pages of the transcript at trial. However, in essence, Mr Howard and Mr Pringle were not able to point to anything which refuted the suggestion that the costing process for the project of 29 units commenced essentially with the Woodhead letter of 9 April 1990. Mr Spence could say only that his projections were based on figures and assumptions provided to him by or on behalf of Dallas. He accepted that if the West Coast Highway and St Andrews projects went ahead simultaneously in the manner envisaged by his projected cash flow statements this would give rise to borrowings by Dallas at unprecedented levels and at unusually high interest rates of 21.5 per cent. The company had no capacity to meet its obligations other than by promptly realised land sales.

647 Mr Spence agreed that in fact the St Andrews project did not proceed prior to the mortgagee's sale by Custom Credit in November 1992. He acknowledged that his assumptions about the sales proceeds depended on the presence of a strong demand in the marketplace. He could not point to evidence substantiating such a demand within the timeframe assumed by his projected cash flow statements. He acknowledged that the St Andrews land as a whole fetched only $585,238 at the mortgagee's sale in November 1992.

648 It appears from the summary of quantum of claim in the Spence Report (D51 @ 9/3409) that the loss contended for referable to the Irwin property is $1,111,709.

649 The prefatory note at the commencement of section 6 of the Spence Report concerning this item (at 10/3413) asserts that the Irwin property was effectively swapped with the West Coast Highway land. It is said the Irwin property proved to be a bad investment and was subsequently sold under a mortgagee sale in January 1992. The losses arising from the Irwin property comprise interest and outgoings on the property (described elsewhere as "holding costs") of $200,068, loss on sale of the property including incidental costs of acquisition in the sum of $907,971, and loan establishment costs of $3,670. The total loss on the Irwin property when these three items of loss are drawn together is therefore said to give rise to a total loss of $1,111,709.

650 The alleged loss on sale of $907,971 is arrived at in this way. The acquisition costs are said to be $1,535,632 which is comprised largely of the "purchase price" of $1,475,000, being the figure attributed to the property on the offer and acceptance dated 19 June 1989 pursuant to the arrangements comprising the swap transaction (D20 @ 2/503). The net proceeds from the mortgagee sale after Dallas had ceased to trade of $627,661 are then deducted from the total acquisition costs to arrive at the alleged loss on sale of $907,971.

651 As I have indicated in earlier discussion, a conceptual issue was raised with Mr Spence in cross-examination as to whether there was any basis for a claim in respect of loss referable to the Irwin property. In other words, it might be said that if the object of assessing loss suffered by Dallas was to endeavour to establish the position it would be in but for its allegedly ill-fated entry into the swap transaction, then one should look only at the profits or income it might otherwise have obtained from the exploitation of the assets it held prior to the swap transaction, namely, that West Coast Highway land and the St Andrews land.

652 In regard to that matter, these exchanges occurred in the course of the Spence cross-examination at page 1257 of the transcript:

"I don't want to descend into numbers but conceptually you calculate an amount of income lost because the West Coast Highway project didn't proceed successfully, do you not?---That's correct.

That amount is $812,000?---That's correct.

Which would otherwise, you say, have been factored into the cash flow of Dallas once the project was completed and the units sold off?---Yes.

That hypothesis of 812,000 is only altered by setting off against it the notional profit as between what West Coast Highway was bought for by Mr O'Rourke at 950,000 as opposed to the sale proceeds. So if we eliminate that element of the hypothesis and keep the 812,000 then by parity of reasoning when you look at the losses for Irwin Street you would also, by parity of reasoning, eliminate the loss on sale of $907,971, would you not. You would just ignore that component of the equation?---No, Mr Martin. I am comparing what actually occurs where in one transaction you have West Coast Highway, you successfully go through that transaction and when you finish it and you end up with $812,000 profit.

Yes?---On the other side of it then is - what I'm saying is if Irwin Street hadn't occurred Dallas would have ended up with $812,000 in its bank account. As a result of going into the transaction with Irwin Street it actually ended up with a negative figure."

653 There were other passages of cross-examination to much the same effect. However, a conceptual issue remained open as to whether the Spence claim under this head was flawed because it sought to conflate actual expenses and hypothetical profit and losses in respect of the West Coast Highway land and St Andrews land. Further, and in any event, the Spence claim was said to be not persuasive in seeking to quantify a loss allegedly flowing from the mortgagee's sale when the true value of the subject land (the Irwin property) was not established by a satisfactory valuation of the land at the date of the mortgagee's sale.

654 There was a good deal of debate about all these matters, with Mr Spence in the course of cross-examination, and between counsel on both sides in the course of closing submissions.

655 In the end, I understood the Custom Credit position to be this. Having regard to the reasoning of the Full Court in Henjo (No 1) (supra) it was permissible to conflate hypothetical losses and actual losses to some extent. This meant that it was open to Dallas in conceptual terms to claim an alleged hypothetical loss of profits in respect of the West Coast Highway and the St Andrews projects plus actual costs (essentially holding costs) associated with the acquisition of the Irwin property for a reasonable period after the infringement complained of. However, it was not open to Dallas to claim $907,971 in respect of the Irwin property pursuant to s 6.3 of the Spence Report because it was not permissible to claim a difference between a stipulated consideration for the acquisition of the Irwin property at $1,475,000 on 31 August 1989 and the net proceeds from a 1992 mortgagee sale in an amount of $627,561. Such a claim was not open, since the proceeds of the mortgagee sale in January 1992 would need to be properly contrasted to the then open market arms-length value of the same property, as at January 1992, for one to assess any true measure of possible loss.

The second category of loss - loss of value in Dallas

657 In section 8 of the Spence Report a claim is advanced for $3,401,567 which is said to represent the loss of value in Dallas. This is the fourth item in the "Summary of Quantum of Claim" I mentioned earlier.

658 Mr Spence's prefatory note concerning this part of his report is to this effect:

"Due to the constraints that the Irwin property put on both Dallas' cash flow and its ability to borrow and compounded by the lodgement of caveats by Custom Credit on all its properties Dallas was unable to continue operating. As a consequence a (sic) Dallas' secured creditors forced mortgagee sales on all Dallas' properties with the exception of some of the first sales of the St Michaels Estate properties."

659 Mr Spence went on to say in his prefatory observations that, as stated in the scope of his report, no account has been taken of the loss of income, future development or other profit or loss of value of goodwill. Further, no account has been taken for the loss in value of other assets not disposed of directly as a result of foreclosures. In short, the claim represents the difference between valuation and proceeds on directly affected properties only.

660 He said that the net loss has also been reduced by potential claims against other parties which may have contributed to the loss in value. He said that the net loss to Dallas under this heading was summarised in the table below (the "second category of loss summary"):

Strata units St Michaels (valuation by Hillier Parker)

Shenton Road shopping centre (still awaiting final settlement statement from Beneficial Finance)

Details concerning the second category of loss

661 In the course of his evidence-in-chief Mr Spence provided some elaboration concerning the claim reflected in s 8 of his report.

662 He said that the constraint on the cash flow of Dallas flowing from the swap transaction was that the Irwin property was not leased out so there was a significant interest cost each month that had to be met. There were other holding costs, such as strata costs, rates and taxes. Because it was not a property that could be developed there was no more borrowing capacity in the Irwin property and this restricted the ability of Dallas to borrow and continue its business as a property developer. Because tenants could not be found for the property the property represented a cash flow drain upon Dallas.

663 I note in passing that it was put to Mr Spence that the rent to be derived from the property, having regard to figures reflected in the relevant valuation, would have amounted to no more than $10,000 per month. Thus, in the seven month period following settlement pursuant to the swap transaction, that is, late 1989 to mid-June 1990, Dallas would have received a total of $70,000 only in respect of rent. Mr Spence was asked to explain how a comparatively small amount of rental income could be said to have had a profound effect upon the commercial prospects of Dallas. He replied to the effect that, in his opinion, the absence of such revenue would have had a significant effect but he did not provide details in that regard. I will return to this issue in due course.

664 Mr Spence also expressed the view that after lodgement of the caveats Dallas could not deal upon the properties and this had an adverse effect upon its ability to carry on business. It was put to him that most of the properties were subject to mortgages in any event and it was therefore difficult to see in what respect the lodgement of the caveats of itself impeded the ability of Dallas to deal with the properties. In answer to questioning to this effect, Mr Spence acknowledged that his expertise did not extend to the expression of an opinion about such matters.

665 Before turning to other matters raised in cross-examination, it will be useful to look briefly at the source of some of the figures in the section 8 net loss table.

666 As appears from the table, the figure of $3,061,000 attributed to the St Michaels strata units is a figure extracted from a Hillier Parker valuation dated 19 June 1989 signed by Mr Marr and Mr Collins in respect of Lot 17 to 19 (inclusive) at St Michaels (D22 @ 2453). Mr Spence said in evidence (at transcript 745) that the total of that valuation was $1,878,000. From that value units 13 and 14 were subsequently sold, reducing the valuation down to a net valuation of $1,545,000. There were eight additional units which, applying the same values to those as were applied to units of a similar kind by the valuer, added an additional $1,182,000. This took the value up to $3,061,000. I note in passing that there was a challenge to the methodology and adequacy of the reasoning underlying this valuation in the course of cross-examination.

667 The sale proceeds figure of $2,146,898 was said by Mr Spence to have been drawn from statements from the various financiers, namely, Custom Credit, Esanda and Citibank (transcript 748). The deduction of the sale proceeds of $2,146,898 from the value of the strata units of $3,061,000 produced the net loss of $914,102 which appears in the table.

668 As to the Ocean Reef office, Mr Spence said in evidence that the figure was taken from the Dallas assessment of the value of it at $180,000 and it was then discounted to $160,000 (transcript 748). The sale proceeds figure of $132,134 was said to have been extracted from company records.

669 As to the value attributed to the Joondalup Retirement Village of $1,687,500 this was said to be referable to the Hillier Parker valuation by Collins dated 1 September 1989 (P28 @ 3/883). Mr Spence said in evidence (at transcript 749) that what accounted for the difference between that valuation of $2,400,000 and the figure of $1,687,500 which appears in his section 8 net loss table was due to the requirement for a road to have been put through. He made a discount himself in regard to the road issue. He was questioned about this in cross-examination but was unable to produce documentation bearing upon it.

670 Mr Collins was cross-examined about the absence of comparable sales evidence to support the figure of $2,400,000 contended for in his valuation report. He acknowledged that his report did not refer to the price of $750,000 paid by Dallas when it acquired the land on 19 May 1989 (a few months prior to his report) and the methodology underlying his figure of $2,400,000 was not disclosed.

671 The sale proceeds of $477,901 in respect of the Joondalup Retirement Village was said to have been taken from actual statements. The difference between the value attributed to the Joondalup retirement village and the sale proceeds was said to represent the net loss of $1,209,599 mentioned in the table.

672 I note in passing at this stage that the validity of the sale proceeds figure of $477,901 was called into question in cross-examination. Counsel for Custom Credit drew Mr Spence's attention to a transfer dated 3 September 1991 whereby the Joondalup retirement village (being Lot 855 on Diagram 76076) was sold to the State Housing Commission for $850,000 by Beneficial Finance as mortgagee exercising a power of sale (P64 @ 7/2714). Mr Spence was asked to rationalise the two figures (at transcript 1292) and responded by saying that the sum of $477,000 adopted by him would have been a deposit to the Dallas loan account with the financier. It might be that costs had come out before the deposit was made but he was unable to provide details in that regard or otherwise reconcile the large gap between the price of $850,000 apparently paid and the sum of $477,000 appearing in his table. On the basis of the figures in his table the net loss in respect of the Joondalup retirement village was said to be $1,209,599.

673 As to the Shenton Shopping Centre it appears from Mr Spence's table that the sum of $2,250,000 was attributed to this land. Mr Spence said that this figure was derived from the Hillier Parker valuation dated 27 October 1989 prepared under instruction from Dallas by Mr Collins. I note in passing that in the valuation Mr Collins was of the opinion that the current open market value as at 27 October 1989 was land value $815,000 and "estimate on completion of shopping centre" $2,250,000.

674 Counsel for Custom Credit raised with Mr Collins and with Mr Spence the question of whether the figure of $2,250,000 could properly be regarded as a valuation when it was clearly expressed as an "estimate" only in respect of development work that had not been completed. Mr Collins acknowledged that he did not have access to carefully assessed construction costs. He conceded that the figure of $815,000 attributed to land value gave little weight to the fact that the land was purchased by Dallas for $300,000 from the Joondalup Development Corporation on 2 September 1988, although the price paid was a factor relevant to value, and the figure for land value of $815,000 had been arrived at not by reference to comparable sales but essentially by working back from the estimated value of the land as developed. Mr Collins acknowledged that he and Mr Marr had made an offer to purchase the project from Dallas on 30 November 1989 for $2,200,000 subject to construction of the shopping centre within seven months. This incident was said to cast doubt on the objectivity of the Collins valuation.

675 The figure for sale proceeds of $1,000,000 in respect of the Shenton Shopping Centre is said in the table itself to be an approximate figure. Counsel for Custom Credit, in the course of cross-examining Mr Spence, drew attention to a transfer from Beneficial Finance to Cuscuna Nominees dated 1 December 1989 whereby the land was sold to the transferee for $1,210,000 (P65 not in the agreed bundle). Mr Spence was not in a position to substantiate his figure of $1,000,000. However, as appears from the table, utilising his approximate figure, the net loss in respect of the Shenton Shopping Centre was said to be $1,250,000.

676 Against this background, let me now turn to various matters which were raised with Mr Spence in the course of cross-examination concerning the details of his section 8 claim.

Cross-examination concerning section 8 of the Spence Report

677 It was put to Mr Spence that there were two sets of caveats lodged by Custom Credit. A first set was lodged on 23 June 1990, but only as to properties over which Custom Credit was then the first and second mortgagee. A second caveat was lodged over all Dallas properties on 31 October 1990, by which time, on the Spence analysis, Dallas had already ceased trading. Mr Spence was therefore asked to explain why the caveats could be said to have obstructed Dallas.

678 Mr Spence could only say that according to his instructions the caveats represented a problem. He could not say what effect exactly the caveats had.

General observations concerning the Dallas second category of loss claim

679 It is apparent from the evidence that throughout 1989 Dallas had committed itself to various development projects at a time when the demand for property was high. It entered borrowings at very high interest rates, all tied to the success of its various development projects and on the assumption that a strong demand for property would continue.

680 It emerged from the Dallas financial statements mentioned earlier in this judgment that Dallas had no residual unencumbered asset or revenue base to meet financial obligations as they fell due, independently of the revenue it expected to derive from the various projects. Dallas borrowed on the strength of valuations that proceeded from and reflected assumptions similar to those harboured by Dallas itself. Many of the assumptions and related costings were questionable.

681 All of this indicates that the ability of Dallas to repay its loans was entirely dependent upon its development projects being successful in the declining property market. The evidence before me suggests that these projects were never likely to be accomplished quickly or to be successful as anticipated by Dallas or the Hillier Parker valuation. The planning of the projects had not been finalised in all cases and, as to the St Andrews project, it seems that the project was still subject to further planning work and preliminary estimates of the construction costs in April 1990. The demand for property began to decline at about that time.

682 The facts and matters underlying these observations were confirmed not only by evidence adduced on behalf of Custom Credit but also by the Dallas expert witnesses, Mr Marr and Mr Collins, both of whom confirmed that there was a decline in the property market in 1990. Thus, there was a good deal of evidence before me which tended to explain why Dallas was unable to meet its repayment commitments on its many land acquisitions and construction loans. The various factors I have mentioned weigh against a conclusion that the failure of Dallas was caused by lodgement of the Custom Credit caveats.

683 Against this background, let me now proceed to my findings in respect of the first and second categories of loss.

684 The first category of loss concerned specific properties being the West Coast Highway land ($427,412), the St Andrews land ($1,801,976) and the Irwin property ($1,111,709). The loss referable to the first two properties is arrived at on the basis that, but for the representations complained of and the swap transaction, the two projects would have been proceeded with contemporaneously, and successfully completed within a comparatively short space of time. I will return to the Irwin property claim in due course.

685 In my view, many of the assumptions underlying the claims concerning the first two properties are questionable. Mr O'Rourke recognised that there were difficulties in Dallas attending to two geographically separated development projects. Moreover, the West Coast Highway land was situated not only some distance away from the St Andrews land but also some distance away from the other Joondalup projects, namely, the St Michaels land, the Shenton Shopping Centre and the Joondalup Retirement Village.

686 The Spence Report is based also upon a further but somewhat questionable assumption that Perpetual Finance would fund loan advances to Dallas for the West Coast Highway project of up to a maximum of almost $4,000,000 (as indicated on the D46 Spence spreadsheet projection for September 1990). However, no evidentiary basis to support this crucial assumption was ever provided at trial. The only possible security for a loan of that size was the land itself.

687 Further, it emerges from earlier discussion that it is questionable whether Dallas had committed itself to proceed with this project bearing in mind that before June 1989 it had placed the land on the market for sale and the only feasibility concerning the same appeared to be the undated D12 document prepared for the St Ives Development.

688 All of this suggests that the West Coast Highway land would not in fact have been developed by Dallas in the expeditious manner envisaged by the Spence Report.

689 As to the St Andrews land, the Spence Report presumes that Custom Credit (as against unidentified security) would have been prepared not only to advance funds to complete the purchase of the land but also advance further funds up to a maximum of $1,449,195 by the end of March 1990 so as to allow Dallas to complete construction of 29 units on the St Andrews site. Again, it was not established persuasively on the evidence that Custom Credit would have advanced such funds or that the Dallas hypothesised successful cash flow position could be sustained.

690 I note in passing that the undated D16 feasibility for St Andrews supposedly prepared in-house by Mr O'Rourke envisaged that construction costs in the order of $2,900,000 was required (site works $116,000; building works $2,784,000). Mr Spence seems to have assumed that Dallas would have either obtained these development funds from other lending institutions or met the cost from the Dallas hypothesised cash flow position.

691 Another key but flawed assumption in the Spence Report is that the existing St Michaels loan, made on the security of 12 units, was not going to be repaid at the end of June 1990, but in fact was going to continue on and increase in amount to $1,262,688 as at the end of November 1990. There was a lack of credible evidence to support this contention.

692 The Spence loss of profit scenario, that is, an hypothesised successful development approach, reflects an attempt to invoke the principles reflected in Poseidon Ltd & Sellars (supra) whereby a claim is made for the loss of a valuable opportunity to earn future profits on a land development, long term. However, as I indicated in my review of the legal principles, this approach to valuing an opportunity claim is based on a probability scenario which will only apply if the Court has first found that an opportunity for profit did exist and the opportunity would have been pursued.

693 I note in passing that in Poseidon Ltd & Sellars (supra) French J at first instance applied a discount rate of 60 per cent overall to the loss of opportunity profits which he found to be proven as an appropriate allowance for risk in regard to bringing the subject project to fruition. This approach was affirmed on appeal. However, in the present case, the Spence analysis does not appear to make any allowance for risk. To my mind, this means that his analysis is gravely flawed because there are a range of factors which could detract from the hypothesised successful outcomes, especially in the volatile property market at that time.

694 There was evidence before me that the developed lots would be coming on to the property market at a time of significant market decline in 1990. The risks in that regard appear to be evidenced to some extent by the market's slow acceptance in 1989/90 of the St Michaels units, some of which became the subject eventually of a further refinancing from Citibank. Other risk factors would include competition from competing developments (such as Sandcastles in the case of the West Coast Highway land) strikes, labour shortages and increases in prices of materials.

695 All of this suggests that a discount factor as to both the West Coast Highway project and the St Andrews project would have to be equal to at least the 60 per cent discount factor employed by French J in Poseidon Ltd & Sellars (supra), or higher.

696 In addition to these matters, as I have indicated, there were various questionable features of the Spence spreadsheets. The amount of interest calculated by Mr Spence on the hypothesised loan from Perpetual Finance in order to fund the construction of the West Coast Highway project amounted in total over two years of the loan to $489,338 (D56 @ sheet 1 page 6). However, when it was pointed out to Mr Spence in cross-examination that this figure was $70,000 higher than his total hypothesised amount of interest assumed by him as part of his interest financing cost for West Coast Highway, that is, $419,543, he was unable to provide a satisfactory calculation to explain a $70,000 lesser difference than his spreadsheet account. He suggested that Dallas would have had more money in its bank account, and therefore would not have needed to borrow as much from Perpetual. However, this explanation appeared to be somewhat unconvincing.

697 I noted in earlier discussion that Mr Spence said quite frankly that he was simply relying on the instructions given to him as the basis for his assumptions. However, in determining what weight should be given to his analysis, I feel obliged to keep steadily in mind that the evidence of the Custom Credit valuer, Mr Kennedy, cast doubt upon the value attributed to the landholdings reflected in the various Hillier Parker valuations. Further, and in any event, as I have noted, the Hillier Parker valuations were not compelling on the whole because there was a failure to refer to comparable and relevant sales evidence (including in some cases the purchase price paid by Dallas) and the figures arrived at finally appear to be estimates. Moreover, the assumed construction costs figures could not always be regarded as firm figures.

698 All of these factors contributed to my scepticism as to whether the West Coast Highway projects and St Andrews projects would have been completed successfully in a comparatively short space of time in the manner envisaged by the Spence Report. In a sense, it was an all or nothing situation, because I had no other evidence before me bearing upon criteria of the kind described by the High Court in the Poseidon Ltd & Sellars case (supra).

699 In the end, I was not satisfied on the balance of probabilities that these two projects would have been completed successfully in the manner envisaged by the Spence Report. I am not satisfied that Dallas was minded to or in a position to commence both projects promptly. I am not satisfied that the assumed opportunity for profit would have been pursued successfully and generated the financial return which was said to underlie this head of the claim for damages. Accordingly, even if Dallas had succeeded on its counterclaim, I am not persuaded, as to these two items, that it was entitled to recover by way of damages the amounts claimed, either pursuant to the Trade Practices Act or at common law.

700 Slightly different considerations apply to the Irwin property claim of $1,111,709. The Courts have said that the measure of statutory compensation under s 82 is not to be fettered by attachment to principles of the common law measure of damages. Each case must depend on its own particular circumstances. However, in the Gates case (supra) the High Court indicated a prima facie inclination towards the measure of damages test used in tort cases, that is, putting the injured party in a position it would have been in had it not been exposed to the wrong.

701 In regard to the Irwin property (Item 6 of the Spence Report), it is apparent that the report proceeds upon the basis of a tort damage scenario. His hypothesis is that the swap does not occur. Accordingly, his claim is as to a loss of opportunity to make profits on West Coast Highway plus, as to the Irwin property, a claim for all losses assuming the Irwin property was never acquired. Cases in which a claim for this type of business loss, in the absence of a rescission, has been accepted for a limited period include cases such as Munchies Management Pty Ltd v Belperio [1988] FCA 413; (1988) 58 FCR 274; Collins Marrickville Pty Ltd v Henjo Investments (1987) 72 ALR 601, and Henjo (No 1) (supra) and Henjo (No 2) (supra).

702 When the matter is viewed in this light, there is arguably a basis for Dallas, if successful on its counterclaim, being entitled to the holding costs associated with the Irwin property (which were said at par 6.2 of the Spence Report to be $200,068), as there is apparently uncontradicted evidence before me that tenants could not be found for the premises. However, the 6.3 component of the Spence Report which is said to give rise to an alleged loss on sale claim of $907,971 is more controversial. This was challenged conceptually by Custom Credit on the basis that such a claim is fundamentally inconsistent with the hypothesis which assumes that the Irwin property was never acquired.

703 Mr Spence in Item 6.3 proceeds on an assumption that it is permissible to claim the difference between a stipulated consideration for the acquisition of the Irwin property on 31 August 1989 at a price of $1,475,000, and the net proceeds from a 1992 mortgagee sale in an amount of $627,561. Custom Credit submitted that such a claim was not open, since the proceeds of a mortgagee sale in January 1992, would need to be properly contrasted to the then open market arms length value of the same property, as at January 1992, for one to assess any true measure of possible loss. The Item 6.3 Spence claim was therefore said to be flawed in principle.

704 I have to say that I am persuaded by these submissions and am not satisfied that Dallas would be entitled to the amount claimed. However, I am prepared to hold that in the event of a Dallas claim succeeding Dallas would be entitled to the holding costs in respect of the Irwin property of $200,068. To this must be added stamp duty on the transaction of $58,212 making a total figure by way of damages of $258,280 as the allowable figure under the first category of loss.

705 This head of claim is dealt with in Items 4 and 8 of the Spence Report and is described in general terms as the loss of value of other Dallas assets claim amounting to $3,401,567. What seems to be suggested is that Dallas would not have defaulted to other lenders such as Beneficial Finance, Esanda and Citibank in respect of its other projects, and therefore been exposed later to unprofitable returns from mortgagees sales, had it not been for the poor financial position of Dallas which was allegedly brought about by the representations complained of.

706 Custom Credit contended that this approach was conceptually flawed. The claim appeared to proceed from the assumption that the projects could have been completed in accordance with the costings utilised by Mr Spence and produced the sale proceeds he contended for in his report. However, having regard to the factors and specific criticisms of this approach I touched on in earlier discussion, Custom Credit argued that the Spence approach was unconvincing. Further, this head of claim assumes that the values attributed to the subject lands pursuant to Hiller Parker valuations carried out in 1989 could be regarded as a reliable yardstick as to value two or three years later at the time of a mortgagee sale.

707 This head of claim appears to be conceptually linked to the lodgement of caveats issue. Mr Spence was of the view that the lodgement of caveats had a detrimental effect and compounded the problems under discussion, but this assumption appeared to be based on what he had been told by Mr O'Rourke. Mr Spence conceded in cross-examination that unless he had some direct knowledge from lenders such as Esanda and Beneficial Finance to the effect that the Custom Credit caveat of 31 October 1990 had a negative effect, he was not really in a position to give evidence one way or another about how such caveats affected the Dallas position with other lenders. He had no such direct knowledge and there was no other evidence from any reliable quarter in regard to that matter. Mr Spence's own analysis of Dallas' actual financial position indicated that it had ceased to do business by the end of June 1990. Accordingly, I am inclined to accept the Custom Credit contention that the only caveat of any real significance was the October 1990 caveat and it is difficult to see exactly how that caveat could be said to have compounded the Dallas problems, bearing in mind that Custom Credit was entitled to lodge the caveat in question.

708 In the course of earlier discussion I drew attention to various weaknesses in the evidence underlying the figures set out in the second category of loss summary. The Hillier Parker reports relied upon were in the nature of estimates and provided an insufficient picture of the comparable sales evidence. In at least two instances the sales proceeds figures were refuted by figures obtained from the subject transfers. I have mentioned other difficulties. In the end, I am not satisfied on the balance of probabilities that, in the event of the Dallas counterclaim succeeding, it is entitled to damages under this head of claim in the sum of $3,401,567 in the manner envisaged by the Spence Report.

709 I have not been satisfied on the balance of probabilities that the various representations underlying the Dallas counterclaim were made as alleged or that Dallas was entitled to relief in respect of the fourth representation. It follows that the Dallas counterclaim will be dismissed. There will be judgment for the plaintiff, Custom Credit, against Dallas in the sum of $40,608,849 as at 30 April 2004 with additional amounts of total interest accruing each day thereafter at $26,120 per day. I will hear from the parties as to whether any further orders are required and as to costs.