However, the Full Court in Bialkower v Acohs Pty Ltd (supra) made the following observations about this statement (at 12-13):
"However, despite the observation of Davies J in Jones at 422 […] that he could see no reason why equity "should not aid … the ascertainment of what would be a just contribution", we doubt whether the general law of contribution authorises an apportionment such as that made by the primary judge. Contribution is "founded on equality": Albion at 351, though it is true that "equality" in the maxim "equity is equality" is not literal equality, but proportionate equality: Re Steel [1979] Ch 218 at 225-226."
26 It appears from this passage that the Full Court was approving the observations of Sir Robert Megarry VC in Re Steel [1979] Ch 218 at 226 who, in turn, was discussing remarks of Fry J in Steel v Dixon (1881) 17 ChD 825. Sir Robert Megarry VC was considering how the residue of an estate should be distributed amongst beneficiaries who had received legacies in nominated but differing amounts and said (at 226):
"The other [authority] is Steel v. Dixon (1881) 17 Ch.D 825. There, at p.830, Fry J is discussing the rule that as between co-sureties there is to be equality of the burden and of the benefit. The judge says, "When I say equality I do not mean necessarily equality in its simplest form, but what has been sometimes called proportionable equality"; and he then explains that if the sureties are sureties for unequal amounts, they must contribute proportionately to the amount for which each is a surety. That, of course, is a very different case from this: but I think it is valuable as correcting any assumption that equality necessarily means mathematical equality. When the maxim "equality is equity" comes to be applied, it often, and I think usually, will mean mathematical equality, in that no other basis of equality can be discerned: but given suitable circumstances a true equality of treatment may require the application of a mathematical inequality, and instead a proportionate equality."
27 Thus the burden and the benefit are ordinarily to be divided equally unless there are "suitable circumstances" in which "a true equality of treatment" requires "proportionate equality".
28 I now turn to the question in the present proceedings of whether and the extent to which Burke should be required, by way of contribution, to satisfy Hanave's loss. In my judgment of 31 August 1998 I concluded that the conduct of Jagar did not cause Hanave loss so as to give rise to liability under s 82 of the TP Act. The majority of the Full Court concluded that the conduct I viewed as contravening s 52 together with Jagar's failure to disclose the incentive payments caused Hanave's loss in the sense that it was at least one decisive consideration leading to the decision of Hanave to purchase the property. Kiefel J, with whose reasons Wilcox J agreed, described the contravening conduct as having been "of significance to any rational prospective purchaser and to operate as influential when considering an investment in the centre, or the price paid for it." What are the hallmarks of a "rational prospective purchaser" and why, as a matter of fact, Burke was to be treated as having them is not clear. Nonetheless I am plainly bound to give effect to what appears to have been a finding of fact by Kiefel J that the contravening conduct of Jagar "must be taken to have been of significance" to Burke in deciding, on behalf of Hanave, to purchase the property which was worth less than the purchase price. Kiefel J appears to have accepted, however, that Burke had been careless and his carelessness may, at the least, have contributed or did contribute to Hanave's decision to purchase but, as a matter of law, that carelessness provided no answer to a claim founded on the combined operation of ss 52 and 82 of the TP Act. Wilcox J did not expressly deal with Burke's carelessness but his Honour can be taken to have agreed with Kiefel J's observations given his general agreement with her Honour's reasons. Any consideration of contribution has to be by reference to the view the Full Court took of the effect of the conduct of Jagar and not the view I earlier expressed.
29 It must be assumed that Burke, as director of Hanave, was induced into believing that each of the tenants, and in particular Barbara's Storehouse, was a high quality tenant by the combined effect of the property report which he was sent on 28 June 1994 and the draft contract he was sent on 11 July 1994 which did not disclose the incentive payments. However it was when he received the draft contract that he should have appreciated, as Hanave's solicitor, the desirability of undertaking inquiries about the solvency and financial standing of the tenants. There was no practical or commercial reason why those inquiries could not have been undertaken prior to exchange and, if properly advised, Hanave would have undertaken them. In my opinion a cause of Hanave's loss was Burke's failure to advise Hanave to undertake the inquiries. It is inconceivable, in my opinion, that the combined effect of the description of the tenants as high quality tenants and the failure to disclose the incentive payments would have caused Burke, in his capacity as a director of Hanave, to reach such a level of confidence about the solvency and financial standing of the tenants as to ignore or not act on advice that should have been given about making further inquiries. I do not read the reasons of the majority of the Full Court as precluding this conclusion. It is, of course, somewhat artificial to speak of Burke effectively giving himself advice though it must be borne in mind that it was Hanave which was entitled to the advice. However as a practical matter Burke, because he was also acting as Hanave's solicitor, should have realised that further inquiries were desirable because of the terms of clause 11 of the contract and realised there was no impediment to them being made on Hanave's behalf. Had he realised they should have been made, he would have made them on behalf of Hanave even if, in making them, he was doing so in his capacity as director. Had this occurred and had, for example, he read the tenancy files maintained by Jagar and accessed rent records, the position of the tenants would have been made apparent to Hanave at least in substantial part. Burke, in my opinion, should share the burden with Jagar (and indirectly Tresidder) for the loss Hanave suffered. In my assessment, it is for Burke to bear one half of Hanave's loss and Jagar (and Tresidder) one half.
Damages
30 The purchase price of the property was $2,550,000. During the hearing two experts gave evidence about the value of the property. Hanave called Mr Philip Barlow who provided various valuations based on a number of assumptions. He provided two valuations of the property as at 20 July 1994 (the day of exchange) but both were based on actual rents. One was for $1,962,183 and the other was for $1,697,350. The respondents called Mr John Howes who also provided several valuations based on a number of assumptions. He utilised three bases for valuing the property as at 20 July 1994. One resulted in a value of $2,100,000, another in a value of $2,150,000 and another in a value of $1,870,000. He ultimately proferred a valuation of $2,000,000.
31 I will return shortly to the evidence of the valuers but I should say something now about the applicable principles. The starting point in assessing damages under s 82 of the TP Act is the difference between the real value of the thing acquired at the date of acquisition and the price paid. So much is apparent from the joint judgment of the High Court in Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291. However the Court went on to say:
"Nevertheless, although the value is assessed as at the date of acquisition, subsequent events may be looked at in so far as they illuminate the value of the thing as at that date. A distinction is drawn, however, between subsequent events that arise from the nature or use of the thing itself and subsequent events that affect the value of the thing but arise from sources supervening upon or extraneous to the fraudulent inducement. Events falling into the former category are admissible to prove the value of the thing, those falling into the latter category are inadmissible for that purpose. Thus, the takings of a business subsequent to purchase are generally admissible, not only to prove that a representation concerning the takings was false but also to prove the true value of the business as at the date of purchase. Even when some difference exists between the conditions under which the business was conducted before and after purchase, evidence of subsequent takings may be admissible, "subject to due allowance being made for any differences in relevant conditions". But if it is established that the decline in takings has been caused by business ineptitude or unexpected competition, evidence of subsequent takings is not admissible to prove the value of the business as at that date, events such as ineptitude and unexpected competition being regarded as supervening events."
32 There was, in substance, agreement between the valuers about what the net annual market rent was at the time of exchange, namely $174,980. However issues arose about the treatment of the rents due under the leases to the extent that they exceeded the market rent and to the extent to which events following exchange and rents received thereafter should be considered in arriving at a valuation. The general expertise of each valuer was not challenged.
33 Howse's evidence was compelling and he was prepared to concede matters in cross examination. One was the relevance of the absenceof bank guarantees for the leases. He was cross examined extensively about his first method of valuing the property based on the rents reserved under the leases and his use of a rate of 15% to capitalise the lease rents to arrive at a valuation of $2,100,000. However nothing emerged from that cross examination that suggests to me any error in his approach. His second valuation was based on rent received from the commencement of each lease to the date of transfer of the title of the property in August 1994. He paid regard to Barbara's Storehouse's difficulties in paying the full rent in July and August 1994, the drop in Talk the Ted's rent and Table Eight's threat to leave. He did not rely upon the actual rental payments of Barbara's Storehouse after August 1994. Adopting a capitalisation rate of 13%, he arrived at a value of $2,150,000. His third valuation of $1,870,000 was based on calculations adopting market rents and capitalising them using a lower rate and making adjustments for under or over renting for the term of existing leases. During cross examination he accepted that the rate of capitalisation was too low in respect of that component of the rent paid by Barbara's Storehouse that exceeded the market rent because there was no bank guarantee for the rent. Howse expressed the opinion that the capitalisation rate should be 18% for that rent within resultant value of $1,840,000 rather than $1,870,000. While he did not express an opinion about a reduced valuation by this method on his ultimate valuation of $2,000,000, it can be assumed it had some impact.
34 Barlow's valuations were based substantially on his knowledge of events occurring after the purchase of the property by Hanave. Hanave's management of the property after purchase was, in my opinion, markedly different from that of Jagar prior to sale. Jagar was committed to promoting the complex as a factory seconds outlet and did so with some success. Hanave was not. It did little more than collect rent, effect necessary repairs and when a vacancy arose attempt, with no measure of sophistication, to secure a new tenant. The Leichhardt property was but one of the considerable number of properties managed by Hanave and it received limited attention. Hanave's management approach was not pro active like that of Jagar and it did not maintain the character of the complex which Jagar had gone to some lengths to create. These changes make it inappropriate, in my opinion, to determine without qualification a valuation based on events that occurred after the acquisition of the property by Hanave and, in particular, on vacancies that arose and their effect on the rental stream and the pattern of rental payment after acquisition. The way in which the property was managed by Hanave can, in my opinion, be fairly described as "a difference in relevant conditions" for which some allowance should be made in assessing Hanave's loss.
35 Counsel for Hanave sought to focus on events after Hanave's purchase of the property from another perspective. It was submitted that because Barbara's Storehouse left shops 1 and 2 and moved to a smaller shop within eight months of the date of the contract, and then a further four months later ceased to pay any rent, it was appropriate not only to have regard to these events but also to discount entirely the rents reserved under the lease to the extent they exceeded market rents. The relevant valuation, it was submitted, was that based on the market rents and reference was made to the judgment of Lehane J in Flemington v Raine & Horne (1997) 148 ALR 271 especially at 311. Barlow's valuation on this basis was $1,306,958 and Howse's was $1,367,769. That approach, however, appears to ignore entirely the existence of the leases requiring the payment of rents in excess of the market rents.
36 Some balance has to be struck between the approaches of the two valuers in determining Hanave's loss, though there is an element of imprecision in that balancing process: see Spencer v The Commonwealth (1907) 5 CLR 418 at 442, and Magenta Nominees Pty Ltd v Richard Ellis (Western Australia) Pty Ltd [1995] FCA 671. I assess the loss suffered by Hanave as $750,000. Damages in this sum should be awarded.
Costs
37 On one view order 4 made by the Full Court deals with the costs of the hearing before me to the point where I gave judgment on 31 August 1998. Thus, on that view, the only costs in relation to the cross-claim, in which the cross-claimants have substantially succeeded, I need to consider would be the costs of the directions hearing on 6 May 1999 and the preparation of the written submissions. However the cross-claimants have sought an opportunity to make submissions on costs. Any such submissions, from any party, should be filed and served within 21 days of today.
I certify that the preceding thirty seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.