Derring Lane Pty Ltd v Fitzgibbon [2007] VSCA 79

Derring Lane Pty Ltd v Fitzgibbon [2007] VSCA 79 - VSCA 2007 case summary — Zoe

2 Derring Lane Pty Ltd ("Derring Lane" or "the appellant") brought a claim against Jamie Fitzgibbon ("Fitzgibbon" or "the respondent") in the Victorian Civil and Administrative Tribunal claiming damages for negligence and for misleading and deceptive conduct under s 9 of the Fair Trading Act 1999. The claim arose out of a valuation made by Fitzgibbon of a property situate at the rear of 854A Centre Road, Bentleigh East.[1] The property was purchased by Derring Lane from the City of Glen Eira by contract of sale dated 23 May 2002. The purchase price was $2,250,000 plus GST. Under the contract, settlement was to take place on 10 January 2003. The purpose of the valuation was to enable calculation of GST under a so-called margin scheme. Derring fixed its claim against the respondent in an amount of $70,000, being the difference between GST paid of $115,000, and $45,000 which it claimed that it should have paid as GST had the property been valued in an appropriate amount for the purposes of the margin scheme.

3 Derring Lane's claim failed in the Tribunal for want of proof of causation. Its appeal to the Trial Division under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 was dismissed. Now it appeals by leave to this Court. It contends, for different reasons, that the learned judge in the Trial Division misdirected himself as to the applicable principles of causation. The respondent denies that there was any such error. Further, by notice of contention he seeks to support the decision below on the footing that any duty of care which might otherwise have arisen was negated by a disclaimer in the valuation; and on the further footing that the negligence discerned by the Tribunal was irrelevant to a finding of breach of duty pertinent to the appellant's loss and damage.

Pertinent circumstances

4 In order to understand the issues raised by the appeal it is necessary to understand something of the circumstances of the matter.

5 The property the subject of the contract was vacant land. The appellant purchased it for purposes of subdivision.

6 Clause 17.2.4 of the contract provided for the potential operation of the "margin scheme". It said this:

[7]

15 There were two aspects to the third-mentioned conclusion. Each of them raises a question of law. First, that it is a necessity, in every case in which damages for pure economic loss are sought in consequence of a negligent misstatement, that the action which results in the loss be induced on the faith of the reliability of the misstatement; or, put another way, that the action which the representee takes to his detriment is in reliance upon the representation. Second, that by inducement is meant what the tribunal characterized as "active" - by contrast with "passive" - reliance.

16 There were two elements to the fourth-mentioned conclusion. First, that the negligence identified by the tribunal was causative of the appellant's loss. Second, that the quantum of loss was established by assessing the GST which would have been payable had the subject land been valued at $1.45m on 1 July 2000, and contrasting that amount with the amount of GST which in fact was paid.

17 I turn to the claim raised by the appellant under the Fair Trading Act. The tribunal found that the respondent had made representations in breach of s 9 of that Act. But it found that the appellant had not established, in the language of s 159 of the Act, that it had suffered loss "because of" such breach.

Resolution of the appeal to the Trial Division

18 The learned judge in the Trial Division concluded, in essence, that the common law and statutory claims had rightly failed for want of proof of causation. The reasons assigned by the tribunal in that connection revealed no error of law, and the unchallenged findings of fact justified the conclusions reached. That made it unnecessary for his Honour to consider issues raised by the respondent by its notice of contention. I add that, had his Honour determined the question of causation in the appellant's favour - whether in one or both of the common law and statutory contexts - the question what was the proper amount of damages would not, or at least may not, have arisen. That emerges from a comparison of the Notice of Appeal pertinent to the appeal to the Trial Division and the Notice of Appeal pertinent to the present appeal.

The disclaimer

19 In the logical development of the appellant's claim, the first issue was whether the appellant had established that the respondent owed it a pertinent duty of care. The tribunal's finding, favourable to the appellant in that connection, is put in issue by the respondent's notice of contention. I should deal with that matter immediately.

20 Before considering the respondent's submission, this should be said: In finding for the appellant on the duty of care issue, the tribunal applied the criteria of foreseeable reliance and intended reliance which were described by Brennan CJ and McHugh J in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords.[3] I think it is doubtful, in light of Interchase Corporation Ltd (in Liq) v Grosvenor Hill (Queensland) Pty Limited (No 3)[4] that such an analysis was appropriate. But an Interchase approach - see later - would have produced no different outcome.

21 That said, I go to paragraph 1 of the notice of contention, which is in the following terms:

[24]

30 The first aspect of the respondent's contention focussed upon the reasons assigned by the Tribunal for its conclusion, noted above, that "there is no difficulty about elements (a) and (b)." According to counsel's submission, the Tribunal found, in substance, that proof of element (a) was to be found in the respondent's evidentiary concession, whilst proof of element (b) was to be found in the words of the disclaimer itself. But, counsel submitted, proof of a matter necessary to establish duty of care logically could not be found in a clause that was intended to negate liability.

31 I do not agree with the reading which counsel sought to give to the passage in the tribunal's reasons which explained why there was "no difficulty" with the two elements of proof. To my mind, the sentence which shortly outlined the respondent's concession bore upon both of elements (a) and (b), whilst the sentence referring to the disclaimer represented an intended check as to the validity of the conclusion that both elements had been made out. So much is evident from the tribunal's reference to the words of the disclaimer confirming that the respondent intended that the valuation should be acted upon, and showing that he knew that the appellant might reasonably rely upon it. It is not necessary to decide whether the disclaimer could have been used as a check in that way. The tribunal's conclusion that elements (a) and (b) had been proved did not depend upon the validity or otherwise of such a check; and I do not doubt that the evidence apart from the disclaimer entitled such a conclusion.

32 I turn to the submission that the tribunal should have construed the disclaimer to negate the existence of a duty of care.

33 The submission falls away in the event that the matter is analysed as one in which the valuation operated, in substance, to finally ascertain the amount payable under the contract. As was the situation in Interchase,[6] the case is not then one in which the appellant relied upon the content of the valuation. Neither should it be said that the appellant used the valuation.

34 But suppose that the matter should be analysed as one in which the appellant was required to prove that it relied upon the valuation. Assume also that it established sufficient reliance. The tribunal, approaching the matter from that standpoint, concluded that on a proper construction of the disclaimer it did not apply to the appellant. That was because -

[31]

38 The decision of the High Court (by majority) was reversed by the Privy Council (by majority).[10] But the accuracy of the observation of Barwick CJ cited above, strictly obiter dictum, was not thereby undermined.[11]

39 In my opinion, an investigation of "all the circumstances of and surrounding of the giving of" the valuation well justified the conclusion reached by the tribunal concerning the operation of the disclaimer. The matters to which the tribunal referred, and the several additional matters which I have mentioned, pointed in that direction.

40 I should add this: The tribunal concluded, in part, that the appellant was not a "third party" within the meaning of that expression in the disclaimer. That showed a tendency, I think, to treat the disclaimer as if it was a term of a contract made between the respondent and the appellant. But there was no such contract. The duty of care owed by the respondent to the appellant, if duty there was, was a tortious duty arising from consideration of all pertinent circumstances.

41 The appellant submitted that the Tribunal's conclusion was consistent with the decisions of Wootten J in BT Australia Ltd v Raine & Horne Pty Ltd[12] and of the Queensland Court of Appeal in Interchase. According to the respondent's submissions, however, those decisions were distinguishable because there the maker of the statement knew that the recipient thereof was required to act in a way that must affect particular third parties; and that was not this case.

42 Assuming that the present matter was not one in which, by operation of the contract of sale, the valuation bound both the vendor and the appellant, then Interchase would be distinguishable on the facts. McPherson JA, it appears, would have applied Raine & Horne reasoning if, in Interchase, there had not been a contractual imprint. But that was obiter dictum.

43 The analysis in Raine & Horne, on the other hand, did not depend upon the valuation having operation, by force of contract, between the recipient of the report and the parties suffering loss. Wootten J analysed the relationship between the statement maker, the statement recipient and the party suffering loss using the language of reliance. Raine & Horne, his Honour said, indisputably owed a Hedley Byrne duty to BT - the trustee of a unit trust and the investment manager for the assets for superannuation funds. But BT, although it had acted on the negligent statement, was not the person who had suffered damage. Nor were the third plaintiffs, the trustees of a number of superannuation funds with investments in the trust - which funds had suffered losses by reason of a negligent valuation of property that had resulted in a wrong valuation of units in the unit trust - persons who, like the plaintiff in Hedley Byrne, were and were known to be, the real recipients and users of the advice. The third plaintiffs did not receive or use the advice. The third plaintiffs were simply passive suffers from BT's reliance on and use of Raine & Horne valuation.[13]

44 Nonetheless, his Honour said, it appealed to notions of common sense and justice that -

[40]

48 Even if, in the present case, the contract of sale had not obliged the use of the valuation for calculation of GST, the pertinent circumstances of the matter - in which I include the statement within the valuation report stating the purpose for which the same was made, and the respondent's concession that he knew the parties would depend upon the valuation - made the case in substance indistinguishable from Raine & Horne. By analogy, the second part of the disclaimer should not be understood to exclude responsibility for damage resulting to the appellant by the very use of the valuation by the vendor for which the respondent had impliedly accepted responsibility in the first part of the clause.

Were the findings of breach of duty and of misleading or deceptive conduct incapable of being causative of the loss alleged by the appellant?

49 Once the appellant established that the respondent owed it a duty of care, the next matter for proof was breach of duty. The tribunal found breach. By his notice of contention, developed in argument, the respondent contended that the breach identified by the tribunal was necessarily irrelevant to the appellant's claimed loss and damage. Following a logical progression, I turn to consider that contention. In my opinion it should be rejected. I consider that it involved a misunderstanding of what the tribunal decided.

50 Before explaining what I have just said, I should note the detail of the respondent's argument. It ran this way: The tribunal had found that the respondent's negligence, in turn pertinent to representations which were in breach of statute, consisted of not having paid proper regard to comparable sales data, and not having applied the comparable sales method of valuation. But the tribunal had also held that the respondent's adoption of the hypothetical subdivision method of valuation had not been negligent, that the respondent had only used that methodology, and that he had taken reasonable care in formulating his calculations when applying that methodology. It followed, absent passing reference by the respondent in his report to the comparable sales method, that a finding of negligence (or statutory breach) causing loss could not have been made. Further, to have made out loss attributable to the identified breach of duty, there must have been evidence that the appellant had relied upon the respondent's application of the valuation method which he selected, not simply the valuation itself.

51 I turn to the reasons why the contention should be rejected. It is necessary to consider the tribunal's reasons in some detail.

52 First, the tribunal noted that according to his report the respondent had -

[45]

53 Second, the Tribunal noted that clause 24 of the pertinent ruling exhorted valuation using the comparable sales method unless the valuer formed the opinion that such method was for some reason inappropriate.

54 Third, the tribunal observed that the respondent's valuation spreadsheet in fact set out no calculations for valuations by either the comparable sales or discounted cash flow methods.

55 Fourth, the tribunal noted that the appellant's case was put two ways: The respondent had adopted negligently wrong methodology; and the respondent's valuation was so much too low that it must have been prepared negligently.

56 Fifth, having described the evidence of expert witnesses called at trial, the tribunal concluded that the sales of three particular properties "were all sales which ought to have been taken into account as comparable sales" for the purpose of retrospective valuation of the subject land as at 1 July 2000.

57 Sixth, the tribunal appears to have accepted that the hypothetical subdivisional method of valuation is one that is "more prone to error because of the number of variables that have to be considered".

58 Seventh, "tend(ing) towards generosity when allowing a range of latitude", the tribunal adopted, as falling within an acceptable variation, valuations which were within 20% of each other. In applying this approach, it should be noted, the tribunal treated the 20% as being 20% either way, this importing a latitude of 40% from other, accepted, valuations.

59 Eighth, the tribunal noted that the respondent's evidence about what methodology he had adopted had been inconsistent. It did not accept his evidence, given at times, that he had valued the land both by the hypothetical subdivision and comparable sales methods.

60 Ninth, the tribunal found that the respondent had employed the hypothetical subdivisional method in making his valuation, and had paid "little more than lip service" to the comparable sales method, his regard to that method having been "too cursory". He had only "gone through the motions" of considering adjustments to the comparable sales which he had identified.

61 Tenth, the tribunal found that the respondent's application of the hypothetical subdivisional method, "whether right or wrong, was not negligent". By that the tribunal meant, as it explained, that particular criticisms of the way in which the respondent used that method had not been made out. It said that

[50]

63 It can now be seen that the Tribunal did not find, contrary to the submission made for the respondent, that the respondent's use of the hypothetical subdivisional method was not negligent. It rather found that the mechanical steps taken in application of the method were not negligent, but that application of the method had nonetheless yielded a valuation which was so wrong as to bespeak negligence. The negligence discerned by the Tribunal in explanation of the aberrant valuation may be described in either one of two ways. Either the respondent had been negligent to adopt and apply the hypothetical subdivisional method notwithstanding that he eschewed reference to comparable sales as a check; or otherwise the respondent had been negligent because he had not subjected the valuation arrived at by the error-prone hypothetical subdivisional method to the corrective check of the comparable sales method.

64 In the event, the contention fails at a factual level. The case is not one, by distant analogy, where the negligence pleaded and proved, two cars having collided head-on, is that the defendant's car had a faulty tail light.

65 There is possibly a second reason why the contention should fail. The second aspect of the respondent's submissions involved the assumption that in every case of negligent misstatement proof of causation depends upon proof of the representee's reliance on the statement. Such an assumption, see later in these reasons, seems not to be sound.

Proof of causation

66 Being of opinion that the tribunal did not err in law in concluding that the respondent owed the appellant a duty of care, in preparing the valuation, not to cause the appellant pure economic loss, that the valuation was negligently prepared, and that the identified negligence was not irrelevant to the plaintiff's loss and damage, the central issue raised by the appeal resolves itself into this: Did the tribunal commit an error of law - as the appellant submits - in finding that the appellant could not make out a claim for pure economic loss founded in negligent misstatement, or a statutory claim founded in misleading or deceptive conduct, unless it could establish that the misstatement or conduct induced the action resulting in the loss; inducement requiring "active" rather than "passive" reliance?

67 In considering causation, the tribunal began by focussing upon aspects of the appellant's points of claim. There, in respect of the common law claim, the appellant alleged that -

[61]

"Nevertheless, I accept [the] principal submission [of counsel for the respondent], that Derring Lane has not proved that it relied, in the relevant sense, upon the valuation at the time of settlement. My findings are as follows. By having entered into the contract, Derring Lane was locked into an arrangement that meant that clause 17.2.4 would operate if it made the election referred to in that clause. By having made the election to use the margin scheme, but by not having commissioned any valuation of its own up to the date (three days before the date due for settlement) on which it became aware of Mr Fitzgibbon's valuation, Derring Lane was locked into a further position of having to use the valuation as a basis for settlement or to pursue one of two unattractive alternatives: either to ignore the valuation and its own election and pay GST on the full contract price, or to delay settlement - which would have meant, at least temporarily, a default under the contract - and try to obtain a higher valuation. It decided to use the valuation and pay GST calculated accordingly, not because it believed that the calculations based upon the valuation would be correct but because, in Mr Davidson's words, it 'appeared to have no choice', in practical terms.

I do not question the commercial wisdom of the decision. On the contrary, I think that Mr Davidson was wise not to have got into dispute with the vendor over the application of a vague and unclear clause. The decision was not one, however, that came from reliance upon the valuation. There was no active reliance, as I have termed it, in the way that successful claimants in other negligent mis-statement cases have been able to show. Derring Lane did not put faith in the correctness of the valuation. It did not, on the faith of the valuation, do something that it would not otherwise have done; it would have settled by paying GST in accordance with the margin scheme, rather than pursue an unpalatable alternative. Having become aware of the valuation, it used it in circumstances where there was no practical alternative to doing so. That might be termed passive reliance, but in my understanding of the law it is not enough to establish the kind of reliance which is an element in the cause of action for negligent mis-statement."

[71]

83 Pausing for a moment, this may be said: First, the appellant seems to have argued that it was sufficient if it could demonstrate, as a matter of common sense, a direct link between the negligent valuation and the loss suffered. If there was such a link, "reliance [could] be inferred from the fact that the amount of GST paid by the appellant to the vendor was calculated by reference to the valuation." This argument sought to meld the commonsense concept of causation with an acceptance that reliance - in the sense of inducement - must be proved.

84 Second, presumably because the appellant approached the matter from the standpoint that, by some mechanism, reliance must be proved to make out causation, and in any event because the learned judge regarded proof of actual inducement as essential in that connection, clause 17.2.4 remained unconstrued.

85 Third, his Honour reasoned, as I understand it, that a representee could not prove relevant inducement if, although the representee could not have suffered the loss which it did had it not made a payment the amount of which was dictated by the negligent misstatement, it was led to make that payment because it believed, in the particular circumstances, that it had no choice but to do so.

86 In my opinion, the way in which the appellant put its claim, at the tribunal, before the learned judge below, and at times in argument in this Court, tended to obscure proper analysis of the matter. Once a pertinent duty of care was discerned, the plaintiff had to prove that it had been caused economic loss by the negligent misstatement. The question was then whether, in the circumstances of the case, the appellant had to prove, if it was to recover damages, that it had been induced to act to its financial detriment on the faith of the reliability of the negligent valuation; or whether causation might be proved in some other, and what, way. The further question was whether, if inducement must be proved, there was error in the analysis below of what is necessary to satisfy that test.

87 There is a long line of authorities, in this country and in other common law jurisdictions, in which the necessary causal link between a misstatement actionable in tort and recovery of damages has been expressed in the language of inducement.[25] Many of the authorities have been principally concerned with the question whether a duty of care should be discerned in the particular circumstances, whilst sometimes the question has been one of the proper measure of damages. But none of that denies what has been said in the context of proof of causation. Indeed, making a point that could not be in doubt, counsel for the respondent cited two cases in which the inducement analysis had been employed in determining the presence or absence of a causal link between negligent misstatement and economic loss: AGC (Advances) Ltd v Baillieu Knight Frank (SA) Pty Ltd[26] and Richard Ellis (WA) Pty Ltd v Mullins Investments Pty Ltd (In Liquidation).[27]

88 On the other hand, the common characteristic of the very many cases to which I have been referring is that the plaintiff's conduct, engaged in to its detriment, was voluntary. Whatever may have been the force of the auditor's report, or the property valuation, or the publicly exhibited redevelopment scheme, or the council's certificate, the plaintiff was not constrained to act in the way it did simply because the statement had been made. It was therefore entirely understandable that, when a particular plaintiff acted in a certain manner, it should be put to proving that its conduct was not simply coincidental, but had been actuated by the negligently erroneous statement. There would be such proof if the plaintiff established that it had acted on the faith of the reliability of the misstatement.

89 An analysis such as I have just mentioned could be used - indeed, would almost certainly be the easier of proof - in cases where the circumstances were "akin [or "equivalent"] to contract".[28] But that does not mean that the analysis has application where, by a contract to which the statement-maker is not a party, but of which the statement maker has relevant knowledge, the plaintiff is constrained to act in accordance with the statement made.

90 What I have thus far said leads on to this proposition: There are cases, I consider, in which a negligent misstatement can be held to have caused recoverable damage simply because, as the representor knows will happen, the representee is obliged to, and does, act consonantly with the misstatement, and so suffers loss. Indeed, counsel for the respondent accepted that there is such a class of case, citing Interchase in that connection.

91 I do not say that such cases might not be fitted into reliance/inducement framework, though it may be regarded as artificial to do so. Of this, more later.

92 Counsel for the respondent emphasised that no argument had been raised for the appellant that clause 17.2.4 of the contract of sale was relevant to the question whether the case was of the Interchase kind. He submitted also that the attitude of the parties to the clause had been addressed in evidence. He further submitted that Interchase was a different case, because there evaluation had always been required, whereas here no question of a valuation arose until the appellant made an election under clause 17.2.4.

93 In my opinion, the true meaning of clause 17.2.4 is of great importance to the resolution of this appeal. Its meaning involves a question of construction. Even if some evidence was given at trial about the attitude of the contracting parties to the clause, nothing said by the tribunal suggests that what was said could bear upon the issue of construction. This Court, in the circumstances, is able to undertake the task of construction, and in my opinion it should do so.

94 It cannot be said that the clause is satisfactorily drafted. Nonetheless, it should be read so as to make it workable. Four features should be noted. First, recourse to the margin scheme was to be at the election of the purchaser. Understandably so. Although the vendor was obliged to charge GST, and to remit same when received to the Australian Taxation Office, it was the purchaser which had to pay GST[29] and the amount payable was likely to be less if the margin scheme applied. Second, an election was required to be made at least 14 days before settlement. Third, the clause did not squarely say that the vendor must have a valuation made in the event of the purchaser making an election. But it conveyed that this was the parties' intent by referring to "the vendor's valuation costs" in an unqualified way - that is, it did not refer to "the vendor's valuation costs, if any". Fourth, the clause contained no mechanism for dealing with conflicting valuations.

95 In my opinion, having regard to the features just noted, the clause should be construed to mean, in the event that the purchaser elected that the margin scheme should apply, that the vendor was to obtain a valuation, at cost to the purchaser, which was to provide the basis for calculation of GST. The clause did not contemplate that valuations operative in respect of the application of the margin scheme would be obtained by each of the vendor and purchaser.

96 In the event, and contrary to the tribunal's observation, the situation was not one in which the appellant "locked itself into a rather vague, unclear provision about the way in which it might utilize the margin scheme." So far as the tribunal contemplated that, within the clause, the appellant might have "commissioned a valuation of its own", it misunderstood the import of the clause. This in turn led it to err when it said that the appellant -

[73]

97 The true position was rather that the valuation operated to quantify the GST payable - that is, by a comparison of the value of the property as at 1 July 2000 with the purchase price. The purchase price plus the GST so quantified was the total amount payable under the contract, the amount which the appellant was contractually bound to pay.

98 The tribunal noted in its reasons, as I have said earlier, the respondent's concession that at the time he prepared the valuation he knew of the contract of sale, and that he knew both parties would depend upon it for the purposes of calculating GST. It noted also in its reasons that he had certified the value of the land "for GST purposes", and that he had referred in his report to a pertinent GST ruling by the Australian Taxation Office.

99 In the entirety of the circumstances which I have described, I consider that this matter was of the kind considered in Interchase. So viewed, in my opinion the better view is that the case did not turn, in proof of causation, upon the appellant having been induced to act upon the negligent valuation, to its loss, because it believed in the reliability of the valuation. Rather, as the respondent understood - in substance if not in precise detail - when he provided the valuation, the appellant was contractually bound to pay the amount of GST which flowed from application of the negligent misstatement.

100 I have referred to Interchase a number of times. I should say why I consider that it assists resolution of the present matter.

101 In that case the respondent, Interchase, agreed with P that the latter would complete the construction and fitting out of a shopping centre on the respondent's land. When the job was complete, each of P and the respondent was to obtain a valuation of the shopping centre. The average of the valuations was to provide the basis for determining the amount ultimately payable by the respondent to P. Two valuations were made, and each was negligently inaccurate. The respondent had to pay too much. It sued both valuers. One valuer settled, one contested the claim brought against it. The principal question was whether it owed a common law duty of care to the respondent, it having being retained by P, not the respondent. The Queensland Court of Appeal, relevantly confirming the decision at trial, held that a duty of care had been owed.

102 The leading judgement was delivered by McPherson JA. His Honour said this:

[79]

In support of that proposition, his Honour cited Sutcliffe v Thackrah[40] and Arenson v Arenson.[41]

107 I should briefly refer to Arenson, which followed Thackrah. It involved an attempt to strike out a statement of claim as disclosing no cause of action. The application succeeded at first instance, and in the Court of Appeal. Not so in the House of Lords. The claim, so far as relevant, turned on an agreement between A and B that if B was to leave his employment by a private company, he would sell his shares in it to A, who was the controlling shareholder and chairman, for "fair value" - that being the price determined by the company auditors, whose valuation was to be binding upon A & B. B left the company. The shares were valued by the auditors, and B transferred them to A at that amount. Later circumstances showed, B claimed, that the shares had been grossly undervalued.

108 Consideration of the matter was complicated by a question whether the auditors had acted as arbitrators, and were immune from liability for negligence. But clear it is that their Lordships considered that the case as pleaded disclosed a cause of action in negligent misstatement against the auditors. Since the valuation was to be binding on the parties, the concept of inducement to act on the faith of the reliability of the valuation, as the obligatory causal link, would not seem to have had scope for operation. B's obligation to sell the shares for the amount of the valuation did not depend upon whether he agreed with or distrusted the valuation, or upon whether he had, or did not have, misgivings as to its reliability.

109 In the event, Arenson seems to me to sit comfortably with Interchase, and to bear upon both duty and causation.

Another way of looking at causation?

110 Although, in my opinion, the language of inducement is not apt to describe a situation where a representee acts consonantly with a misstatement because of a contractual obligation owed to someone other than the representor to do so, it does not follow that inducement cannot be made to fit that situation. The tribunal concluded that the appellant had not actively relied upon the valuation. It had not put faith in the correctness of the valuation and done something which it would not otherwise have done. But, when regard is had to the proper construction of clause 17.2.4, it might equally be said that, by making the election there referred to, the appellant committed itself to acting in conformity with the valuation; and that by so committing itself, and then paying GST calculated by reference to the valuation, it ought be taken to have acted in reliance on the reliability of the valuation.

111 The sense of the tribunal's reasoning was that a party obliged to act in a particular way when presented with a negligent misstatement must fail to prove causation regardless whether or not it positively endorsed the reliability of the misstatement before it acted - for its endorsement could add nothing to its obligation otherwise existing. That, with respect, seems to me to be wrong at two points. First, it assumes that an obligation to act consonantly with a statement is necessarily incompatible with inducement to act in reliance on the reliability of the statement. Second, it does not take account of the prospect that there may be more than one cause of loss, of which inducement need only be one.[42]

112 The tribunal did not consider, because it did not construe clause 17.2.4, the potential significance of the appellant committing itself, by making the election, to acting consonantly with the valuation. Again, the tribunal's finding that the appellant "decided to use the valuation and pay GST accordingly, not because it believed that the calculation based upon the valuation would be correct, but because ... it appeared to have no choice, in practical terms" seems to me to sit ill with its rejection of the respondent's submission that the appellant actually believed the valuation was wrong but proceeded to settlement nonetheless; and to have failed to grapple with the conception of multiple causes. The likely explanation of the last-mentioned failure, I think, was the tribunal's categorization of reliance as "active" and "passive", the categories apparently being mutually exclusive.

113 In the event, I would hold, were it necessary, that the tribunal misdirected itself upon the issue of inducement.

The statutory claim

114 Because, in my opinion, the appellant has made good its appeal in reliance on its common law claim, I need not address the nature of the causal relationship required to make good the claim founded on breach of the Fair Trading Act. The respondent submitted, in the context of the statutory claim, that the appellant must have shown that it was misled or deceived by the impugned conduct. Hence, there must be proof of reliance. Counsel cited Ford Motor Company of Australia v Arrowcrest Group Pty Ltd,[43] where Lander J plainly approached the matter in that way. But, as I say, the issue need not be determined.

115 Also because it was advanced in the context of the statutory claim, I will say nothing about the appellant's claim based upon third party reliance.[44] The learned judge below opined, I think correctly, that the tribunal had misunderstood the appellant's relevant submission at trial, but that the tribunal's findings of fact doomed the point in any event. But, as I say, the issue need not be investigated.

What amount of damages should have been awarded?

116 The Tribunal held that, if it had been awarding damages, it would have awarded $35,000. It arrived at that amount as follows: Although a "proper valuation" should have "approximated to" $1.8m as at 1 July 2000, a range of latitude must be allowed to a valuer within which a valuation might be made and yet not be accounted outside a permissible, non-negligent, extreme. The range of latitude was plus or minus 20%. The respondent's valuation, $1.1m, was outside the permissible extreme. It bespoke negligence. The permissible 20% extreme, on the "down side" of a proper valuation, was $1.45m. Damages should therefore be calculated by comparing the amount of GST actually paid on the difference between $1.1m and $2.25m - $115,000, with the amount of GST that would have been payable on the difference between $1.45m and $2.25m - $80,000. The difference, $35,000, was the measure of the plaintiff's damages.

117 Counsel for the appellant submitted, in my opinion correctly, that the question at what figure a valuation so far departed from a "proper valuation" as to bespeak negligence, whilst pertinent to the issue of breach of duty, did not provide the base point for assessment of damages. Rather, the starting point was the value of the land on 1 July 2000, according to the evidence of a "proper valuation" as found by the tribunal. The proper comparison was thus between $1.8 million and $2.25 million. If it was otherwise then, depending upon the valuation made the starting point for comparison could have been $1.8 million plus or minus 20%.

118 In my opinion, had the appellant succeeded in its claim before the tribunal, but been awarded $35,000 in damages, it could have contended, properly, that the tribunal had misdirected itself in its approach to assessment of damages - by treating evidence going to proof of negligence as evidence providing a necessary base point for quantification of damages. Whether the appellant could have raised such a question of law in circumstances that the tribunal found liability against it need not be decided. The fact is that the appellant did not seek to agitate such a question when it sought and obtained leave to appeal to the Trial Division.

119 Appeal is available, on a question of law, from an order of the Tribunal, if leave to appeal is granted.[45] The circumstances in which leave will be granted were discussed by Phillips JA in Secretary to the Department of Premier and Cabinet v Hulls.[46] Although there is some capacity to extend time, s 148 of the Victorian Civil and Administrative Tribunal Act plainly contemplates that the question of law will be speedily identified and pursued.[47]

120 A question might arise whether, one question of law having been identified and having been the foundation stone of grant of leave to appeal, it is open to an appellant to supplement the appeal by recourse to a further question of law - the time for identification of a question of law having long expired. It was noted in Housing Guarantee Fund Ltd v Moutidis[48] that an appellant, having been granted leave to appeal, had amended its grounds of appeal so as to challenge the Tribunal's very jurisdiction. But the efficacy or otherwise of the amendment, which presumably raised a new question of law, was not decided.

121 The issue which I have highlighted is akin to that which, in the context of s 109 of the Magistrates' Court Act 1989, gave rise to considerable debate in appeals to which Order 58 of Chapter 1 of the Rules in its previous form applied.[49] It is an issue which is also akin to, though not identical with, the legislative regimes considered in State of Victoria v Bacon,[50] where the presently relevant question was left unanswered and in He v Aloe[51] where the Court permitted the reformulation of questions of law by a self-represented litigant.[52]

122 The question which might have arisen was not agitated, however, before us. Rather, counsel for the appellant contended that the Court's power under s 148(7)(b) of the Act to make an order which the tribunal could have made enabled the Court to make an order in his client's favour for $70,000.

123 In my opinion, the Court does not have power to make an order which is dependent, in substance, upon the resolution, favourably to the appellant, of a question of law which is not raised by the notice of appeal. That is so regardless of the proper answer to the question whether a new question of law may be relied upon once leave to appeal on a particular question of law has been granted.

124 Having regard to the amount involved in this controversy, and to the fact that it has already been the subject of litigation in the tribunal, the Trial Division, and this Court, it would be much the best thing if an order could now be made bringing the matter to an end. But, unless the respondent consents to an order being made against it for $70,000 rather than $35,000, I think that the matter must go back to the tribunal for the pronouncing of orders in conformity with this Court's reasons.

[80]

[1] The land described in Certificate of Title, Vol 10638, Folio 634.

[2] See the tribunal's reasons at [9].

[3] [1997] HCA 8; (1997) 188 CLR 241, at 252 per Brennan CJ and at 274-275 per Mc Hugh J.

[4] [2003] 1 Qd R 26.

[5] Those concessions sat comfortably with the respondent's note of his instructions: "To ascertain the fair current market value of the said property, as at 1st July 2000, to facilitate the calculation of GST for sale settlement purposes using the Margin Scheme.."

[6] Ibid at 47-48, [48] per McPherson JA.

[7] [1963] UKHL 4; [1964] AC 465. See, for instance, per Lord Reid at 492-493 and Lord Morris at 504.

[8] Cf Hedley Byrne at 483 per Lord Reid.

[9] [1968] HCA 74; (1968) 122 CLR 556 at 570.

[10] [1970] UKPCHCA 2; (1970) 122 CLR 628.

[11] It was cited by McPherson JA in Interchase, supra, at [47], 47.

[12] [1983] 3 NSWLR 221.

[13] Paraphrasing his Honour's findings at 229.

[14] Ibid, at 232.

[15] Ibid, at 236.

[16] Ibid, at 236

[17] Ibid, at 237

[18] Ibid at 237.

[19] Otherwise called by witnesses "the Turner Method", in reference to Turner v Minister of Public Instruction [1956] HCA 7; (1956) 95 CLR 245.

[20] Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964].

[21] Apparently an employee of Glen Eira City Council.

[22] At paragraphs 31 and 32, and at paragraphs 40 and 41 of its reasons.

[23] (1986) 162 CLR 341, particularly at 357 per Gibbs CJ, Mason, Wilson and Dawson JJ, and at 366-367 per Brennan J.

[24] Supra at 257 per Dawson J.

[25] One could begin, in relatively modern times, with the dissenting judgment of Denning LJ in Candler v Crane, Christmas & Co [1951] 2 KB 164, approved by the House of Lords in the Hedley Byrne case. See also, in England, amongst many authorities, Smith v Eric S Bush and Harris v Wyre Forest District Council [1990] UKHL 1; [1990] 1 AC 831, Caparo Industries plc v Dickman and ors [1990] UKHL 2; [1990] 2 AC 605, and Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1996] UKHL 10; [1997] AC 191. In Australia, see for example San Sebastian at 357 per Gibbs CJ, Mason, Wilson and Dawson JJ, and at 366 per Brennan J; Esanda Finance at 256 per Dawson J, and at 287 impliedly by McHugh J; and Kenny & Good Pty Ltd and Anor v MGICA (1992) Ltd [1999] HCA 25; (1999) 199 CLR 413.

[26] Full Court, Supreme Court of South Australia, 12 October 1992, unreported.

[27] (1995) 124 FLR 157.

[28] The meaning of the term, often used, is not free of debate. Lords Templeman and Jauncey did not agree whether Smith and Harris were such cases. Its meaning, in a particular context, was described by Gummow J in Hill v Van Erp (1997) 188 CLR 159 at 233. In Kenny & Good, Mc Hugh J, citing Gummow J's observations, applied it to a "free rider on the contract"; supra at 434.

[29] Though it might ultimately recoup the same from the ATO, or set off the amount paid against GST charged by it.

[30] Supra, at 39, [27].

[31] Supra, at 40, [30].

[32] [1997] NSWSC 144; (1977) 23 ACSR 590 at 596.

[33] (1985) 1 NSWLR 314 at 335.

[34] Supra, at 41, [32].

[35] Supra at 252.

[36] Albeit the party who must pay the cost of the valuation.

[37] At least recovery should not be denied where the affected party does not know that the valuation is negligently - and detrimentally to that party - inaccurate.

[38] Citation at footnote 33.

[39] At 335F-G.

[40] [1974] AC 727.

[41] Reported as Arenson v Casson Beckman Rutley & Co [1977] AC 405.

[42] See, for instance Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 at 493, [106]- [107] per McHugh JA, Hanave Pty Ltd v Lfot Pty Ltd & Ors [1999] FCA 357; (1999) ATPR 41-687 at 42,791 [46] per Kiefel J, Smith v Noss [2006] NSWCA 37 at [26]- [27] per Gyles JA.

[43] (2003) 134 FLR 532 particular at s 35 [94], 536-539, [98]-[123].

[44] See Janssen Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FLR 526, McCarthy v McIntyre [1999] FCA 805 and Hampic v Adams [1999] NSWCA 455 at [35]- [36].

[45] Victorian Civil and Administrative Tribunal Act 1998, s 148(1).

[46] [1999] VSCA 117; [1999] 3 VR 331 at 335-337.

[47] See s 148(2)(a), (3).

[48] [2004] VSCA 226, per Eames JA at [6].

[49] Williams, Civil Procedure in Victoria, paras 58.06.170-175. That matter was left open by Brooking JA in Ericsson Pty Ltd v Popovski (2000) 1VR 260 at 267-268, [22].

[50] [1998] 4 VR 269.

[51] [2006] VSCA 150.

[52] Ibid at [3]-[6]. The reasons suggest, however, that it was not argued that re-framed questions could not be relied upon, as being out of time. See also He v Aloe & Co Pty Ltd [2006] VSCA 235 at [3]- [5]

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Judgment (80 paragraphs)

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Cases Cited (12)