Kenxue Pty Ltd ATF The Susan Investment Trust v Westpro Finance Pty Ltd

Solicitors: Stanton and Stanton (Plaintiff) Wotton + Kearney (First and Second Defendants) File Number(s): 2016/262424 Publication restriction: Nil

Judgment

1. These proceedings concern a loan made by the Plaintiff Kenxue Proprietary Limited as trustee for the Susan Investment Trust ("Kenxue") to YIC Proprietary Limited as trustee for the YIC Area Trust ("YIC"). There were two guarantors of the loan: Mr John Quinn and Quinnco Proprietary Limited ("Quinnco").
2. The loan was for an amount of $6M for a 12 month period at an interest rate of 14.5% (and a higher rate for default). As matters transpired an amount of $420,000 for six months of interest was pre-paid out of the $6M loan and $102,000 was received by Kenxue as a Loan Application fee but YIC repaid no other amount to Kenxue and YIC was ultimately placed in liquidation. The guarantees of Mr Quinn and Quinnco were virtually worthless and Mr Quinn was made bankrupt with his trustee in bankruptcy making an insignificant distribution to Kenxue as creditor. The loan was advanced to YIC in connection with the purchase of a block of land known as Lot 1000 or Area 1 in Yeppoon Queensland. Lot 1000 was part of what had been a pineapple plantation. I shall refer to Lot 1000 as "the Property". The Property was mortgaged to Kenxue as security for the loan and pursuant to rights given to Kenxue under the mortgage on default sold by Kenxue eventually for $3.355M in October 2016: CB5 1551-1578. The total recovery by Kenxue from the sale of the land (less the expenses of that sale and earlier efforts) and from the very small amounts obtained from the liquidator of Quinnco and Mr Quinn's trustee in bankruptcy was $3,005,991.51. The amount actually advanced on settlement on 6 October 2010 was $5,547,425.00. The shortfall, ignoring any issue of delay in recovery, was therefore $2,595,831.80 which I shall round up to $2.6M for ease of reference in the balance of these reasons. I shall refer to the amount advanced on settlement as a rounded figure of $5.5M and shall, in the balance of these reasons, refer to rounded figures for convenience.
3. The $6M loan for the purchase of the Property by YIC was arranged through Westpro Finance Propriety Limited ("Westpro"). Westpro was controlled by Mr Andre Kemp. Westpro is a mortgage broker and Mr Kemp had been operating the business for some four years as at September 2010. He had prior to that worked for the National Australia Bank ("NAB") first as a junior assistant and as a bank teller, and later as a Branch Manager and then as a Relationship Manager for many years.
4. Kenxue sues Westpro and Mr Kemp on several different bases asserting that: 1. Westpro was retained by Kenxue to act on its behalf in the transaction and breached its obligations under the contract. 2. Westpro (through Mr Kemp) and Mr Kemp engaged in misleading and deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth) ("TPA"), the relevant legislative provision at the time of the alleged conduct. 3. Westpro and Mr Kemp engaged in unconscionable conduct in breach of s 51AC of the TPA (again the relevant legislative provision at the time of the alleged conduct).
5. The conduct alleged by Kenxue relates to: 1. What Mr Kemp said concerning the transaction and in particular concerning the value of the Property and the guarantees proffered. 2. What Mr Kemp did not, on Kenxue's case, tell Mr Campbell about matters relevant to the transaction.
6. Mr D Williams SC (with Mr N Riordan) appears for Kenxue. Mr M McCulloch SC (with Mr R Notley) appears for Westpro and Mr Kemp.
7. Kenxue's case is that had Westpro performed its obligations and had it, through Mr Kemp, not engaged in misleading and deceptive conduct or unconscionable conduct, Kenxue would not have lent $6M to YIC and (a) not suffered the loss on the transaction which it did suffer; and (b) it would have had the use of the $5.5M that it transferred to YIC and made a profit on that money either by (1) investing in real estate in the Penrith region or, if that was not available, (2) investing in other private loans at a market rate of interest for such loans.
8. Mr Kenneth Campbell is a director and shareholder of Kenxue. There is no dispute that all of the factual matters relevant to this matter involved him as agent of Kenxue and Mr Kemp as agent of Westpro. I shall refer in the balance of these reasons to Mr Campbell and Mr Kemp for convenience and any reference to each of them is intended to be a reference also to their respective companies, except where the context requires otherwise. There are four affidavits of Mr Campbell dated 17 March 2017 ("Campbell I"), 19 July 2018 ("Campbell II"), 7 December 2018 ("Campbell III") and 25 March 2020 ("Campbell IV"). There are two affidavits of Mr Kemp dated 19 April 2018 ("Kemp I") and 14 December 2018 ("Kemp II").
9. Westpro and Kemp deny any liability to Kenxue on the basis of any of the three grounds advanced. They also resist a claim for damages for the loss of use of the money even if otherwise held liable. They also assert a positive defence based on the assertion that Mr Daniel Essey, a solicitor retained by Kenxue to draft the documentation required for the loan to YIC (mortgage, floating charge and so forth) was negligent and that accordingly any liability that they may have to Kenxue for misleading and deceptive conduct or pursuant to contract should be reduced by between 25 to 331/3% by reason of the application of section 87CB of the TPA and by reason of section 34 of the Civil Liability Act 2002 (NSW) ("CLA"). Mr Essey's affidavit filed by Kenxue is dated 7 December 2018. A defence of failure to mitigate loss pleaded by Westpro and Kenxue was abandoned at or prior to the commencement of the hearing.
10. Section 87CB of the TPA is in the following terms: "87CB Application of Part (1) This Part applies to a claim (an apportionable claim) if the claim is a claim for damages made under section 82 for: (a) economic loss; or (b) damage to property; caused by conduct that was done in a contravention of section 52. (2) For the purposes of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind). (3) In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of 2 or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim. (4) For the purposes of this Part, apportionable claims are limited to those claims specified in subsection (1). (5) For the purposes of this Part, it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died."
11. Section 87CB of the TPA has been replaced by s 87CB of the Competition and Consumer Act 2010 (Cth) but it is essentially in the same terms.
12. Section 34 of the CLA is in the following terms: "34 Application of Part (1) This Part applies to the following claims (apportionable claims) - (a) a claim for economic loss or damage to property in an action for damages (whether in contract, tort or otherwise) arising from a failure to take reasonable care, but not including any claim arising out of personal injury, (b) a claim for economic loss or damage to property in an action for damages under the Fair Trading Act 1987 for a contravention of section 42 of that Act (as in force before its repeal by the Fair Trading Amendment (Australian Consumer Law) Act 2010) or under the Australian Consumer Law (NSW) for a contravention of section 18 of that Law. (1A) For the purposes of this Part, there is a single apportionable claim in proceedings in respect of the same loss or damage even if the claim for the loss or damage is based on more than one cause of action (whether or not of the same or a different kind). (2) In this Part, a concurrent wrongdoer, in relation to a claim, is a person who is one of two or more persons whose acts or omissions (or act or omission) caused, independently of each other or jointly, the damage or loss that is the subject of the claim. (3) For the purposes of this Part, apportionable claims are limited to those claims specified in subsection (1). (3A) This Part does not apply to a claim in an action for damages arising from a breach of statutory warranty under Part 2C of the Home Building Act 1989 and brought by a person having the benefit of the statutory warranty. (4) For the purposes of this Part it does not matter that a concurrent wrongdoer is insolvent, is being wound up or has ceased to exist or died. (5) (Repealed)"
13. On 23 April 2020 I heard an application by Westpro and Mr Kemp to vacate the hearing on the basis that it would have to be conducted by Audiovisual Link ("AVL") and that this would be unsatisfactory. Vacation of the hearing was opposed by Kenxue. I determined that the matter should proceed by AVL. Mr McCulloch indicated that reasons were not required to be given at the time of that decision but he requested that they be given as part of this judgment and so I will now set out my reasons in the following paragraph.
14. My reasons for refusing to vacate the hearing were: 1. Whilst there have been some issues in relation to the Court AVL system (which system, I believe, had not been designed for the high usage required by the Covid-19 crisis) the Plaintiff was proposing that a different and potentially better system be used. Reports from other judges using one option, Microsoft Teams, were positive, and I was myself willing to utilise alternative technology in the expectation that dropouts might be reduced. 2. Expedition had been granted in this matter at the request of the Defendants. As part of that process of expedition was due to the ill health of Mr Kemp, his evidence had already been taken and recorded audio visually before the registrar in December 2018. 3. Given Mr Kemp's illness further delay of the hearing of the matter was undesirable since there was always a possibility that instructions might be needed from him or even further evidence if it was possible for him to give such evidence. 4. There was no indication at the date of the hearing of the application as to how long the restrictions due to Covid-19 would be in place. 5. The trial had been fixed for a period of seven days and the Court needs to have regard to the appropriate use of Court resources as one of the matters in deciding whether to grant an adjournment: see sections 56 to 59 of the Civil Procedure Act 2005 (NSW) ("CPA"). 6. I indicated to the parties that if the matter proceeded using Microsoft Teams (or some other AVL system) and were there difficulties which made the continued receipt of evidence impractical then consideration would be given to abandonment of the hearing. 7. Whilst I accept that a trial in the court room is a preferable mode of proceeding, Covid-19 restrictions were in place preventing the hearing taking place in the court room save for the possibility of seeking dispensation from the Chief Justice or alternatively the Chief Judge of the Equity Division. It did not seem to me that the case warranted such a request of either the Chief Justice or the Chief Judge and I was not asked to seek such by the Defendants. 8. All of the witnesses speak English with no requirement for an interpreter. 9. Although Courts are always concerned to ensure that a hearing is as fair and as appropriate as possible that does not mean that it must in all respects be perfect: see McLean v Sydney Water Corporation [2001] NSWCA 122 at [27] per Giles JA, with whom Stein JA and Hodgson CJ in Eq concurred. 10. The limited number of witnesses and what appeared to be the limited scope of factual dispute based upon the transcript of the evidence of Mr Kemp, and the fact that Mr Kemp, the only lay witness for the Defendants, had already been cross examined indicated a relatively limited scope of factual enquiry. 11. In all the circumstances it seemed to me that the trial could and should proceed by way of AVL.
15. I would add as a postscript that whilst there were adjustments that had to be made during the hearing, once they were made the AVL system using Microsoft Teams worked well and I do not believe that the cross examination of Mr Campbell (the only lay witness as matters transpired), or of the experts Mr Gross and Mr Doyle was impaired by reason of the evidence being given through the AVL system.
16. I have referred to the fact that Mr Kemp was cross examined before a registrar. The transcript of that evidence is found in Volume 7 of the Court Book but I was also provided with a USB stick containing the audiovisual recording in a digital form. I shall make that USB Exhibit C. I have viewed that cross examination out of court as well as.
17. I received detailed opening and closing submissions from Counsel. I shall refer to the Plaintiff's Closing Submissions as the "PCS" and the Defendants' Closing Submissions as the "DCS". I also received written submissions from Counsel for both parties on various issues relating to admissibility of evidence.
18. I shall summarise what is not in contest between the parties: 1. Mr Quinn approached Mr Kemp on around 7 September 2010. He told Mr Kemp that he had entered into a contract in 2004 (the "2004 Contract") giving him an option to buy the Property and three other lots and that he needed a loan of $6M in connection with the purchase of the Property by YIC. 2. Mr Kemp was the sole director and principle shareholder of Westpro, a mortgage brokering business, and mainly worked with accredited aggregators who had first and second tier lenders and some nonconforming lenders (i.e. third tier lenders, being finance companies: CB7 2398; T5) on their books. Westpro had never settled any loans with a private lender: CB7 2399; T6. The Court Book was marked Exhibit A1 to A9, but in these reasons I shall use the reference "CB" followed by the volume number and the page number. 3. On 8 September 2010, Mr Quinn provided Mr Kemp with a copy of both the 2004 Contract (which had a purchase price of $10M for all of the 279.8 hectares of land forming the pineapple plantation area, and not just the Property), and a copy of the contract dated 10 June 2010 (the "2010 Contract") entered into by YIC for the purchase of the Property at a price of $4.5M. Mr Quinn in his email of 8 September 2010 to Mr Kemp explained that the purchase price ($4.5M) represented an "uplift in value" based on the approvals he had obtained from Council for the development of the Property: see CB1 154. 4. Mr Quinn also provided Mr Kemp with a draft valuation from Taylor Byrne, real estate valuers. The document (at CB5 1655-1695), which I shall refer to as the TB Valuation: 1. was clearly marked "DRAFT" on every page; 2. was dated 16 July 2010 and referred to a date of inspection of 16 July 2010; 3. was unsigned but had on its last page the name Rod Hewitt as the valuer; 4. on its last page contained the words: "The Market Value of the Area 1 of the Pineapple Patch property situated at 2922 Yeppoon Road, Hidden Valley as at 16th July 2010 is considered to be $20,000,000…" 1. it also noted on page 1: "In this matter we have been instructed by Mr John Quinn, Quinn Group to assess the Market Value of the property described herein for Mortgage Security Purposes for submission to ?????" 1. contained a number of qualifications and disclaimers including the following: "2.7 Qualifications and Disclaimers (i) We state that this report is for the use only of ?????????? and their mortgage insurer, if necessary. The report is to be used for no other purpose, and no responsibility is accepted to any third party for the whole or part of its contents and annexures. No responsibility will be accepted for photocopied signatures. (ii) This valuation cannot be relied upon for the mortgage security purposes of a solicitor's mortgage fund or private mortgage lender which do not have an Australian Financial Services Licence. (iii) This valuation is current as at the date of valuation only. The value assessed herein may change significantly and unexpectedly over a relatively short period (including as a result of general market movements or factors specific to the particular property). We do not accept liability for losses arising from such subsequent changes in value. Without limiting the generality of the above comment, we do not assume any responsibility or accept any liability where this valuation is relied upon after the expiration of three (3) months from the date of the valuation, or such earlier date if you become aware of any factors that have any effect on the valuation. (iv) Buildings, including houses, built prior to 1983 may contain asbestos related products. Taylor Byrne is not expert in detection, remediation or disposal of asbestos or contamination of any kind. It is recommended that advice be sought from experts in that field should that issue affect your reliance on this valuation. The Professional Indemnity Insurance Policy for Taylor Byrne does not cover losses arising from any asbestos issues. (v) We advise we do not have a pecuniary or other interest that would conflict with the proper valuation of the property. (vi) We have identified the property by reference to a cadastral map." 1. Mr Quinn also provided to Mr Kemp a document entitled "The Pineapple Patch Summary Document" (at CB1 211 to 216) which appears to be a document designed to elicit interest from investors to "purchase a 50% share of this project and to undertake the development on a joint venture basis with the Quinn Group" (CB1 212). It described Area 1 as an area intended for residential subdivision but also referred to other proposed areas of an industrial nature and a golf course with residences. 2. On or around 9 September 2010 contact was made between Mr Kemp and Mr Campbell. Mr Campbell had spoken with Mr Louis Hanna, his accountant, and mentioned that he was looking to invest money in new areas. Mr Hanna suggested that he consider lending in the private mortgage market and he either suggested that Mr Campbell contact Mr Kemp or he offered to speak to Mr Kemp. Mr Hanna had previously had a role with Westpro and he still retained shares in the company. It may well be that Mr Hanna contacted Mr Kemp and told him that Mr Campbell was looking for investment opportunities and that Mr Kemp then rang Mr Campbell. Mr Campbell had had dealings previously with Mr Kemp in that Mr Kemp had acted for Mr Campbell and another company that Mr Campbell owned called Hermosa Lighting. This previous work involved hire purchase contracts in which Hermosa Lighting was the borrower and Mr Campbell had also sought Mr Kemp's assistance in relation to a loan for his residential property, though this loan had ultimately not proceeded. 3. Mr Campbell's version of his conversation with Mr Kemp is found at paragraph 9 of Campbell I: CB1 3. The conversation to which he deposes is in the following terms: "Andre: Hi Ken. My name is Andre Kemp from Westpro. Louis Hanna asked that I give you a call. I understand that you are interested in investing by way of mortgage lending? Me: Hi Andre. Thanks for your call. Yeah I am. My wife Susan and I are looking for an alternative investment strategy for our funds. I've never done any lending or anything like this before. Andre: That's fine. I am more than happy to help out and see what we can do for you. I have been in this business for a long time and mortgage lending is something that I advise you on and assist with on regular occasions. Me: Thanks. As I said, I've never done anything like this before and I just want to make sure that I'm protected the same way that a bank is when they lend money. Andre: I understand that." 1. In paragraph 38 of Kemp I (CB1 24), Mr Kemp sets out his version of the first conversation: "Mr Campbell: I am looking to invest in mortgage lending and fund loans for your clients. I would consider all requests for finance and would be prepared to lend money for commercial property transactions. Me: Traditionally on a commercial transaction a bank would offer finance around 60% to 70% LVR. Would you be prepared to offer commercial funding at these LVR levels? Mr Campbell: Yes. Me: Would you be prepared to offer commercial funding at higher LVR levels, say 75% or 80% LVR? Mr Campbell: Yes, I would be prepared to offer finance at those LVR levels. Me: What type of security would you require? Would you require a directors guarantee, a charge on the company assets, a first mortgage? Mr Campbell: Whatever a bank would require as security for a commercial loan, I would want the same security." 1. Mr Kemp at paragraph 38 of Kemp I (CB1 24) denied that he had said "mortgage lending is something I advise you on and assist with on regular occasions". 2. Mr Kemp was cross examined on this topic at CB7 2413 to 2415 (T20-22) and I here set out the transcript of the cross examination on this topic: "WILLIAMS Q. During the course of the conversation you said something to [the] effect that you understood he was interested by way of mortgage lending, didn't you? A. Yeah, he wanted to invest, that's correct. He was looking at getting better returns on his money. Q. He said something like he was looking for an alternative investment strategy for his funds? A. That's correct, that's correct. Q. And that he'd never done any lending like that - like the one you were contemplating, he'd never done anything like that before? A. That's correct, yes. Q. You understood him to be a novice in commercial lending? A. He had a commercial - I wouldn't say novice in commercial lending. Novice from the point of view of lending money out but not from the point of commercial lending because he had a commercial - he ran a business, he had a relationship with a commercial manager, the ANZ Bank, he understood commercial lending. Q. So far as lending his own funds or funds controlled by him for the purposes of residential or commercial properties, you understood him to be a novice? A. No, I understood this to be the first transaction with me. Q. But you understood he hadn't had any other transactions of that nature with any other person, didn't you? A. I can't recall that. Q. He told you that he had never done anything like this before, didn't he, when you were talking about the proposed loan? A. Not with me anyway, that's correct. Q. He told you that he had never done anything like that before, didn't he? A. I can't recall. Q. He may well have? A. I can't recall, sorry. Q. That's okay. You said to him that you were happy to help out and see what you could do for him, didn't you? A. Yes, I was - yeah, okay yep. Q. You told him that you had been in business for a long time? A. Yes, at that time I had probably been in business for four years. Q. You told him that that you had been in the mortgage lending business for some years? A. Yep. Q. You told him that you could advise and assist him with those sorts of matters? A. What sort of matters? Q. With lending his funds to third parties? A. I could certainly refer him clients but I certainly had no - I could give - I could advise him in regards to names of people that might be looking for funds and names of people that might be looking that he could assist. Q. You told him something to the affect that you could advise him and assist him on regular occasions with seeking to place funds? A. Yep. Q. During the course of that initial conversation Mr Campbell said something like, "As I have never done anything like this before, I just want to make sure that I am protected the same way that a bank is when they lend money". He said words to that effect? A. That's correct. Q. You acknowledged that? You said you understood? A. Yep. Q. And you said you would be happy to help him? A. Yes. Q. When he said that he wanted to make sure in his lending transactions he was protected in the same way as the bank is when they lend money, you understood that included the provision of - I withdraw that - the obtaining of adequate security? A. The obtaining of adequate security, that's correct. Q. Including security of adequate value to be appropriate security for the amount of money loaned? A. That's correct." 1. Between 9 September and 27 September 2010 emails passed between Mr Quinn and Mr Kemp on the one hand and Mr Kemp and Mr Campbell on the other. There is some confusion over the precise order of some of the emails due perhaps to the fact that at some stage Mr Campbell was in the United States. Exhibit D1, which was prepared by the Defendants, has the emails in the order that Mr McCulloch says they should be read. Mr Williams submits that the order has no significance. The chain of emails is confusing but the only issue to which the precise order of emails is potentially relevant is the question of how the increase in proposed interest rate from 12% to 14% was arrived at and I do not regard that as having any significance to the outcome of the case. 2. The significance of 27 September 2010 is that by that date Mr Campbell had decided to proceed with the loan to Mr Quinn/YIC and had made arrangements for $6M to be lodged in the trust account of a solicitor, Mr Essey, who Mr Campbell retained to prepare the security documents for the transaction. Mr Campbell had retained Mr Essey to draft the security documentation and arrange for receipt of the signed documentation prior to the handing over of the $6M. 3. On 4 October 2010 Mr Quinn wrote an email to Mr Kemp asserting that he had forwarded a signed Taylor Byrne valuation to Mr Kemp (CB2 599). The settlement of the transaction occurred on either 6 or 7 October 2010 and there is no dispute that Mr Campbell did not receive the signed valuation until after settlement. It appears that Mr Kemp received it on 11 October 2010 because that is when he sent an email to Mr Essey offering to post a copy of it: CB2 718. Mr Kemp at one point asserted that he had obtained the signed valuation prior to settlement and provided it to Mr Campbell (see CB7 2456, T63), but at CB7 2410.26 (T26-27) he agreed that he only had the draft valuation prior to 11 October 2010, and it is clear that Mr Campbell did not receive it until then. 4. By 6 October 2010 Mr Essey had the breakdown of how the $6M being loaned to YIC was to be disbursed (see CB2 633 to 634) and he sought and obtained confirmation from Mr Campbell that it was in order to disburse the monies in that fashion. The document at CB2 633 to 634 shows that $4.587M was to be paid to the vendor's solicitors' trust account, $242,694 to the Office of State Revenue in Queensland, $628,862 to YIC, $420,000 was to be withheld as interest for the first six months, and $102,000 was to be paid to Kenxue representing the loan application fee (1.7% of the Loan Amount) and other smaller miscellaneous amounts mentioned in the document. The Defendants draw attention to the fact that not all of the $6M was being paid to the vendor's solicitors, a matter to which I shall return. 5. The monies were paid out in accordance with the disbursement instructions. All of the security documents, including the mortgage given by YIC over the Property, were executed appropriately and the mortgage was registered as a first mortgage, as intended. 6. The signed valuation from Taylor Byrne differed from the TB Valuation in that: 1. it is dated 7 September 2010; 2. it states that there was an inspection on 16 July 2010 and on 7 September 2010; 3. it states (at CB1 114): "In this matter we have been instructed by Mr John Quinn, Quinn Group, to assess the Market Value of the property described herein for Mortgage Security Purposes for submission to the National Australia Bank. The interest being valued is unencumbered freehold on a vacant possession basis." 1. it states that it was prepared for YIC "for submission to the National Australian Bank"; 2. paragraph 2.1 states: "In this matter we have been instructed by Mr John Quinn, Quinn Group, to assess the Market Value of the property described herein for Mortgage Security Purposes for submission to the National Australia Bank. The interest being valued is unencumbered freehold on a vacant possession basis." 1. paragraph 2.7 contained in the following qualifications and disclaimers: "2.7 Qualifications and Disclaimers (i) This valuation has been prepared on specific instructions from Mr John Quinn of the Quinn Group to assess the market value of the property described herein for submission to the National Australia Bank for the purposes of mortgage security. The report is not to be relied upon by any other person or for any other purpose. We accept no liability to third parties nor do we contemplate that this report will be relied upon by third parties. We invite other parties who may come into possession of this report to seek our written consent to them relying on this report. We reserve the right to withhold our consent or to review the contents of this report in the event that our consent in sought. (ii) We state that this report is for the use only of the National Australia Bank and their mortgage insurer, if necessary. The report is to be used for no other purpose, and no responsibility to accepted to any third party for the whole or part of its contents and annexures. No responsibility will be accepted for photocopied signatures. (iii) This valuation cannot be relied upon for the mortgage security purposes of Private Mortgage Lenders or Solicitor's Mortgage Funds. (iv) This valuation cannot be relied upon for the mortgage security purposes of a Managed Investment Act lender where the principal/primary purpose of the property acquisition is for primary production. (v) This valuation is current as at the date of valuation only. The value assessed herein may change significantly and unexpectedly over a relatively short period (including as a result of general market movements or factors specific to the particular property). We do not accept liability for losses arising from such subsequent changes in value. Without limiting the generality of the above comment, we do not assume any responsibility or accept any liability where this valuation is relied upon after the expiration of three (3) months from the date of the valuation, or such earlier date if you become aware of any factors that have any effect on the valuation. 1. The basis of the valuation was stated to be as unencumbered freehold with vacant possession and the method of valuation was said to be by the direct comparison method (CB1 111 and 149) - the same as the draft TB Valuation (CB5 1658 and CB5 1693). 2. When he received the signed valuation from Mr Quinn, Mr Kemp noted that there was a reference to submission to NAB which he thought was odd: see CB7 2452.5-11, T59.5-11. One reason, at least, why it was odd is that Mr Kemp knew that there was no prospect of a first tier lender (or even second or third tier lender) lending monies for the purported purchase: see CB7 2401-2404 (T8-11) and CB7 2412-31(T19-38). It is highly unlikely that the document was intended to be provided to NAB and I infer that both Mr Quinn and Mr Kemp were well aware that, as at September 2010, that was the position.
19. Mr Quinn provided no documents to Mr Kemp that established that YIC had the capacity to pay interest or to repay the loan: CB7 2400, T7.
20. I have referred to the passage of emails in the period 9 September to 27 September 2010. There are also phone calls between Mr Kemp and Mr Quinn on the one hand and Mr Kemp and Mr Campbell on the other. One of the topics discussed was that of guarantees to be provided by the borrower. Mr Campbell says that he asked Mr Kemp to obtain a guarantee from Mrs Quinn (Mr Quinn having stated that he had no significant assets in his own name). In an email of 14 September 2010 to Mr Campbell (CB1 236), Mr Kemp stated: "I was thinking [sic] of getting his wife to co-guarantor the loan however you cannot take his wife's guarantee as we cannot establish something called "Corporate Benefit" … meaning she is not a director of the borrowing entity nor shareholder therefore, legally you cannot rely upon her guarantee".
21. Mr Campbell in his affidavit asserted that it was he who asked Mr Kemp to request such a guarantee. No guarantee for Mrs Quinn was in fact provided (or sought by Mr Kemp from Mr Quinn) but what is significant is Mr Kemp's statement that he had been thinking of getting one and the statement to "we cannot establish". The significance is that these comments by Mr Kemp support Mr Campbell's assertion that Mr Kemp had agreed to look after Mr Campbell's interests. The assertion that it was not legally possible to rely on a guarantee from Mrs Quinn is a second significant matter to which I shall return.
22. Another matter discussed in this period between Mr Campbell and Mr Kemp that assumes significance is the question of the interest rate that was to be charged to Mr Quinn. Mr Quinn had told Mr Kemp that he was willing to pay 12% interest rate (see CB1 209) and later, according to Mr Kemp, 14%-15%: see paragraph 8 of Kemp II, CB1 52C. In an email to Mr Quinn dated 13 September 2010 at CB1 227, Mr Kemp said: "Interest rate - my client would be looking at charging interest rates between 14% and 15% with interest to be capitalised onto the loan. Could you confirm whether you are prepared to pay these interest rates?" (Emphasis added)
23. Mr Quinn responded that he would agree to that range of interest: CB1 232. Mr Kemp then wrote in an email to Mr Campbell (CB1 221): "Client is happy to pay an interest rate of 14% for this transaction - do you think we could charge him 14.50% and I could collect a trail for referring the loan… this arrangement will need to be discussed and sorted out (I could manage the loan for you and monitor interest payments etc.)" (Emphasis added)
24. It will be observed that Mr Kemp describes Mr Campbell as his client in his email to Mr Quinn and describes Mr Quinn as his client in his email to Mr Campbell. Mr Kemp in cross examination asserted in relation to his use of the term "client" to describe Mr Campbell/ Kenxue that it was "just a general term that I use to describe customers that I'm dealing with" (CB7 2429.15, T36.15) and that it was "just a generic term that we use" (CB7 2429.22, T36.22). Later Mr Kemp agreed that he had two clients in the transaction: see CB7 2426.42-44 (T33.42-44), 2427.6-8 (T34.6-8) and 2437.17-31 (T44.17-31); and see CB7 2426.23-24 (T33.23-24), 2447.15 (T54.15), 2448.5-25 (T55.5-25), 2468.33-39 (T75.33-39) and 2472.49-2477 (T79.49-84). Mr Campbell described Mr Kemp as the conduit between himself and Mr Quinn (T148.7-8) and certainly there was no communication between Mr Campbell and Mr Kemp. Mr Kemp however did not pass on all information obtained from Mr Quinn - he did not pass on the 2010 Contract and he did not pass on to Mr Campbell the email from Mr Quinn at CB1 154 to which the 2010 Contract was attached. He also seems to have embellished what Mr Quinn told him about the joint venture negotiations since Mr Quinn (in his email of 13 September 2010 to Mr Kemp) said that he was seeking a joint venture partner for the sum of $16M (CB1 232) and Mr Kemp (in his email of 14 September 2010) told Mr Campbell that Mr Quinn "advises that discussions are progressing well" (CB1 221 and CB8 2621), which is not found in Mr Quinn's emails.
25. The idea of the 0.5% "trail" was put into effect. Mr Kemp did charge Kenxue a fee for managing the loan. Mr Kemp also discussed another fee with Mr Campbell. Mr Campbell's evidence is that Mr Kemp said to him either in the first conversation or later: "Our fees for (sic) are based on a commission on the loan amount at the rate of about 1.7%": paragraph 13 of Campbell I, CB1 3. Mr Campbell stated that, at a later time, Mr Kemp said to him: "I'm happy to offer you 50% of our commission on the loan amount": paragraph 14 of Campbell I, CB1 3.
26. Mr Kemp did not explain why he was willing to reduce his fee by 50% but one obvious and rather likely explanation is that he was keen to promote the loan so that he could obtain his fee from Kenxue: see DCS 118 on the reasons why Mr Kemp suggested the loan management fee which accords with this.
27. There is no dispute that Mr Campbell agreed to pay 50% of the 1.7% of the $6M to Mr Kemp as a fee and no dispute that he agreed to pay 0.5% of the loan to "manage the repayment of the loan and the interest repayments" (paragraph 32 of Campbell I, CB1 7). There is no dispute that Kenxue paid both fees to Westpro (or to Mr Kemp at his direction).
28. A topic of considerable significance discussed in the period between 10 September and 27 September 2010 is the TB Valuation. There is no dispute that Mr Campbell was aware that the TB Valuation was not a valuation prepared for Kenxue since he asked Mr Kemp to obtain a valuation that was prepared for Kenxue: see paragraph 23 of Campbell I, CB1 5. Mr Kemp wrote to Mr Quinn saying: "To give my client comfort would you be willing to pay for another valuation report that can be relied upon for a private mortgage": CB1 227.
29. Mr Quinn replied that he would be willing: "…to pay for another valuation out of the proceeds of settlement however I would be very surprised if a valuer would now have time to do this prior to settlement": CB1 232.
30. Mr Campbell instructed Mr Kemp to obtain a new valuation and Mr Kemp informed Mr Campbell that he had found a firm - John Logan and Associates ("Logan") who were willing to look into undertaking a valuation (CB1 244). Mr Campbell told Mr Kemp that he wanted "to go ahead with the valuation" but Mr Kemp says that Logan told him there was not enough time to obtain a valuation before 6 October 2010: see paragraphs 27 to 28 of Campbell I (CB1 6) and see paragraph 58 of Kemp 1 (CB1 28).
31. There was also a request by Mr Kemp to Mr Quinn to see if Taylor Byrne would be willing to delete the disclaimer relating to the private mortgage funder: CB1 246. The email at CB1 248 referring to fresh valuation report suggests that Mr Quinn told Mr Kemp that Taylor Byrne were not prepared to remove the exclusion, but Mr Kemp said he could not locate any email from Mr Quinn telling him this: see paragraph 51 of Kemp I, CB1 26 to 27.
32. Mr Kemp appears to have left obtaining the Logan report to Mr Quinn at one point: see CB1 251.
33. Mr Campbell (at paragraph 23 of Campbell I, CB1 5) deposed to the following conversation with Mr Kemp: "Me: Andre, I've had a look at the valuation provided by Taylor Byrne and I'm concerned that I can't use it. Andre: That's right, you can't use the valuation because it is outside of Taylor Byrne's professional indemnity insurance cover. But you can trust the advice because it was prepared for a bank and contains an LVR of 30% Me: What does that mean? Andre: It means loan to value ratio. You can't go wrong relying on it because you are lending $6 million and the land is worth about $20 million, therefore the land to value ratio is 30% which is good. Me: I would really prefer to get my own independent valuation that I can actually rely on it. Andre: Let me look into it for you and I'll come back to you."
34. Mr Kemp's response is found at paragraph 48 of Kemp I (CB1 26): "I agree that I said words to Mr Campbell to the effect of "That's right; you can't use the valuation because it is outside of Taylor Byrne's professional indemnity insurance cover." I deny that I ever said words to Mr Campbell to the effect of "But you can trust the advice because it was prepared for a bank and contains an LVR of 30%". I deny that I ever said words to Mr Campbell to the effect of "You can't go wrong relying on it because you are lending $6 million and the land is worth about $20 million, therefore the land to value ratio is 30% which is good".
35. There is another conversation deposed to at paragraph 28 of Campbell I (CB1 6) in the following terms: "Mr Kemp: Ken, as you know the proposed settlement date for the loan is 2 October 2010 which is only a couple of weeks away. There isn't going to be enough time for you to get your own valuation of the property. The valuation is showing a land to value ratio of about 30%. You can't go wrong relying on the valuation and advancing the money on the proposed loan based upon this valuation. Me: Well if you say this is correct, I trust your advice." I shall refer to this as the "You Can't Go Wrong Representation".
36. In response to this, Mr Kemp denies that there was a conversation to the effect alleged in paragraph 28 of Campbell I and in particular denies that he ever made the You Can't Go Wrong Representation: see paragraphs 48 and 60 of Kemp I (CB1 28). In cross examination Mr Kemp maintained his denial of having made the You Can't Go Wrong Representation (see CB7 2438.30, T45.30) and denied that he thought that Mr Campbell was safe (see CB7 2436.6-10, T43.6-10). Mr Kemp did assert that on being informed that no report could be obtained from Logan, Mr Campbell said "I am prepared to rely on the Taylor Byrne report" (see paragraph 59 of Kemp I, CB1 28) and does not say that he warned Mr Campbell of the danger in so doing.
37. In relation to guarantees I referred earlier to the issue of a possible guarantee for Mrs Quinn. Mr Quinn did provide a guarantee from Quinnco. In the course of correspondence with Mr Kemp, Mr Quinn provided a statement of the assets and liabilities which he referred to as the assets and liabilities for Quinnco: CB1 237 to 239. Mr Kemp passed on that document to Mr Campbell by his email of 14 September 2010: CB1 236.
38. The document at CB1 239 is headed: "Quinnco Pty Ltd Assets and Liabilities as at 13 August 2010" and shows a net equity of $46.5M. The document has a column on the left-hand side a subheading in much smaller text which says: "Quinnco Pty Ltd atf The J.W. Quinn No 2 Family Trust"
39. In an earlier email of 10 September 2010 (at CB1 217) Mr Quinn had told Mr Kemp: "I have no assets in my own name other than personal effects. Quinn Group's position is quite complex, however YIC is an SPV and this is intended to be a stand alone asset lend."
40. Mr Quinn also said in that same email: "Discussions with a number of parties are at an advanced stage, but no contract at this stage and non likely prior to the due date for settlement."
41. The email from Mr Kemp to Mr Campbell relating to the Quinnco statement (CB1 236) said: "As requested, I have managed to obtain an Asset and Liabilities on the company's sole director - Mr John Quinn. The document is attached to this email."
42. What was attached to Mr Kemp's email was not a statement of assets and liabilities of Mr Quinn but rather of the trust of which Quinnco was the trustee.
43. Mr Campbell said that he did not notice the subheading and he did not know what "atf" meant, on which assertions he was not challenged.
44. The following further matters which are not in dispute emerged from the evidence: 1. YIC was a special purpose vehicle established to purchase the Property. 2. YIC was buying the property at a purchase price of $4.5M, pursuant to the 2010 Contract. 3. Mr Quinn had provided no documents to Mr Kemp which would establish that YIC could pay interest or repay the loan without sale of the Property. 4. Mr Quinn's guarantee was virtually worthless. 5. Quinnco's guarantee was virtually worthless. 6. The TB Valuation could not be relied on in the sense of founding a claim against Taylor Byrne: 1. because it was in draft form and not signed or dated; and 2. because it expressly stated that it was not able to be relied on by anyone other than the person to whom it was addressed and not able to be relied on by a private mortgage lender who did not have an Australian Financial Services Licence.
45. The TB Valuation was not prepared for a bank in the sense of being a valuation prepared by a valuer retained by a bank (i.e. commissioned by a bank) rather it was a valuation prepared by a valuer retained by the borrower.
46. The following matters were accepted in cross examination by Mr Kemp: 1. He was of the view that it would be very imprudent for a lender to advance funds for purchase of the commercial (or residential) property without a valuation on which the lender could rely: CB7 2404.40, T11.40. 2. No first second or third tier lender would be likely to be interested in advancing $6M for the purchase of a $4.5M property: CB7 2401.40, T8.40. 3. If a lender was being asked to lend more than the purchase price of the property that would raise significant questions and would be a highly significant matter: CB7 2402-2403, T9-10. 4. Banks considering whether to lend wish to ensure that they have a valuation in respect of which they consider the value if something goes wrong: CB7 2403, T10. 5. Banks generally will not rely on valuation reports that are not commissioned by the bank itself (CB7 2403.40-2404.4, T10.40-11.4), and Mr Kemp had never been involved in the loan transaction in which the lender had a valuation on which they could not rely: CB7 2404, T11. 6. Mr Kemp considered Mr Campbell was acting very imprudently in advancing the $6M (CB7 2404.36-40 and 2405.20, T11.36-40 and T12.20), but he did not tell him of his opinion: CB7 2404.44, T11.44. 7. Mr Kemp considered it would be imprudent and unrealistic for Mr Campbell to rely on the TB Valuation as providing true evidence of value: CB7 2406.31-2407.4, T13.31-14.4. 8. There was no proper basis in September 2010 for assessing the property as worth $20M: CB7 2407.30, T14.30. 9. Mr Kemp did not bother to seek interest from first or second tier lenders and none of the nonconforming lenders (i.e. third tier lenders) he approached were willing to assist: CB7 2409.12-31, T16.12-31. 10. Lenders that Mr Kemp had dealt with wanted to have "a very clear understanding of the exit strategy in order to work out whether or not they are going to be paid without having to realised the security?": CB7 2400, T7.
47. The failure of YIC to make any payment of interest other than the prepaid interest at the commencement of the loan (which came out of the $6M loan) coupled with the very low return on sale of the property when sold and the practical worthlessness of the guarantees underscores the disastrous nature of this transaction for Kenxue.
48. In very general terms the DCS propound the propositions that: 1. Mr Kemp had no obligation to warn Mr Campbell of anything. 2. Mr Campbell was, on the Defendants' case, asking for information and was provided with the information that he sought. 3. Mr Campbell knew that he could not rely on the TB Valuation both because he worked that out for himself and because Mr Kemp told him so. 4. Mr Kemp was acting for Mr Quinn and not Mr Campbell. 5. Brokers are the agents of the borrower not the lender. Mr Kemp did nothing that was inconsistent with his role as Mr Quinn's agent. 6. There is no correspondence with supports Mr Campbell's claim that Mr Kemp was retained by him.

Credibility of Witnesses

1. I shall deal first with Mr Campbell. Mr Campbell is a man of limited education who left school at fifteen years of age. He has been employed as a public servant at the tax department, as an administrative/purchasing manager, casually in a pub, and he has operated a small cleaning/contract job. In later years, Mr Campbell took over a company which operated a home improvements store, owned, operated and managed a pub, and ran a light fitting shop (in this role he was a manufacturer, importer and wholesaler of lights and light fittings). He described himself as "not the brightest tool" (see T182.20-21) and whilst I think that was an overly self-deprecating description I did not gain the impression that he is particularly astute or commercially savvy as the DCS contends and he appears to have been very naïve or very trusting of Mr Kemp (or both) in entering into this transaction. He is someone who sought and relied on others for advice. Even in relation to this transaction he sought Mr Hanna's views on what he should invest in and was directed to Mr Kemp. The arrangements he put in place for Hermosa Lighting some years ago which permitted tax minimisation were done on the advice of his accountant and he was not sure that at the time he knew what a franking credit was: T61.18-32. He regarded himself as committed to lending to YIC because he had told Mr Kemp he would even though he had not signed any formal documents (see T86.49-T87.13) I thought he was quite restrained in his views about Mr Kemp when questioned about his use of the word "scam" (at T149.44 and T150.12) - and generally, I thought, willing to make concessions where appropriate.
2. There were, however, several aspects of Mr Campbell's evidence which I thought undermined his credibility somewhat. The first related to what he had read of what was provided to him, namely the Taylor Byrne valuation. He claimed he had looked at only the last page of the TB Valuation and had not read any other part of it, yet in his affidavit he said he rang Mr Kemp raising the disclaimer in the TB Valuation with him: see paragraph 23 of Campbell I, CB1 5. In cross examination Mr Campbell said that he had had prior conversations with Mr Kemp about the Taylor Byrne valuation in which Mr Kemp told him about the qualification but no such conversation is set out in his affidavit. It may be true that Mr Kemp had told him about the valuation beforehand and that it contained a qualification but his denial of having read anything but the last page does not sit comfortably with his assertion, in Campbell I, that he raised the matter with Mr Kemp. Secondly, he had appended to Campbell I, not the draft Taylor Byrne valuation but the signed valuation which, although dated 7 September 2010, was not received by Mr Campbell until 11 October 2010. I can see that from Mr Campbell's point of view the important thing about the TB Valuation was the restriction on use, not that it had draft on it or that it was unsigned and the fact that he did receive a valuation dated 7 September 2010 (albeit after the settlement) may have led him to annex that document rather than the draft, but he did not make it clear in his affidavit that he had been sent only the draft TB Valuation prior to agreeing to hand over the $6M.
3. Another document which he said he did not read was the Pineapple Patch Summary Document. I can accept that having read it he did not regard it as of much significance but I find it difficult to accept that he did not read through the only document, other than the TB Valuation, that he was given by Mr Kemp about the project. This links to a denial by him that he knew Mr Quinn was proposing to enter into a joint venture for the project. The Summary Document made that clear, as did an email of Mr Kemp's to Mr Campbell (see CB1 209), nevertheless in his affidavit Mr Campbell had denied that he was aware of the joint venture idea: see Campbell II, CB1 33.
4. Mr Campbell asserted that Mr Kemp had (quite apart from their transaction) attempted to misuse Kenxue's money (see paragraphs 16 to 20 of Campbell II, CB1 34-35 and paragraph 27 of Campbell III, CB1 40) and that assertion was shown to be entirely baseless: see T164-T165.
5. Whilst these matters lead me to view Mr Campbell's evidence with a degree of caution I note that much of what he asserted in his affidavits that is critical to Kenxue's claim has been conceded to be correct.
6. I found entirely credible Mr Campbell's assertion (made in his affidavit, see Campbell III paragraph 27 at CB1 40, and confirmed in cross examination at T178) concerning his lack of knowledge of the $4.5M purchase price and his assertion that if he had known of the actual price of $4.5M he would have called an immediate halt to the transaction and hence would not have made a loan of $6M to YIC: see T178-T179. I say that for the following reasons : 1. The manner in which he gave that evidence in cross examination. 2. He was wise enough to tell Mr Kemp that he had no experience in lending and wanted the same protection as a bank would have. 3. He had been prudent enough to request that he be provided with a valuation he could rely on (inferentially, should it prove to be erroneous) and a guarantee from Mrs Quinn and he had engaged a solicitor to draw up the documentation. 4. The only discussion about LVR between Mr Kemp and Mr Campbell on this property was 30% LVR. A loan of $6M on a $4.5M valuation represents a loan LVR of 133% which it is not asserted by Mr Kemp was ever discussed. There is nothing in Mr Kemp's emails to Mr Campbell explaining why the previously discussed 30% LVR figure was or could still be valid, nor any suggestion by Mr Kemp that he addressed the significance of the $4.5M sale price on the transaction in his emails to or discussions with Mr Campbell. 5. To have been willing to lend $6M on a property being purchased for $4.5M would suggest an extraordinary degree of foolhardiness to any person, at least without a valuation that could be relied on and a fulsome explanation of why $4.5M was not the true value of the property. 6. Mr Campbell had not been told that there was a contract entered into as recently as 10 June 2010 (the 2010 Contract) - Mr Kemp sent him only the 2004 Contract, and not the 2010 Contract or the email from Mr Quinn to Mr Kemp at CB1 154 which attached the 2004 Contract and the 2010 Contract. In that email, Mr Quinn seeks to explain why the 2010 Contract for 88.9 hectares was $4.5M, when the 2004 Contract for the whole of the proposed development area was $10M, by referencing amounts he had expended on the proposed development. 7. Mr Kemp admitted that he withheld the 2010 Contract from Mr Campbell: see CB7 2479 to 2480, T86-87. Whilst it might be surprising that Mr Campbell did not ask to see a copy of the purchase contract and only saw it when it was annexed to Mr Kemp's affidavit of 19 April 2018 (see CB1 40 at paragraph 24), that is explicable having regard to his lack of experience in lending and his general level of sophistication, and his understanding that Mr Kemp was there to assist him. Mr Kemp on the other hand fully aware of the significance of that contract did not pass it or the email CB1 154 on to Mr Campbell.

Mr Essey

1. Mr Essey gave his evidence forthrightly and I have no doubt whatsoever as to his honesty and credibility. His evidence was: 1. That he was retained to draft the loan and security documentation and arrange for it to be obtained in executed form on settlement in conjunction with the handing over of the $6M. 2. That Mr Campbell told him that Mr Kemp was his broker and that Mr Essey could obtain details from him. 3. That Mr Campbell told him to do what Mr Kemp tells him to do in relation to such matters as the loan application fee and invoicing. 4. That he did not need to have a copy of the sale contract because all of the details he needed to prepare the security documentation were provided by Mr Kemp, and he did not know that the purchase price of the Property was $4.5M. 5. That he did observe that not all of the $6M was going to the vendors solicitor: see CB2 633 to 634, but did not know what the purchase price of the Property was. 6. He was informed by Mr Campbell that Mr Kemp would "be attending to due diligence" (T197.30), and that he, Mr Essey should speak with Mr Kemp, and that Mr Kemp would prepare the interest calculation. Mr Essey says he formed the clear view that Mr Kemp was acting for Mr Campbell "providing financial advice" and "leading the negotiations and communications" - and since Mr Campbell's evidence is to that effect it is not surprising that Mr Essey had that understanding. 7. He did not take any steps to analyse whether Mr Campbell was acting prudently (T199.10), but nor did the he understand that that was his role: see T201.42. 8. He accepted that it was part of his retainer to explain the nature and effect of the documents that Mr Campbell was signing: T199.48-T200.27. 9. He thought Mr Kemp was acting for both Mr Campbell and Quinn: T202.23.
2. It was not put to Mr Essey that having seen the settlement figures at CB2 633 to 634 he was on notice that there was a problem and that he ought to have obtained a copy of the sale contract (found at CB1 182 to 203), rather the cross examination focused on the need for Mr Essey to explain the meaning of the documents he prepared to Mr Campbell and to deal with the proposition that he did in fact have the sale contract: see T205.31-206.8.

Mr Kemp

1. There were a number of aspects of Mr Kemp's evidence that lead me to have serious doubts as to his veracity: 1. He accepted at CB7 2401.30-42 (T8.30-42) that he was aware that Mr Quinn's only hope of obtaining a loan was from a source other than a first or second tier lender (see CB7 2420.33-35, T27.33-35), yet when confronted with the assertion in the signed TB Valuation that it was prepared for submission to NAB he denied that he knew that no application was being made to NAB around that time: CB7 2452-2453, T59-T60. 2. He asserted that he had received the signed TB Valuation before settlement (see CB7 2436, T43), but the only email by which the signed TB Valuation was sent to Mr Campbell via Mr Essey was dated 11 October 2010: CB2 718. 3. Mr Kemp agreed that Mr Campbell had told him that he had never done any commercial lending before, but after endeavouring to assert that Mr Campbell was not a novice he said he could not recall being aware of any transactions Mr Campbell had been involved in prior to the loan to YIC. When asked again to agree that Mr Campbell had told him that "he had never done anything like that before" Mr Kemp said could he could not recall: see 18 above, where the relevant portion of the transcript is set out. 4. I found Mr Kemp's assertion that NAB, when he worked for the bank, to his knowledge, never took a guarantee from a wife or family member in respect of a mortgage, even though he knew that the NAB utilised independent certificate advice (which he asserted was used for guarantees: CB7 2433, T40), difficult to accept. It seems odd too that he claims to have thought of this option himself since on his evidence it was not possible: see paragraph 46 of Kemp 1, CB1 26. 5. I found Mr Kemp's assertion that he was not concerned about ensuring that the deal went through so that he could obtain his fee as implausible: see CB7 2424.38-50, T31.38-50. His offering to reduce his fee without any request from Mr Campbell that he do so also speaks against this and see the email at CB1 223 in which he told Mr Quinn that he "shall to do everything [he] can to get this deal across the line". The DCS at 118 suggested that Mr Kemp's reason for offering to manage the loan was to ensure that the loan proceeded, which is consistent with this theme. 6. His attempts to deny that Mr Campbell was his client: see [24] above. Mr Kemp's explanation as to why he described Mr Campbell as his client in emails to Quinn: see CB7 2429.15, T36.15, were implausible and contradicted by his later admissions: see [24] above. 7. Although he had not in his affidavits challenged Mr Campbell's evidence relating to the fees, Mr Kemp asserted that Mr Campbell was not paying him a fee, but that he (Mr Kemp) was charging it to "the customer" meaning Mr Quinn: CB7 2417, T24. In fact Mr Quinn (i.e. YIC) was required to pay a loan application fee to Mr Campbell out of which Mr Campbell had agreed to pay Mr Kemp but then Mr Kemp had said he would accept 50% of that fee: at CB7 2417, T24. Mr Kemp later accepted that YIC was liable to pay the fee to Mr Campbell and that the fee to him was paid "through Mr Campbell's solicitor" to himself (i.e. Mr Kemp). 8. His attempt to assert that the fee arrangements were simply "industry standard" (CB7 2425, T32) contrasted with his subsequent acceptance that the management of the loan fee at least was "quite different to industry practice": CB7 2425 to 2426, T32-33. 9. Mr Kemp sought to contend that the words in brackets in the email of 13 September 2010 at CB1 221, "(I could manage the loan for you and monitor interest payments, etc)" were unconnected with his proposal that the interest rate be increased to 14.5%: see CB7 2423.6, T30. The connection is obvious, in my view, from the terms of the email itself. 10. I have noted that Mr Quinn did not provide any documents to Mr Kemp that demonstrated an ability of YIC to repay the loan and the interest on the loan and when cross examined on this absence Mr Kemp sought initially to rely on the joint venture (see CB7 2400.15-35, T7.15-35), but the emails from Mr Quinn indicate only that Mr Quinn was endeavouring to establish a joint venture. Mr Kemp was forced to admit that he had been given nothing from Mr Quinn in writing to establish that the joint venture had been entered into and that he was aware that the development the subject of the purported joint venture would not be completed within 12 months: see CB7 2400 (T7) and CB1 217; see also CB1 221, 223, 228 and 232. 11. Mr Kemp at CB7 2478.6-15 (T85.6-15) asserted that he had told Mr Campbell that the purchase price of the Property was $4.5M. He had in his affidavit denied that Mr Campbell did not know that the purchase price was $4.5M (contrary to Mr Campbell's assertion). Further cross examination revealed that Mr Kemp had not told Mr Campbell that the purchase price was in fact $4.5M, he agreed that he had not referred to $4.5M "in that context": CB7 2479, T86. Advising of the amount due on settlement from the $6M loan fund does not reveal the price being paid for the Property since a deposit could have been paid and the difference could also have come from another source (such as Mr or Mrs Quinn). 12. Mr Kemp in cross examination initially said that he thought the TB Valuation "was probably close to the mark" (CB7 2411.25, T18.25) and that he told Mr Campbell that the Property was valued at $20M (CB7 2411.39, T18.39), but at CB7 2407.28-31 (T14.28-31) he agreed that the draft unaddressed valuation did not provide him with a proper basis for him to "assess the land as being worth $20 million".
2. I am aware that Mr Kemp had at the time of cross examination been diagnosed with a significant illness, but this issue was addressed: see CB7 2395.32 to 2396.24, T2.32 to T3.24. To my observation and contrary to the Defendant's submissions (at DCS 98), Mr Kemp did not in the video of his cross examination appear to be fatigued or otherwise affected so as to engender any doubt as to his ability to handle the cross examination and I note that he was asked whether he wished to proceed to complete the cross examination before lunch or would he prefer a break and he indicated that he was happy to continue: CB7 2477.1-7, T84.1-7.
3. Although I have said that I need to approach Mr Campbell's evidence with some caution I am of the view that far more caution needs to be exercised in relation to Mr Kemp's evidence save where it consists of admissions against interest. However, if my reading of the transcript is correct there are in reality very few areas of factual dispute between Mr Campbell and Mr Kemp. I have expressed the matter this way because Mr McCulloch put up a spirited argument that: 1. The transcript of cross examination should not be viewed as Mr Kemp making concessions. 2. The Court should start with and place more reliance on what the correspondence passing between Mr Kemp and Mr Campbell in September 2010 contained, particularly having regard to the passage of time before anyone endeavoured in 2018 to report in affidavits what had been said.
4. There are, I find, a number of critical admissions or "concessions" (as Mr McCulloch prefers to call them) in the cross-examination of Mr Kemp, i.e.: 1. The first conversation concession: 18 and (10) above. 2. The two clients concession: [24] above. 3. The fee for services concession: 18 and (10) above. 4. The unreliability of the TB Valuation: 46, (7) and (8) above. 5. The absence of any material in Mr Kemp's hands to support a conclusion that YIC could meet the interest payments due and repay the loan within the 12 month loan period: see [19] above.
5. Mr McCulloch contended that the Court should focus its enquiry on the documentary material on the basis that memory of events so long ago is fallible and unreliable. He made reference to Watson v Foxman (1995) 49 NSWLR 315 at 318 to 319 which contains the often cited passage from McClelland CJ in Eq's judgment: "Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition."
6. Mr McCulloch also referred to: 1. What has been said by Leggatt J in Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm) at [22] and also to Hill End Gold Ltd v First Tiffany Resource Corporation [2011] NSWCA 276 at [56] to [64] per Allsop P and Meagher JA (with whom Handley AJA agreed), and in particular the reference to "spectacular concessions" at [58] of the trial judge's judgment set out at [59] of the Court of Appeal judgment. 2. The decision of the Court of Appeal in Nominal Defendant v Cordin [2017] NSWCA 6.
7. Mr Williams in response drew attention to AGC Industries Pty Ltd v Karara Mining Ltd [2019] WASC 140 and Cardtronics Australasia Pty Ltd v FX Investments Australia Pty Ltd [2020] FCA 218 [8].
8. I make the following observations: 1. The paragraphs from Hill End [56]-[64] do not support the proposition advanced by the Defendants. The "spectacular concessions" which were made concerned a different agreement, not the one the terms of which the trial judge was required to determine. 2. What was said in Foxman (supra) as to the fallibility of human memory in relation to assertions of misleading and deceptive conduct needs to be borne in mind as does the importance of examining the contemporaneous evidence to see if what is asserted by one party is inconsistent with that material. 3. I set out what was said by Leggatt J in Gestmin (supra) (after a detailed excursus at [15]-[21] of "evidence based on recollection") at [22]: "In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose - though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth." 1. I think that Vaughan J in Westgyp Pty Ltd v Northline Ceilings Pty Ltd [2018] WASC 244 [53] was referring to what Leggatt J has said in Gestmin when he said: "There is a view that in the trial of a commercial case the best approach in such circumstances is to place little, if any, reliance on witnesses' recollections of what was said in meetings and conversations. I acknowledge the doubt that necessarily attends the recollection of conversations many years in the past. But it does not follow that the correct starting point is to simply place little reliance on oral recollection. Rather, I should assess that evidence in light of its inherent probabilities in the context of the objectively established facts." Vaughan J's approach was endorsed by Allanson J in Karara Mining at [82]. 1. I doubt that Leggatt J intended his comments to apply to a case in which a plaintiff's evidence as to what had been said is largely accepted by the defendant but, in any event and with respect, I am unable to accept Leggatt J's views as to the best approach for a judge to adopt in the trial of a commercial case and I respectfully adopt the approach of Vaughan J in Westgyp and Allanson J in Karara Mining. 2. In relation to Cordin, the DCS contends that it supports the approach of Leggatt J in Gestmin. Cordin concerned a push bike accident in which the plaintiff was seriously injured. He claimed that the accident had been caused by a motor vehicle the registration and owner of which he was unable to identify, and brought proceedings against the Nominal Defendant. The plaintiff said that he had no clear recollection of the accident. The trial judge accepted the plaintiff's claim that he had been hit by a vehicle and found in his favour. On appeal the majority, Davies J and Emmett AJA, upheld the appeal. Macfarlan JA dissented. The majority held that the trial judge had paid insufficient regard to the contemporaneous documentation and that he may have in effect reversed the onus of proof requiring the defendant to establish that the plaintiff was not struck from behind by a motor vehicle. The ambulance notes recorded no assertion of any collision with a motor vehicle or Contin having been knocked off his bike or hit and nor, for example, did the various hospital notes. Davies J at [165] drew attention to the fact that he had in Coote v Kelly; Northam v Kelly [2016] NSWSC 1447 collected a number of authorities "that have provided assistance in dealing with credibility issues and the fallibility of human memory." These cases included a citation of [15]-[22] of Gestmin. At [100] Davies J emphasis the need for the Court to consider all of the evidence as a whole. His Honour then said at [167]: "[167] One reason that contemporaneous statements and documents are likely to be more accurate than a recollection of events is that a statement made at the time of an event, particularly when relatively spontaneous, is likely to be more accurate than a later statement made at a time when false memories can intrude. In a minority of cases the false memories are deliberately so because of the contrivance of the maker of the statement. In the majority of cases the false memories are honestly believed either for the reasons such as those outlined by Leggatt J in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm) or because the person recalling the events has tried to assemble recollections logically so that what happened can have some rational explanation in the person's mind. As Leggatt J noted at [17] memories are fluid and malleable, being constantly rewritten whenever they are retrieved." 1. It is true that Emmett AJA at [155]-[159] agreed with Davies J's conclusion, but Emmett AJA did not express any view on the issues relating to the frailty of human memory or the correctness of the approach in Gestmin. Macfarlan JA did not address the topic either, so I do not think Cordin can be seen as support by the Court of Appeal for the approach adopted by Leggatt J and upon which the Defendants rely. In any event I do not take Davies J to have done anything more than to emphasise the need for caution when assessing testimony as to events long ago and the need to examine that testimony having regard to contemporaneous documentary evidence particularly when those documents are created by persons having no self interest in their contents, an approach also reflected in the judgment of Emmett AJA.
9. In this case we have a version of events given by Mr Campbell that was largely accepted by Mr Kemp in cross examination.
10. Not only that but there are no documents which contradict the facts asserted by Mr Campbell and accepted by Mr Kemp, but rather evidence within the documents that lends support to the version propounded by Mr Campbell, including, for example, that Kenxue as well as Mr Quinn were clients of Westpro. Emails from Mr Kemp to Mr Quinn in which Mr Kemp described Mr Campbell/ Kenxue as his "client" are relevant and confirmatory of the retainer established by the conversation between Mr Campbell and Mr Kemp. There is an email from Mr Kemp to Mr Campbell which provides some support for this conclusion as well: i.e. CB1 236.
11. In my view each of the admissions relied upon by Kenxue are significant admissions which corroborate Mr Campbell's version of events, and both for that reason and the issue of credit to which I have referred, I accept the evidence of Mr Campbell in those limited cases where there is a dispute on the facts between Mr Campbell and Mr Kemp.
12. I make the following findings of fact, based on the evidence of Mr Campbell, Mr Kemp and the documents: 1. Mr Campbell told Mr Kemp that he had never invested in private mortgage lending before and Mr Kemp told Mr Campbell that he would provide him with advice and assistance, implicitly, in respect of mortgage lending to be considered and undertaken by Kenxue as an investment strategy. Mr Kemp told Mr Campbell that he had been involved in the loans business for a long time and that constituted a representation that he had the necessary expertise and experience to advise and assist Kenxue. 2. Mr Campbell agreed to pay Mr Kemp a fee of 1.7% of $6M for his assistance although subsequently Mr Kemp offered to reduce his fee by 50% to 0.85% of the $6M. 3. Mr Campbell agreed to pay Mr Kemp a further amount of 0.5% on interest to be paid by YIC in return for Mr Kemp managing the loan and repayments on behalf of Kenxue. 4. Mr Campbell told Mr Kemp that he wanted the same level of protection in relation to the transaction that a bank would obtain for itself. 5. Mr Kemp told Mr Campbell that he would be happy to help Mr Campbell and see what he could do for Mr Campbell. 6. Although he originally denied this, Mr Kemp admitted that Kenxue was a client in relation to the transaction and described Kenxue/ Mr Campbell as such in his emails to Mr Quinn. I reject the Defendant's submissions that Mr Kemp's concessions in cross examination were meaningless: DCS 84. 7. Mr Kemp knew that YIC had entered into the 2010 Contract to buy the Property for $4.5M. He knew that the fact that the purchase price was less than the amount a lender was to advance was a matter that would be relevant to a lender's decision on whether to lend, indeed a "highly significant factor": CB7 2402-2403, T9-T10. 8. Mr Kemp withheld the 2010 Contract from Mr Campbell and did not advise Mr Campbell of the purchase price under the 2010 Contract. 9. I infer that Mr Kemp withheld the 2010 Contract and information about the purchase price because he could foresee that revelation of the price to Mr Campbell would very likely end the prospect of the loan proceeding. 10. I find that Mr Campbell was well aware that Mr Kemp was not a valuer (T140.8), but I find that Mr Kemp told Mr Campbell that the Property was worth $20M and that he could rely on the draft TB Valuation. I do so not only on the basis of Mr Campbell's evidence that that is what Mr Kemp said to him: see [33] above and Mr Kemp's admissions at CB7 2458.26-2459.4 (T65.26-T66.4) but because of the contents of his email at CB1 236: "Commercial Loan of $6,000,000 against a property worth $20,000,000 - LVR will be 30%". 11. I find that in saying what he said Mr Kemp was not simply passing on what was contained in the TB Valuation because he knew that the TB Valuation was a draft and could not be relied on as against Taylor Byrne, but rather was expressing his view that reliance could be placed on it by Mr Campbell in deciding whether to loan the $6M because the TB Valuation was prepared for a bank (see paragraph 23 of Campbell I, CB1 5) and because the LVR was 30%. 12. I prefer the evidence of Mr Campbell wherever it is in conflict with Mr Kemp's evidence for the reasons I have given and because the documents are consistent with Mr Campbell's evidence. In particular, I find that Mr Kemp made the You Can't Go Wrong Representation. I accept Mr Campbell's evidence that Mr Kemp told him that because the Property was worth $20M and he was lending $6M leading to an LVR of 30% he could "not go wrong" with the loan. Even on Mr Kemp's evidence when Mr Campbell told him that he was prepared to rely on the TB Valuation Mr Kemp did not tell him that in his view that would be imprudent. 13. Mr Kemp told Mr Campbell that a guarantee from Mrs Quinn would not be legally enforceable. Although he was not a solicitor he was giving advice to Mr Campbell that he intended Mr Campbell to rely on, and what he said had the appearance of being based on legal advice or his expertise in the field of lending. Mr Kemp did not mention that an independent certificate from a solicitor advising Mrs Quinn could be required and would alter significantly the prospect that the guarantee would be enforceable: see for example National Australia Bank Limited v Paul Burness in his capacity as Trustee of the Bankrupt Estate of Mark William Bradley [2007] NSWSC 247 per Cooper AJ at [170]-[210]. 14. Mr Kemp thought that it was "odd" and contrary to his experience that Taylor Byrne would not agree to delete the restrictive clause (a limitation he had never seen before) or issue a new valuation report assigned to Mr Campbell (CB7 2440, T47), but he did not tell Mr Campbell his views. 15. Mr Kemp held the view that Mr Campbell would be imprudent to lend $6M to YIC on the transaction but he did not tell Mr Campbell of that view. 16. Mr Kemp was aware that Quinnco was a trustee and that its guarantee was worthless, or at least probably worthless (see CB7 2432.19-39, T39.19-39), but he did not draw that risk or the possibility of that risk to Mr Campbell's attention, indeed he described what he sent as an "Assets and Liabilities on the company's sole director - Mr John Quinn": CB1 236. 17. Mr Kemp did not recommend that Mr Campbell require a guarantee from Quinnco that did bind the trust as a condition of the loan. It is clear that Mr Quinn, wisely no doubt, did not regard it as appropriate to commit as a the assets of the trust to supporting the loan: see CB1 233. 18. That it was obvious to Mr Kemp that YIC had not demonstrated an ability to repay the loan or the interest and he did not draw that serious deficiency to Mr Campbell's attention even though he was very aware of the deficiency and had even raised the matter with Mr Quinn asserting that his "investor" needed to know how the loan was to be repaid and had been told that repayment was based on securing a joint venture partner (CB1 227-228) which so far as Mr Kemp was aware had not occurred at any time prior to settlement.
13. In relation to 68 I accept the Defendants' submissions that no loss has been established by reason of the failure to seek a guarantee from Mrs Quinn because it has not been established that she would have agreed to provide such. A refusal by Mrs Quinn to provide a guarantee may however have been significant.

The Contract/ Retainer

1. Kenxue relies on the following matters to establish the existence of a contract between Kenxue and Westpro: 1. The conversations between Mr Campbell and Mr Kemp deposed to by Mr Campbell, the essential elements of which were admitted by Mr Kemp in cross examination. 2. The negotiation of a fee by Mr Kemp to be paid on settlement of the transaction and of a separate fee for management of the loan post transaction, both of which fees were paid by Kenxue to Westpro. 3. Mr Kemp's acceptance during cross examination that he was acting for both parties to the transaction and for two clients: see [24] above. 4. Mr Kemp's references to Mr Campbell as his client in his emails to Mr Quinn at CB1 227 and 251. 5. Mr Kemp said he thought of protecting Kenxue by a guarantee from Mrs Quinn but that "we cannot establish something called "Corporate Benefit"…meaning she is not a director of the borrowing entity nor shareholder therefore, legally you cannot rely upon her guarantee": CB1 236. 6. Mr Kemp proposed to Mr Campbell a higher rate of interest be paid by YIC to cover at least in part the fee that Mr Kemp wanted to be paid to himself. 7. The context being one in which Kenxue had funds that it was looking to invest in mortgage lending and Westpro and Mr Kemp had the necessary expertise and network of potential clients - the connection had arisen because Mr Campbell had indicated an interest in lending and he contacted Mr Kemp or asked Mr Kemp to call him in a context where he had no knowledge of what opportunities might be available: CB7 2441. 8. The following found in the transcript of Mr Kemp's cross examination (at CB7 2437, T44): "WILLIAMS Q. So you were very keen to get this deal over the line, weren't you? A. I was very keen to help Mr Quinn. Q. So you were very keen to help get yourself a commission, weren't' you? A. Commission is secondary. My main concern was helping clients. Q. Which client were you helping with this transaction? A. Mr Quinn because he's the one with the most on the line. Q. What about the person who was providing $6 million to him? He had a lot on the line too, didn't he? A. He had a lot on the line, that's correct. Q. You were trying to help him too weren't you? A. I was trying to assist him."
2. The Defendants assert that finance brokers are the agents of the borrower rather than the lender and refer to cases such as Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd [1986] HCA 14; (1986) 160 CLR 226 at 234 per Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ; Octaphon Pty Ltd v Esanda Finance Corp Ltd (unreported, NSWSC, 3 February 1989) at pages 27 to 28 per Cole J; Morlend Finance Corporation (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 at 308 per Fullager J (with whom Brooking and Tadgell JJ agreed); Custom Credit Corporation Ltd v Lynch [1993] 2 VR 469 at 486 per Marks J (with whom Fullager and Ormiston JJ agreed); Micarone v Perpetual Trustee (1999) 75 SASR 1 at 123 per Debelle and Wicks JJ; Barker v GE Mortgage Solutions Limited [2013] QCA 137 at [45] to [46] per Philippides J (with whom White JA and Lyons J agreed).
3. By the DCS the Defendants resist the conclusion that any contract was formed between Kenxue and Westpro and that if there was a contract it included a term implied on the authority of Astley v Austrust Ltd [1999] HCA 6; (1999) 197 CLR 1 at 43 that Westpro would exercise all reasonable care and skill of reasonable advisers with particular expertise in advising investors (lenders) in relation to proposed mortgage lending transactions and also a term that the advice provided would be reasonably fit for the purpose. Apart from the issue based on Con-Stan to which I refer to below, the Defendants contend that the conversation between Mr Campbell and Mr Kemp did not establish a contract, other than perhaps in relation to management of the loan once made in respect of which no breach is asserted.
4. In Con-Stan, which was a case involving an insurance broker, the High Court said at 234: "…under the general principles of the law of agency, a broker is the agent of the assured, not the insurer: [cases omitted]. There will be rare circumstances in which a broker may also be an agent of the insurer, but the courts will not readily infer such a relationship because a broker so placed faces a clear conflict of interest between his duty to the assured on the one hand and to the insurer on the other."
5. In Barker (supra) Philippides J, with whom White JA and Lyons J agreed, accepted that agency depends on the facts of the particular case. Her Honour referred to what had been said in Micarone: "[46] In the same vein, Douglas J observed in Hilton v Gray [2008] ASC 155-094; [2007] QSC 401 at [40]: Were it necessary, I would conclude that Mr Sultan was not the plaintiffs' agent; see also Micarone v Perpetual Trustee (1999) 75 SASR 1 at 123 at [632] where Debelle and Wicks JJ said: A finance broker in a transaction of this kind is prima facie the agent of the borrower: Morlend Finance Corp (Vic) Pty Ltd v Westendorp [1993] 2 VR 284 at 308 and that is so notwithstanding that the broker may receive a commission from the lender: Custom Credit Corp Ltd v Lynch [1993] 2 VR 469 at 486 to 487; Octapon Pty Ltd v Esanda Finance Corp (unreported, Supreme Court NSW, 3/02/89). The position may, of course, differ according to the individual circumstances of each case." At [47] of Barker Philippides J noted that the forms which the borrower filled out contained an express provision that the broker was not the agent of the lender, a significant matter absent in the present case.
6. The High Court in Con-Stan accepted that an insurance broker could be the agent of both the insurer and insured. It was held that the insurance broker was the agent of both the insurer and insured in F Gliksten & Son Ltd v State Assurance (1922) 10 Ll L Rep 604 at 615, and in Lloyd's Non-Marine Underwriters v Lawlor et al. (1997) 167 DLR (4th) 2 in both the majority and minority judgments it was accepted that an insurance agent could have authority from both insurer and insured: [33] and [52]. That a finance broker can be the agent of the lender can be seen in Perpetual Trustees Australia Ltd v Schmidt [2010] VSC 67 per Forrest J and in a decision of mine: Tran v Perpetual Trustees Victoria Ltd [2012] NSWSC 1560; see also Permanent Trustee Co Ltd v O'Donnell [2009] NSWSC 902 [339]-[341] and [358] per Price J. The real question here in any event is not one of agency viz a viz a third party - it is whether there was a contract formed between Kenxue and Westpro based on what was said and done by their representatives.
7. As the PCS point out Kenxue was not a traditional lender, indeed as Mr Campbell made clear to Mr Kemp he was an absolute novice. There was nothing said by Mr Kemp to Mr Campbell to indicate that he would not be acting for and could not advise Kenxue. That there was a conflict of interest on Mr Kemp's part in advising Kenxue and acting for Mr Quinn is undoubted and it was emphatically demonstrated by Mr Kemp's proposal to Mr Campbell that Kenxue seek 14.5% as the rate of interest and by Mr Kemp's advice to Mr Campbell that a guarantee from Mrs Quinn would be unenforceable and his failure to pass on the 2010 Contract or to draw attention to the absence of any basis for concluding that YIC could repay the loan or the interest required. That Mr Kemp should not have agreed to act for both Kenxue and Mr Quinn, or acted in breach of his obligations to one or other or both of Kenxue and Mr Quinn, does not lead to the conclusion that he did not agree to act for both.
8. It is clear that the circumstances were not those normal in Westpro's business and I do not accept that the prima facie position in relation to mortgage brokers applies here. If, as the DCS contends, Mr Kemp/ Westpro did not have experience advising lenders then Mr Kemp should have said so and not accepted that he would assist and advise Mr Campbell/ Kenxue. I am conscious that at one point (T119.26-20) Mr Campbell agreed that Mr Kemp was seeking finance on behalf of Mr Quinn, and "was not acting for Mr Campbell in respect of this transaction" but the whole of the cross examination (T119.25-T120.10) reflects the fact that whilst Mr Campbell may have understood that Mr Kemp was acting for Mr Quinn, he believed that Mr Kemp was acting for him as well.
9. I am unable to accept the DCS contention (at DCS 139) that Mr Kemp was simply agreeing to introduce borrowers to Mr Campbell - that submission ignores the conversation which Mr Kemp agreed he had with Mr Campbell.
10. In relation to the implied terms alleged, the Defendants resist the due care and skill term on the basis that Westpro did not contract with Kenxue to provide professional services. They also assert that the implied term would not be implied under s 74 of the TPA or ss 60 or 61 of the Australian Consumer Law (sch 2 of the Competition and Consumer Act 2010 (Cth)) ("ACL") as Kenxue was not a consumer.
11. The evidence and particularly the matters referred to at [70] above establishes that Kenxue retained Westpro as its adviser on commercial lending and agreed to pay it a fee of 1.7% (later reduced to 0.85%) for that retainer, and also to pay a "trail" commission of 0.5% of interest paid for managing the loan once made, and I find that Mr Kemp agreed that Westpro would assist and advise Kenxue in relation to the loan transaction and agreed to ensure, or at least take reasonable steps to ensure, that Kenxue had the same protection a bank would have if lending the money to a borrower. I find that Mr Kemp did hold himself and Westpro as having relevant expertise and experience, contrary to the DCS submissions (see DCS 106). I also find that although the contract was not formally documented its terms are sufficiently clear and objectively discernible from what was said and the context: see Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104 [46]-[51] and see County Securities Pty Limited v Challenger Group Holdings Pty Limited [2008] NSWCA 193 per Spigelman CJ [7] where the issue of determination of the terms of oral contracts is specifically addressed; see also Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 BPR 11,110 at 11, 117-118, per McHugh JA with whom Hope and Mahoney JJ concurred.
12. I find that a duty of care and skill should be implied here on the basis of Astley. It is irrelevant that Kenxue would not be classed as a consumer for the purpose of s 74 of the TPA or ss 60 or 61 of the ACL. The work of a mortgage broker is professional work in the financial services sector: see Snowden v Australia Mortgage Assist Pty Ltd [2019] NSWSC 1799 [121]-[122] per Ball J and see Walmsley et al (eds), Professional Liability in Australia (Lawbook Co, 2nd ed, 2007) at [8-2000]. This would be so whether the broker is acting for the lender or the borrower.
13. Given the identification of the due care term in Astley I do not think there is any need to consider any other basis for implication of the term.
14. I have referred to the contractual term that the advice would be directed to ensuring or taking reasonable steps to ensure that Kenxue had the same protection as a bank would have.
15. The DCS accept that Mr Campbell said he wanted the same security as a bank would require (based on Kemp I, CB1 32). The DCS asserts that this was not breached because Kenxue did obtain a fixed mortgage and floating charge. The DCS accept that Westpro agreed to manage the loan once made but assert that there was no breach of that element.
16. It seems that the argument about security is framed around whether security documentation is all that was intended as opposed to whether the security itself was worthwhile. Mr Campbell used the words "protected like a bank" and a mortgage security over a property that was not worth anything like the figure which it was presented as having would be very inadequate security even assuming the mortgage documentation was water tight and effective. The security (i.e. the Property) was worth at most between $7.2M and $10.55M and nothing like $20M: see [98]-[102] below and unlike a bank Kenxue had no potential to recover the shortfall from the 'valuer' in this case.
17. I need to deal with the question of admissibility of two items of evidence, one of which relates to breach of contract and on which appears to be put in relation to causation.
18. The Plaintiff seeks to rely on the expert report of Mr John Sanders. Mr Sanders has had many years' experience as a bank manager involved in commercial lending. He has worked for St George Bank, a division of Westpac Banking Corporation, as a Senior Relationship Manager and as a Line Manager and, from January 2004 to April 2007, for NAB as a Senior Relationship Manager in the Property Finance and Investment area of the Major Client Group: CB7 2384.
19. By Mr Sanders' evidence Kenxue seeks to establish what a bank involved in lending would do to protect itself. I do not read Mr Sanders as saying merely what he would do but rather as giving evidence as to industry practice. Evidence of industry practice is admissible: see National Australia Bank Ltd v Smith [2014] NSWSC 1605 per Slattery J, and Smart v AAI Ltd; JRK Realty v AAI Ltd (No 2) [2015] NSWSC 621 and see another example in a different field: Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2007] FCA 1828; (2007) 245 ALR 15 at [13] per Allsop J (as his Honour then was). I note as a practical matter that Mr Sanders' main propositions are readily understandable and hardly surprising. Mr Sanders said that: 1. A bank would not have provided a loan to YIC without a confirmed source of servicing given that the Property was vacant rural land and not likely to be producing income: CB7 2386. 2. A bank would require a clear and defined exit source at the time of initially lending the funds: CB7 2386. 3. A bank would require in addition to a registered mortgage over the Property a fixed and floating charge over the borrower, both in its own right and as trustee of any trust involved in the borrowing: CB7 2386. 4. No bank would lend $6M on a purchase price of $4.5M. Any loan would have been based on a gearing of the lower of the valuation or the purchase price and would not have exceeded 35% of the value of the Property to reflect the fact that the Property was an englobo parcel of rural land and the undefined time to any development commencing: CB7 2387. 5. A bank would have insisted on a valuation being provided by an independent bank instructed valuer selected from the bank's preferred panel of valuation firms: CB7 2387. 6. An additional relevant matter was that "the major issue impacting at that time on the banking sector was the Global Financial Crisis and any appetite for "new to Bank" lending for purchase of englobo development sites in non-metropolitan areas, with no servicing ability was zero": CB7 2387.
20. In my view, Mr Sanders' report based on extensive experience of practice in the relevant area is admissible evidence of banking practice and should be received. Items 88, (2) and (5) were in effect accepted by Mr Kemp in any event: see [19] and [46] (10) above.
21. The second admissibility issue is evidence on which the Defendants seek to rely relating to Mr Scartuchio. In early 2011, Kenxue lent $400,000 to Mr Scartuchio and obtained a mortgage on a property in Leichhardt, Sydney. This was another loan organised by Mr Kemp. The Defendants seek to rely on the details of the loan to support the contention that Mr Campbell was willing to lend at much higher LVR than 30%. Kenxue objects to the tender of this evidence on a number of grounds: 1. It is tendency evidence for which no notice in accordance with s 97(1)(a) of the Evidence Act 1995 (Cth) ("Evidence Act") was given, and hence which should be rejected. 2. It is of no assistance to the Court since it would involve considerations of the same issues that exist in relation to the YIC loan - what Mr Kemp had said to Mr Campbell, what he had not said, and so forth, including whether Mr Kemp had a duty to warn Mr Campbell in respect of that loan as well. 3. A mortgage property in Sydney raises very different issues in terms of risk to a vacant block of land in Yepoon.
22. I accept Kenxue's submissions and reject the evidence relating to the Scartuchio loan because it is relied on as tendency evidence and no notice was given as required pursuant to s 97(1)(a) of the Evidence Act and because it does not have significant probative value.
23. In my view the matters set out in 68-(18) above involved Westpro in a failure to properly advise Mr Campbell and/or to ensure that he had the protection that a bank would require. I am reinforced in that view by the evidence of Mr Sanders.

Misleading and deceptive conduct

1. Kenxue claims that Mr Kemp and Westpro engaged in misleading and deceptive conduct by: 1. Representing that the Property was "valued at $20 million". 2. Representing that there was a legal impediment to Mrs Quinn giving a guarantee of YIC's liability. 3. Representing that "you can trust the advice because it was prepared for a bank and contains an LVR of 30%": see CB1 5. 4. Failing (i) to disclose that the purchase price of the Property was $4.5M; (ii) that there was no reasonable basis for the valuation; and (iii) that it was imprudent for Kenxue to rely on the valuation.
2. The PCS make reference to the summary of principles relating to misleading and deceptive conduct in ACCC v Dukemaster Pty Ltd [2009] FCA 682 [10] per Gordon J viz: "1. A contravention of s 52(1) of the TPA is established by "conduct" which is misleading or deceptive or likely to mislead or deceive: Global Sportsman Pty Ltd 2 FCR 82, 87. The "conduct", in the circumstances, must lead, or be capable of leading, a person into error (Hannaford (trading as Torrens Valley Orchards) v Australian Farmlink Pty Ltd [2008] FCA 1591 at [252] citing Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 200; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198) and the error or misconception must result from "conduct" of the corporation and not from other circumstances for which the corporation is not responsible: Global Sportsman Pty Ltd 2 FCR 82, 91. "Conduct" is likely to mislead or deceive if there is a "real or not remote chance or possibility regardless of whether it is less or more than fifty per cent": Global Sportsman Pty Ltd 2 FCR 82, 87. 2. Section 52(1) is concerned with the effect or likely effect of "conduct" upon the minds of that person or those persons in relation to whom the question of whether the "conduct" is or is likely to be misleading or deceptive falls to be tested. The test is objective and the Court must determine the question for itself: Global Sportsman Pty Ltd 2 FCR 82, 87. Section 52 is not designed for the benefit of persons who fail, in the circumstances of the case, to take reasonable care of their own interests: Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 241. Moreover, it would be wrong to select particular words or acts which although misleading in isolation do not have that character when viewed in context: Elders Trustee 78 ALR 193 at 241 citing Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 199. 3. "Conduct" can, of course, include making a statement which is misleading or deceptive or likely to mislead or deceive: Global Sportsman Pty Ltd 2 FCR 82, 88. 4. By making a statement of past or present fact, a corporation's state of mind is irrelevant unless the statement involved the state of the corporation's mind: Global Sportsman Pty Ltd 2 FCR 82, 88. Contravention of s 52(1) does not depend upon the corporation's intention or its belief concerning the accuracy of the statement of fact but upon whether the statement conveys a meaning which is false. A false meaning will be conveyed if what is stated concerning the past or present fact is inaccurate but also if, although literally true, the statement conveys a meaning which is false. 5. Precisely the same principles control the operation of s 52(1) to statements involving the state of mind of the maker when the statement was made (e.g. promises, predictions and opinions). A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or impliedly) that the maker of the statement had a particular state of mind when the statement was made and, commonly, that there was a basis for that state of mind: Global Sportsman Pty Ltd 2 FCR 82, 88. 6. A statement of opinion will not be misleading or deceptive or likely to mislead or deceive merely because it turns out to be incorrect, misinforms or is likely to do so: Elders Trustee 78 ALR 193, 242 and Bateman v Slatyer (1987) 71 ALR 553, 559. An incorrect opinion does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any or any adequate foundation: Global Sportsman Pty Ltd 2 FCR 82, 88. An expression of an opinion which is identifiable as an expression of opinion conveys no more than that the opinion is held and perhaps that there is a basis for the opinion. If that is so, an expression of opinion however erroneous misrepresents nothing: Global Sportsman Pty Ltd 2 FCR 82, 88. 7. However, an opinion may convey that there is a basis for it, that it is honestly held and when it is expressed as the opinion of an expert, that it is honestly held upon rational grounds involving an application of the relevant expertise. If the evidence shows that the opinion was not held or that it lacked any or any adequate foundation, particularly if the opinion was expressed as an expert, a statement of opinion may contravene s 52 of the TPA: Elders Trustee 78 ALR 193, 242, proposition (4): see also Hannaford [2008] FCA 1591 at [253] and RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164; Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388; NC Seddon and MP Ellinghaus, Cheshire and Fifoot's Law of Contract (9th Australian Edition, 2008), [11.116]."
3. As Lindgren J in MGICA (1992) Ltd (formerly MGICA Ltd) v Kenny & Good Pty Ltd and Kenny (1996) 140 ALR 313, 356 made clear, an expression of opinion can convey that the person expressing the opinion has expertise in forming and expressing opinions on the matter and that the person to whom the opinion is expressed knows (or should know) that another person will or may act in reliance on the opinion. Another issue is whether the expression of opinion conveyed the representation that the opinions were based on reasonable grounds.
4. The PCS point out that conduct in the nature of giving advice can also amount to misleading and deceptive conduct where the adviser fails to attach appropriate qualifications or fails to disclose that the advice is based on less than reasonable grounds: Sweetman v Bradfield Management Services Pty Ltd [1993] FCA 907; (1994) ATPR 41-290 per Lee J; and MGM Bailey Enterprises Pty Ltd v Austin Australia Pty Ltd [2002] NSWSC 259 [22] per Austin J.
5. I shall, in considering this head of claim, proceed on the basis that there was no contract created between Kenxue and Westpro.
6. The parties have both retained valuers as experts to endeavour to establish what the property was worth as at 6 October 2010. Mr Graham Gross of Herron Todd White estimated the value of the Property at $7.26M (see CB7 2116). Mr Dale Doyle of Savills Valuations Pty Ltd estimated the value at $10.55M (see CB7 2150). They prepared a joint report (see CB7 2255 to 2559) and were cross examined together. They adopted the same method, i.e. the Direct Comparison Method. They identified several properties which they agreed were comparable. There was a dispute as to whether some of the identified properties were comparable and Mr Doyle made the point that sales after 6 October 2010 should be excluded. Mr Gross agreed that the sale 29 October 2010 should be excluded - he had included it because he had originally been instructed that "October 2010" (and not 6 October 2010) was the date as at which he should provide an opinion. Mr Gross had valued the Property in April 2009 at $12.5M.
7. One sale which neither Mr Gross nor Mr Doyle had taken into account was the sale to YIC itself (although Mr Gross had referred to it at the commencement of his report). A sale at $4.5M of the identical land in question would appear to be highly relevant matter to take into account but both valuers explained why that sale was not as relevant as it might appear, since it was not a sale achieved by auction or with the property having been advertised on the open market.
8. Mr Doyle having been told in cross examination about Mr Quinn's email of 8 September 2010 (CB1 154) explained that on the basis of what he was being asked to assume a figure of $7.5M might be the appropriate figure to ascribe to the sale under the 2010 Contract (see T255-265), but he did not agree that the 2010 Contract, even with that adjustment, would affect his assessment much (putting it down to $9.685M: see T266.5 and CB7 2187). Mr Gross saw the 2010 Contract incorporating Mr Doyle's assessment of Mr Quinn's email (i.e. $7.5M), as lending support "broadly" to his figure of $7.26M (arrived at without regard to the Mr Quinn email or the 2010 Contract): see T262.25.
9. I was impressed with Mr Gross and I thought he exhibited all the characteristics of an impartial expert in whom I am able to repose confidence. Mr Doyle, whilst obviously experienced and an articulate witness, on occasions seemed rather combative and there were a number of questions to which he gave unresponsive answers. I think that cross examination of Mr Doyle revealed, as a most significant difference between himself and Mr Gross, their respective assessment of the trend in the market as at 2010 for properties of the type and in the region in question. Mr Gross in a very convincing manner explained that the market by 2010 post GFC had cooled considerably to the point that very few englobo properties were being marketed in Queensland (see T279.48-290.1) reflecting the difficulties in prospective purchasers obtaining finance from banks and other major lenders. Mr Doyle agreed that there was a downturn, but not to the extent that Mr Gross opined. I accept Mr Gross' views on the downturn not only because I found him to be a more impartial witness, but also because his analysis of the market trends was convincing and because: 1. Mr Gross' $7.26M is far closer to the $4.5M paid under the 2010 Contract and almost spot on if the adjustment to the purchase price for the Property suggested by Mr Doyle and accepted by Mr Gross is taken into account 2. Mr Gross' $7.26M is far closer to the amount obtained on sale in 2016 (i.e. $3.335M), which amount retrospectively supports Mr Gross' view of the downward spiral in real estate of the type and location in question. 3. I think that cross examination of Mr Doyle demonstrated that he placed too much significance on contracts entered into before the GFC and in this connection that he was unwilling to recognise that sale of a comparable property the subject of a staggered sale several years apart was affected by a significant impact of the market trend in September 2010.
10. I therefore conclude on the basis of Mr Gross' evidence that the value of the Property as at 6 October 2010 was $7.26M.
11. Although the value which is to be ascribed to the Property as at 6 October 2010 became an issue which I have determined in the previous paragraph, the representation that the Property was worth $20M was false whether Mr Gross' figure of $7.26M is accepted or Mr Doyle's adjusted figure of $9.685M is accepted, and the indication that $6M represented an LVR of 30% of the value of the Property was false in both cases as well. A loan of $6M on a value of $7.26M would equate to an LVR of 83% and on a value of $9.685M would equate to an LVR of 61%.
12. The DCS point out that for a representation, belief or opinion to be misleading or deceptive, Kenxue must demonstrate either that the Defendants did not actually hold that belief or opinion or that there was no adequate foundation upon which it could be held: Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 88 per Bowen CJ, Lockhart and Fitzgerald JJ; DCS 176.
13. I conclude that Mr Kemp's advice to Mr Campbell on the valuation and the You Can't Go Wrong Representation constituted misleading and deceptive conduct on the part of Westpro through Mr Kemp in breach of s 52 of the TPA because: 1. Mr Kemp knew that the TB Valuation could not be relied on as a guide to the true value of the Property and he knew that Mr Campbell was intending to rely on it. Further, Mr Kemp knew that Kenxue could not sue Taylor Byrne in relation to contents of the TB Valuation, removing a potential safety net for the transaction. 2. Mr Kemp was aware that to rely on the TB Valuation was imprudent. 3. Mr Kemp failed to draw attention to the absence of any evidence that YIC could repay the $6M loan and the interest due on the loan without recourse to a forced sale. 4. Mr Kemp knew that the Quinnco Assets and Liabilities Statement was in fact a statement of the assets and liabilities of a trust, rather than of Mr Quinn or Quinnco, and that a Quinnco guarantee was of little or no value. 5. The 2010 Contract price was $4.5M. 6. The matters in (1) to (5) above were all matters which pointed to the lack of prudence in Kenxue proceeding with the loan, and were matters of which Mr Kemp was fully aware.
14. On the issue of the failure to provide the 2010 Contract and/or the information that Mr Kemp held concerning the purchase price in the 2010 Contract the question is did this amount to misleading and deceptive conduct by silence?
15. According to Russell V Miller, Miller's Australian Competition & Consumer Law Annotated (Thomson Reuters, 42nd ed, 2020) at [ACL 18.380]: "The essential question is whether in all the circumstances constituted by acts, omissions, statements or silence, there has been conduct likely to mislead or deceive: Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited [2010] HCA 31, (2010) 241 CLR 357; 270 ALR 204; 84 ALJR644 (French CJ and Kiefel J): Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608; (1993) ATPR 41-203; Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 68 ALR 77; 12 FCR 477: (1986) ATPR (Digest) 46-010."
16. In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31; (1992) 110 ALR 608 at 609-610 on the issue of silence Black CJ said: "Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of "mere silence" or of a duty of disclosure can divert attention from that primary question. Although "mere silence" is a convenient way of describing some fact situations, there is in truth no such thing as "mere silence" because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed."
17. See also Gummow J at 618 of Demagogue who adopted the remarks of French J (as his Honour then was) in Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 at 53,195: "If in a particular case silence would, as a matter of fact, constitute misleading or deceptive conduct, s 52 by virtue of its prohibition of such conduct imposes its own statutory duty to make disclosure. The cases in which silence may be so characterised are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined. However, unless the circumstances are such as to give rise to the reasonable expectation that if some relevant fact exists it would be disclosed, it is difficult to see how mere silence could support the inference that the fact does not exist."
18. It should be noted that if there has been silence on a topic of significance in a context where the expectation is established it need not be demonstrated that the silence was intentional: see CCP Australian Airships Ltd v Primus Telecommunications Pty Ltd [2004] VSCA 232 and Liao v LNG Properties Pty Ltd [2019] NSWSC 1846 at [57].
19. The fact of the $4.5M sale price was known to Mr Kemp and there are several relevant reasons why there was a reasonable expectation that it would be disclosed to Mr Campbell: 1. Mr Kemp had passed on the TB Valuation to Mr Campbell. 2. Mr Kemp had expressed a view on the value of the Property, and implicitly on the reliability as a guide to value of the TB Valuation. 3. Mr Kemp knew that Mr Campbell was completely inexperienced in private lending. 4. Mr Kemp had told Mr Campbell that he could advise and assist Mr Campbell. 5. Mr Kemp had been provided with the 2010 Contract and knew that its contents would be relevant to an experienced lender. 6. Mr Kemp knew that Mr Campbell was looking for advice about the investment, including on the value of the Property, the LVR and the risk element of the transaction. 7. Mr Kemp admitted that he withheld the 2010 Contract from Mr Campbell.
20. I reject the Defendants' assertion that the $4.5M sale price was immaterial - that assertion ignores not only Mr Campbell's evidence but also Mr Kemp's admission that it would be a significant matter to a lender: CB7 2402-2403 (T9-T10) and 46 above.
21. There then arises the question of reliance. I have referred to Mr Campbell's evidence in relation to his lack of knowledge of the purchase price and the effect it would have had on him. I accept his evidence that he would not have proceeded with the loan had he known that the purchase price was only $4.5M, not simply because he says that it would have raised a "red flag" and brought him to "a complete stop" (see T178-179 and T180.24-42) but also because, as Mr Kemp admitted, the fact that the purchase price of the security was less than the amount being lent would be a highly significant matter to a lender and raises significant questions. At the very least it would have provided a very stark contrast to the draft TB Valuation of $20M and made the need for an independent reliable valuation even clearer. If the correct value to be ascribed to the Property was $7.26M or even $9.85M, Mr Campbell's evidence in Campbell IV is that he would not have proceeded with the loan.
22. I also think that if the following matters had been drawn to Mr Campbell's attention, Mr Campbell would, more likely than not, have not proceeded with the loan to YIC: 1. The fact that without finalisation of the joint venture arrangement (which had not occurred prior to settlement) there could be no real prospect of payment of interest and repayment of the loan by YIC without forced sale of the Property. 2. The fact that there could, for a number of reasons, be no confidence placed in the TB Valuation as an indication of the real value of the Property and hence no proper assessment could be made of what the LVR on a $6M loan was. 3. The fact that the TB Valuation had a highly unusual restriction in it (to Mr Kemp's understanding) and that he had doubts that it would ever be finalised (see CB1 234) and that he had asked questions about it of Mr Quinn to which he did not receive an answer.
23. The DCS sought to make out the case that Mr Campbell would have gone ahead with the loan even if he had been made aware of the $4.5M purchase price and was told that the Property was worth $10M. Mr Campbell denied that was so saying that the 30% LVR was attractive and gave him some security and that he would have regarded a purchase price less than he was lending as in effect a most significant matter: T180.31-42 and see also Campbell IV at CB6 2108. I accept Mr Campbell's evidence.

Unconscionable Conduct

1. In APS Satellite Pty Ltd (formerly known as "SkyMesh Pty Ltd") v Ipstar Australia Pty Ltd [2016] NSWSC 1898 [124]-[128], I endeavoured to summarise the principles relevant to unconscionable conduct a summary which both parties relied on in this matter and in particular: "[127] Turning now to the content of what is intended by unconscionable conduct discussed in Paciocco to which I have added references to other decisions on unconscionable conduct: (1) Courts should be wary of attempting to substitute for the phrase used in the statute "unconscionable conduct," other phrases such as 'moral obliquy' and treat those phrases as if that is what the statute provided. (2) The Court needs to consider all the circumstances of a case in order to reach a conclusion on unconscionability. Thus obviously it is not just a question of what is contained in the contract. (3) The statute, by referring to matters to which attention can be given, provides guidance as to what the legislature regarded as conduct which is or might be regarded as unconscionable and see Australian Competition and Consumer Commission (ACCC) v Simply No-Knead (Franchising) Pty Ltd (2000) 104 FCR 253; [2000] FCA 1365. (4) The standard of conduct expected as a person in the commercial context is not that of a fiduciary. (5) The enumerated matters are not exhaustive and see: Australian Competition and Consumer Commission (ACCC) v ACN 117 372 915 Pty Ltd (in Liq) (formerly Advanced Medical Institute Pty Ltd) [2015] FCA 368 at [25]. (6) A contracting party is not required to subordinate its interests to those of the other party. (7) Unconscionable conduct is not conduct which is unjust or even unfair, but it need not be dishonest World Best Holdings at [120]-[121] and see Advanced Medical Institute at [39]. (8) At [296] Allsop CJ said: "The working through of what a modern Australian commercial, business or trade conscience contains and requires, in both consumer and business contexts, will take its inspiration and formative direction from the nation's legal heritage in Equity and the common law, and from modern social and commercial legal values identified by Australian Parliaments and courts. The evaluation of conduct will be made by the judicial technique referred to in Jenyns. It does not involve personal intuitive assertion. It is an evaluation which must be reasoned and enunciated by reference to the values and norms recognised by the text, structure and context of the legislation, and made against an assessment of all connected circumstances. The evaluation includes a recognition of the deep and abiding requirement of honesty in behaviour; a rejection of trickery or sharp practice; fairness when dealing with consumers; the central importance of the faithful performance of bargains and promises freely made; the protection of those whose vulnerability as to the protection of their own interests places them in a position that calls for a just legal system to respond for their protection, especially from those who would victimise, predate or take advantage; a recognition that inequality of bargaining power can (but not always) be used in a way that is contrary to fair dealing or conscience; the importance of a reasonable degree of certainty in commercial transactions; the reversibility of enrichments unjustly received; the importance of behaviour in a business and consumer context that exhibits good faith and fair dealing; and the conduct of an equitable and certain judicial system that is not a harbour for idiosyncratic or personal moral judgment and exercise of power and discretion based thereon." (9) At [347] Allsop CJ said: "In all the circumstances, in particular, the lack of any proven predation on the weak or poor, the lack of real vulnerability requiring protection, the lack of financial or personal compulsion or pressure to enter or maintain accounts, the clarity of disclosure, the lack of secrecy, trickery or dishonesty, and the ability of people to avoid the fees or terminate the accounts, I do not consider the conduct of ANZ to have been unconscionable. To do so would require the court to be a price regulator in banking business in connection with otherwise honestly carried on business in which high fees were extracted from customers." (10) In relation to good faith this requires an obligation on the parties to cooperate in achieving the contractual objects, compliance with honest standards of conduct, and standards of conduct that are reasonable having regard to the interests of the parties and conduct which unreasonable, unfair, harsh, oppressive and wanting good faith may constitute, having regard to the relationship between the parties, unconscionable conduct: see ACCC v Simply No Kneed [44]-[47]. (11) The Court must "assess and characterize the conduct of the impugned party in trade or commerce against the standard of business conscience, reflecting the values and norms recognised by parliament" to which his Honour referred. (12) Inequality in bargaining position alone is insufficient and Keane J remarked in Paciocco at [293]: "the existence of a disparity in power which is an all pervading feature of a capitalist economy does not establish that the party which enjoys the superior power acts unconscionably by exercising it.""
2. Also relevant is what was said by Bathurst CJ at [197] and [198] of Ipstar Australia Pty Ltd v APS Satellite Pty Ltd [2018] NSWCA 15; (2018) 356 ALR 440 (whom Beazley P and Leeming JA concurred): "[197] In considering that question, it is appropriate to have regard to, first, the terms of the statute itself, second, the approach taken by the courts in dealing with cases under the unwritten law, whilst recognising these cases do not limit the scope of the provision, and third, judgments in related areas including cases involving want of good faith. It is also necessary to have regard to all the circumstances surrounding the transaction. This was emphasised in Paciocco HC by Gageler J at [189] and Keane J at [294]. [198] As Gageler J pointed out in Paciocco HC at [189], the criterion in s 12CB(2) of the ASIC Act, which, prior to 1 January 2012, was the equivalent of s 22(2) of the ACL, spelt out that "circumstances relevant to the determination of whether conduct was objectively to be characterised as 'unconscionable' … might or might not include, in respect of particular conduct, all or any of" the matters in the subsection. It should be noted that s 22(2)(l) expressly incorporates the concept of acting in good faith. In the context of the exercise of contractual powers, the concept is well understood as including, relevantly for present purposes, "compliance with honest standards of conduct" and "compliance with standards of conduct which are reasonable having regard to the interests of the parties": Alcatel Australia Ltd v Scarcella (1998) 44 NSWLR 349 at 367D-E; Burger King Corporation v Hungry Jack's Pty Ltd (2001) 69 NSWLR 558; [2001] NSWCA 187 (Burger King) at [171]; United Group Rail Services Ltd v Rail Corporation New South Wales (2009) 74 NSWLR 618; [2009] NSWCA 177, although, as was pointed out in Burger King at [172], referring to Garry Rogers Motors (Aust) Pty Ltd v Subaru (Aust) Pty Ltd [1999] ATPR 41-703 at [37], the obligation does not restrict a party from promoting its own legitimate interest."
3. I should note that the DCS, relying on the judgment of Gageler J in Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 333 ALR 569, assert that a high level of "moral obloquy" is required for a finding of unconscionable conduct. Not only was this approach not accepted in Ipstar, but Gageler J himself recanted on this: see ASIC v Kobelt [2019] HCA 18; (2019) 368 ALR 1 at [91].
4. In support of their contention that Kenxue should fail on its unconscionable claim, the Defendants make several points (DCS 208 to 216), which I summarise as follows: 1. Even if Mr Kemp did consider it imprudent for Mr Campbell to rely on the TB Valuation, Mr Kemp and Westpro were acting for YIC and MR Quinn and not advising Kenxue or Mr Campbell and were not retained by Kenxue or Mr Campbell. 2. Mr Campbell was "an experienced, successful and commercially savvy businessman". 3. Kenxue was aware prior to settlement that the purchase price was $4.5M, and "Mr Kemp did not refuse to tell Mr Campbell that the purchase price was $4,500,000. Kenxue could have asked at any time prior to then what the purchase price of Area 1 was". 4. The fact that the purchase price was $4.5M was "immaterial in any event". 5. It would have been plain to Kenxue and Mr Campbell that the Defendants were not the source of the information that the Property was valued at $20M. The Defendants were not valuers and Mr Campbell knew that. 6. Mr Kemp was not aware of any other valuation and the TB Valuation was prepared by a registered and certified practices valuers and Mr Kemp "clearly had a proper basis to represent to Mr Campbell and Kenxue that [he] believed that Area 1 was valued at $20,000,000." 7. Mr Campbell heard as at 14 September 2010 that the assets of Mr Quinn were very limited and that the assets and liabilities of Quinnco were held as trustee and Mr Campbell was aware of that.
5. Dealing with each of these points seriatim: 1. Whilst I have found the facts to be otherwise I think it is appropriate to assume, for the purpose of considering this claim, that there was no contract between Westpro and Kenxue. Nevertheless, my findings as to what was said between Mr Campbell and Mr Kemp stand and in particular that Mr Campbell made Mr Kemp aware that he had no experience in lending out money for real estate transactions. 2. For reasons which it was agreed do not need to be detailed, Kenxue's access to significant reserves should not be attributed to Mr Campbell's business acumen. I accept that Mr Campbell had business experience but I do not think he was shown to be particularly savvy and whatever commercial success he had (which is not established merely because he operated and sold a business), Mr Campbell had no experience or sophistication in lending as he made clear to Mr Kemp. Significantly Mr Campbell thought that Mr Kemp would provide him with advice and assist him, a position which Mr Kemp had, by his words, encouraged Mr Campbell to take. 3. I have found contrary to the Defendants' submission, that Mr Campbell did not know that the purchase price was $4.5M. Whilst it is true that Mr Campbell could have asked what the purchase price was, Mr Kemp knew what it was and did not supply the contract to Mr Campbell when he sent Mr Campbell the 2004 Contract. Mr Campbell may have been unwise not to ask for the 2010 Contract, but that does not affect the fact that Mr Kemp had the contract and was aware of the purchase price but did not pass it on to Mr Campbell. 4. The submission that the purchase price was less than the loan amount was "immaterial" is a submission contradicted by Mr Kemp himself: see CB7 2402-2403 (T9-10) and 46 above, as well as by Mr Campbell's evidence. 5. It might well have been clear to Mr Campbell that the $20M valuation came from the TB Valuation and he knew it was not a report he could rely on in the sense of being able to sue Taylor Byrne if it were later apparent that it had been negligently prepared, but the issue here is did Mr Kemp give Mr Campbell a sense of false confidence in the report by what he said (and by failing to point out a matter that he himself said would be relevant to a lender, namely that the purchase price was only $4.5M). It is true that the experts called in the case both thought that the Property had a value more than $4.5M (but nowhere near $20M), but Mr Kemp did not have such knowledge - all he knew was that YIC was putting forward a valuation that was stamped draft, not signed and expressly marked as one that a prospective lender such as Kenxue could not rely on and which he admits had some odd features. He also told Mr Quinn (but not Mr Campbell) that he suspected "the report shall remain in draft stage" and he asked Mr Quinn whether he was "awaiting on other information prior to the valuation report be[ing] finalised" (see CB1 234), a query to which he does not appear to have received an answer prior to settlement. Again the Defendants' submission that Mr Kemp had a proper basis to believe that the Property had a value of $20M is inconsistent with Mr Kemp's concession that he did not, and Mr Kemp also knew that the purchase price was $4.5M. 6. Point 6 (set out in [119(6)] above) is also dealt with in (5) above. 7. It is true that Mr Campbell knew that Mr Quinn's guarantee was of very little value, but in relation to Quinnco's guarantee I have made reference to the fact that the lack of worth of its guarantee was not made plain by Mr Kemp to Mr Campbell and that Mr Campbell did not appreciate that the Quinnco Assets and Liabilities Statement was in fact for a trust.
6. In my view the failure, in the circumstances I have described, to pass on the 2010 Contract or at least to fail to tell Mr Campbell that YIC was paying only $4.5M when he knew that that fact was an important one to any experienced lender amounted to unconscionable conduct. The You Can't Go Wrong Representation was a further instance of unconscionable conduct since Mr Kemp knew how imprudent it would be for a lender not to have a valuation he could rely on and which failed to draw a distinction between a valuation prepared at the request of a bank and one prepared for the borrower with an intention that it be supplied to a bank. The failure to highlight that YIC had, on the material available, no established prospect of repaying the loan or interest without a forced sale of the Property is a further element of the unconscionable conduct having regard to all the circumstances. In my view the conduct was unfair and indicated an absence of good faith. To take an example in the field of sales of real estate, I accept that a vendor's agent may not be required generally speaking to tell a purchaser all he knows about defects in a property, but when the agent has agreed to assist and advise the purchaser and the agent has passed on information that is rendered incorrect, doubtful or incomplete by knowledge of other facts, a different conclusion is required. The same reasoning applies here, in my view.

Conclusion on Liability

1. I therefore hold that: 1. There was a contract entered into between Kenxue and Westpro (through Mr Campbell and Mr Kemp) and that Westpro breached the express and implied terms of that contract. The breaches led Kenxue to advance $5.5M to YIC. 2. Westpro, though Mr Kemp, engaged in misleading and deceptive conduct which led Kenxue to advance $5.5M to YIC. 3. Westpro though Mr Kemp engaged in unconscionable conduct by taking advantage of Mr Campbell's lack of experience in the area, failing to pass on material known to Mr Kemp, and in making statements concerning the loan that implied the loan was a prudent investment when it was imprudent to the knowledge of Mr Kemp. The unconscionable conduct was a material factor in Kenxue proceeding with the loan.

The Joint Tortfeasor Defence

1. The Defendants assert that Mr Essey failed in his duty to Kenxue because he learnt of facts that "put him on notice that his client's interests might be endangered or at risk": DCS 245. This knowledge required Mr Essey, it is asserted, to bring to his client's attention the fact that he was lending $6M for purchase of a property for $4.5M.
2. I received detailed submissions from both parties on the topic of a solicitor's obligations. David v David [2009] NSWCA 8, Richtoll Pty Ltd v WW Lawyers Pty Ltd (in Liquidation) [2016] NSWSC 438 and Lauvan Pty Ltd v Bega [2018] NSWSC 154; (2018) 330 FLR 1, to which my attention was drawn, all deal with the question of whether any duty arises outside the scope of the retainer. As Hoeben CJ at CL put it in Richtoll the duty of the solicitor is to apply the relevant degree of skill and exercise reasonable care in carrying out the particular task in which the solicitor has been engaged and does not have a duty to give options about the financial prospects of the purported arrangements but if he "becomes aware of facts during the execution of the retainer putting the solicitor on notice that the client's interests are at particular risk, the solicitor may be obliged to provide further advice, or at least suggest that further advice be obtained": [162].
3. Here Mr Essey's retainer was very limited. He was not retained to do anything more than draft the security documents - he did so and there is no suggestion that there was any defect in them or that he did not explain the effect of them adequately to Mr Campbell on behalf of Kenxue. His client, Kenxue, does not assert that the retainer extended beyond that and further Mr Campbell told Mr Essey that Kenxue had a broker (i.e. Mr Kemp) acting for it. Mr Essey did not have a copy of the 2010 Contract and his evidence was that he did not need it. There is no evidence from any expert to the effect that Mr Essey could not adequately fulfil his role without a copy of the 2010 Contract and it was not put to him that the absence of the contract led him to hold a concern that Kenxue's interests were at risk or that it ought to have produced a concern.
4. In the circumstances I am unable to find any basis for the Defendants' contention that Mr Essey was negligent and it follows that there is no basis for any reduction in the liability of the Defendants. I would add that, in any event, even were a finding of negligence to be required, the apportionment of liability between a negligent solicitor and a defendant who deliberately withheld the 2010 Contract and who had acted as Westpro through Mr Kemp has done would, in my view, require the entire liability to be borne by Westpro/ Kemp: see Burke v LFOT Pty Ltd [2002] HCA 17; (2002) 209 CLR 282 for the importance of considerations of this kind.

The Damages Sought

1. Kenxue claims for two separate heads of loss: its loss of the money advanced (less the amount later recouped); and the loss of the use of the money. I did not understand the parties to draw any distinction for the purpose of the assessment of damages in this case between breach of retainer, misleading and deceptive conduct, or unconscionable conduct. The Defendants accept that if liable they are liable for the loss of the money head of damage, being the difference between the $5.5M advanced (after allowance for the early interest payment and fees) and the amounts recouped from the sale or received as a result of the guarantees. They also accept that Kenxue is entitled to interest at the rates applicable by virtue of s 100 of the CPA.
2. Kenxue's claim for "loss of use" compensation is put on the basis of the following matters: 1. Mr Campbell deposed to the fact that had he been properly advised by Mr Kemp he would not have entered into the loan to YIC but rather: "I would have invested the $6,000,000.00 into purchasing commercial property in the Western Sydney Area": see paragraph 103 of Campbell I, CB1 15. 1. That he deposed to having purchased in May 2011 two properties (one for $1.15M, and one for $1.2M in Penrith), a property in Jamistown in June 2000 for $1.3M, a property in Emu Plains in October 2014 for $2.3M and another in St Marys for $1.3M in February 2015: see CB1 15. 2. That in the alternative, he would have invested $6M "into mortgage lending with a reputable adviser that properly advised me (for Kenxue) and properly secured my (for Kenxue) position with appropriate security": CB1 16. 3. There are three reports of Ms Amy Hamilton dated 31 October 2017, 31 March 2020, and 12 May 2020. The last report was obtained to take into account the possible effect of the Covid-19 virus on the market returns. 4. Ms Hamilton provides evidence of the market in Penrith, Blacktown, Liverpool and Campbelltown and examples of properties sold in each of these regions. Ms Hamilton provides details of yields and rents for "a selection of leasing and sales transactions" for each area: see CB7 2269, 2271, 2274 and 2276. Originally she was asked to assume a $6M investment, but later this was adjusted to $5.5M and this was later further adjusted to allow for the fact that Kenxue did receive $2.9M from the forced sale of the Property in February 2017, following its sale in October 2016. 5. Ms Hamilton calculates the figure that would have been derived from an investment of $5.5M in late 2010 as $7.5M having regard to capital appreciation and cumulative net income, and with allowance for the sale first for 2016 and for Covid-19.
3. The Defendants did not object to the Hamilton reports. They did not challenge any of the calculations. There was no cross examination of Ms Hamilton or Mr Campbell on his evidence of what he says he would have done. The sole basis of the Defendants' resistance to the loss of use claim is that it is contended that it was not demonstrated that there was a specific property which Mr Campbell had identified as a proposed purchase and that on close analysis of the properties to which Mr Hamilton referred a portfolio of purchases could not be demonstrated. I shall deal with that contention later in these reasons but first I will set out the approach that I think should be taken for the assessment of loss: 1. Kenxue is entitled to an amount of $2.6M for the loss on the transaction and interest on the $2.6M from 6 October 2010 until the date of judgment, and interest on the $2.9M from 6 October 2010 until February 2017 (i.e. when Kenxue received the sale proceeds from the October 2016 sale), subject to considerations of the loss of money claim which would affect the entitlement to interest. If Kenxue is compensated by an amount for loss of use of the money it cannot recover interest, as I shall explain below. 2. If Kenxue is entitled to recover on its loss of use of the money claim then the receipt of the $2.9M must be brought to account - since on receipt of that amount it was no longer, to that extent, deprived of its use. 3. Ms Hamilton's figures would need to be adjusted to allow for vicissitudes and Mr Williams accepted this - suggesting that a reduction of 15% would be appropriate.
4. I return to the question of whether a loss of use of money claim is available where no specific purchase was in contemplation as at 6 October 2010 (or in close proximity in time to that date).
5. The PCS approach the issue of damages by: 1. Referring to the controlling principle that requires a Court to assess damages in a manner "best adapted to giving an injured plaintiff that amount in damage which will most fairly compensate him for the wrong he has suffered." 2. Pointing out that they do not assert that any difference flows depending on whether the claim is one in contract or one under the TPA. This is because Kenxue claims that it would not have entered into the loan to YIC. It therefore would have not lost the $5.5M lent to YIC. 3. Referring to Esso Petroleum Company Ltd v Mardon [1976] EWCA Civ 4; [1976] QB 801 and South Australia v Johnson (1982) 42 ALR 161, the latter case recognising that a plaintiff is entitled to the profits he "would have made had he not acted on the misrepresentation." 4. Referring to Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1 in which the High Court said (at 608): "Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed: cf. Esso Petroleum Co. Ltd. v. Mardon [1976] QB 801 at 820-1, 828-9; Doyle v Olby (Ironmongers) Ltd at p 167. The lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation… So in the present case if the appellant were able to establish that, but for his reliance on Mr. Rainbird's representation, he could and would have entered into policies of insurance containing a disability clause of the kind represented by Mr. Rainbird, he might then succeed in obtaining an award of damages equal to the benefits which would have been payable under such policies less the premiums paid or payable in respect of them." See also Manwelland Pty Ltd v Dames & Moore Pty Ltd [2001] QCA 436 at [22] per McPherson JA (Thomas JA and Douglas J agreeing). 1. Referring to the following passage from Sellars v Adelaide Petroleum NL; Poseidon Ltd v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 at 355 per Mason CJ, Dawson, Toohey and Gaudron JJ: "…the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities. It is no answer to that way of viewing an applicant's case to say that the commercial opportunity was valueless on the balance of probabilities because to say that is to value the commercial opportunity by reference to a standard of proof which is inapplicable." 1. Whilst a plaintiff has the onus of proving that it has suffered loss and the amount of loss when precise evidence of what has been lost cannot be adduced: "estimation, if not guesswork may be necessary in assessing the damages allowed" per Hayne J in Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd [2003] HCA 10; (2003) 77 ALJR 768 at [38]. The Court "must do the best it can": Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 83 per Mason CJ and Dawson J.
6. The DCS focused on Sellars (supra), La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4; (2011) 190 FCR 299, Mal Owen Consulting Pty Ltd v Ashcroft [2018] NSWCA 135; (2018) 97 NSWLR 1163 at [100], and St George Bank Ltd v Quinerts Pty Ltd [2009] VSCA 245; (2009) 25 VR 666. In short the Defendants' point is that the Plaintiff must establish that there were "particular properties in the Western Sydney area that he would have invested in" and the fact that Ms Hamilton does not identify any particular commercial properties that Mr Campbell had in mind in 2010-2011 and could have purchased.
7. I set out what Barrett AJA said in Mal Owen Consulting at [99]-[100] after referring to Sellars at CLR 355: "[99] The court's task, in relation to the issue of causation, is thus to assess the prospects of success of the opportunity had it been pursued. Such an assessment depends on proof by a plaintiff according to the balance of probabilities that he or she has sustained some loss or damage because deprived of an opportunity having value beyond merely theoretical or negligible value. As French CJ, Kiefel and Keane JJ pointed out in Badenach v Calvert (2016) 257 CLR 440; [2016] HCA 18 at [40], there must be a determination, according to the balance of probabilities, whether there was a substantial prospect of a beneficial outcome; and the plaintiff's onus in that respect is discharged only by proof that it was more probable than not that an opportunity of value would have been received but for the defendant's negligence. [100] The process just described goes to the issue of causation. It represents the first of what the joint judgment in Sellars v Adelaide Petroleum NL identifies as two distinct stages relevant to the resolution of a case such as the present. At that first stage, causation must be proved on the balance of probabilities: the question of causation is, after all, "entirely factual, turning on proof of relevant facts and on the balance of probabilities in accordance with s 5E" of the Civil Liability Act 2002 (NSW). The second stage becomes relevant only if causation is established at the first. The issue at the second stage is the assessment of damages; and the focus then is upon the actual value of the lost opportunity which, to that point, has been appraised only as not merely theoretical or negligible. Value must be ascertained at the second stage by reference to "the degree of probabilities, or possibilities, inherent in the plaintiff's succeeding had the plaintiff been given the chance" of which the plaintiff has been deprived. These are again words used in the joint judgment in Sellars v Adelaide Petroleum NL.
8. In La Trobe issues relating to damages of the kind sought here were under consideration. Although the conclusion of the majority, Jacobson and Besanko JJ, differs from that of Finkelstein J as to the amount to be awarded the view of the Court was unanimously that: 1. The lender was entitled to recover from the defendant valuer for the loss of use of the money lent to the borrower on the basis of a negligent valuation of the security. 2. To succeed on that head the lender did not need to establish that there was a particular loan which it had forgone because it lent the money to the borrower which had defaulted.
9. In his judgment, Finkelstein J pointed out that the Court needs to consider separating the question of causation and quantification which echoes [100] of Mal Owen. Whether the conduct of the defendant caused a particular loss is to be determined on the balance of probabilities. If that is established the Court must then assess the question of what the plaintiff has lost and often in that vein the Court will have to estimate the degree of likelihood of the lost opportunity: [81]-[83]. His Honour said: "[89] The assertion that had money not been lent to Jet, La Trobe would have entered into another loan on the same terms as the Jet loan is a hypothetical. Although it is a hypothetical the cases say that a plaintiff must establish on the balance of probabilities that s/he would have taken action to obtain the lost benefit: Allied Maples Group Ltd v Simmons & Simmons [1995] 4 All ER 907; [1995] 1 WLR 1602 at 1610 . There is, to my mind, no doubt that Mr Gidman's evidence established the relevant hypothesis. [90] Having reached the point that a loss is established, its value must be estimated. That must be done no matter how difficult the task, even if some guesswork is involved: JLW (Vic) Pty Ltd v Tsiloglou [1994] 1 VR 237 at 241; Waribay Pty Ltd v Minter Ellison [1991] 2 VR 391 at 398. What is required is to estimate the chance of La Trobe finding a substitute borrower willing to borrow on the same terms, whether or not the chance of this happening is more or less than even: Mallett v McMonagle [1970] AC 166 at 176; [1969] 2 All ER 178 at 191."
10. Finkelstein J referred to Quinerts noting at [93] that "It seems that the bank did not lead evidence of what it would have done had it not lent any money on the negligent valuation." The plurality referred to Sellars and said: "[110] Their Honours said that the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue of whether the applicant has sustained loss or damage. It follows that the applicant must prove on the balance of probabilities that he or she has suffered some loss or damage. In a case such as Sellars, an applicant established that some loss or damage was sustained "by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had some value (not being a negligible value)". The value of the lost opportunity was then to be determined "by reference to the degrees of probabilities or possibilities": at CLR 355; ALR 30. [111] Brennan J wrote separate reasons for judgment. On the point presently under consideration we do not think that his Honour's approach differed in any material respect from that of the plurality. His Honour said (at CLR 368; ALR 40): Where a loss is alleged to be a lost opportunity to acquire a benefit, a plaintiff who bears the onus of proving that a loss was caused by the conduct of the defendant discharges that onus by establishing a chain of causation that continues up to the point where there is a substantial prospect of acquiring the benefit sought by the plaintiff. Up to that point, the plaintiff must establish both the historical facts and any necessary hypothesis on the balance of probabilities. Although the issue of a loss caused by the defendant's conduct must be established on the balance of probabilities, hypotheses and possibilities the fulfilment of which cannot be proved must be evaluated to determine the amount or value of the loss suffered. Proof on the balance of probabilities has no part to play in the evaluation of such hypotheses or possibilities: evaluation is a matter of informed estimation. [Citations omitted.] [112] It seems to us that the question is whether an applicant has established on the balance of probabilities that there was another commercial opportunity of some value or there were other commercial opportunities of some value. An applicant who is able to establish a particular opportunity which has been lost as a result of contravening conduct will no doubt have an easier path to establishing what is necessary for the purposes of recovery. At the same time, an applicant in a case such as this who can do no more than point to the fact that he or she is in the business of lending money and was making loans at the time of the improvident loan is likely to fail to establish the loss of a commercial opportunity of some value. [113] However, in our respectful opinion it is an error to proceed on the basis that unless an applicant can establish a particular alternative transaction he or she cannot establish a lost commercial opportunity of some value. We think that this is where the primary judge erred. His Honour said (at [37]): [37] The above analysis is persuasive. In the current case I am not satisfied that La Trobe has proved, on a balance of probabilities, that there was a particular loan or loans that were not entered into by reason of La Trobe entering into a loan agreement with Jet. Mr Gidman's evidence is vague and imprecise and an insufficient foundation for this aspect of La Trobe's case. As counsel for Hay submits, there is no evidence that there ever existed a particular loan application which was acceptable on all terms to La Trobe, but which La Trobe did not accept due to insufficient funds by reason of the Jet loan. (La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd [2010] FCA 250.) [114] The analysis to which his Honour refers in this passage is the analysis by Nettle JA in St George Bank Ltd v Quinerts Pty Ltd [2009] VSCA 245. We do not think that there is any inconsistency between what we have said and what was said by Nettle JA. We do not read his Honour's reasons as suggesting that a particular alternative transaction must be proved before recovery is allowed. The fact is that the evidence in the case before Nettle JA was insufficient to satisfy his Honour that there was a lost commercial opportunity of some value."
11. In my view the approach taken by the Full Court in La Trobe is applicable here. Kenxue has established that it provided $5.5M to YIC because of the breach of contract, misleading and deceptive conduct and unconscionable conduct of Westpro. Had it not placed that money with YIC it would have had $5.5M to invest. Mr Campbell's unchallenged evidence is that he would have invested in real estate (as he did a few months later). The relevant questions are then: 1. What is the likelihood that Kenxue would have been able to invest in real estate in the Penrith or proximate regions? 2. What is the likely return he would have made on such an investment? I note that the figure advanced by the Plaintiff is based on an average of returns for four different areas and not simply the highest. 3. Finally, what deduction should be made to take into account the vicissitudes of such an investment?
12. Ms Hamilton's evidence provides an answer to the first two of these questions and contrary to the Defendants' contention the properties which are specifically identified as available in Ms Hamilton's report were not said to be the only properties but rather a selection. Ms Hamilton's evidence was not the subject of challenge. I therefore do not need to give consideration to the alternative basis for the loss of use claim (i.e. investment in mortgage lending with other borrowers), and do not need to consider the admissibility of Mr Jason Meares' reports.
13. I think that there are several matters to be taken into account in allowing for vicissitudes. The first is that it cannot be assumed that suitable properties would be available and found promptly. Secondly, it cannot be assumed that each investment must be a successful investment and remain tenanted at all times and the third is that the purpose of an allowance for vicissitudes is to take account of the unknowns. I think that a 20% reduction for vicissitudes is appropriate.
14. In paragraphs 8.17 and 8.18 of the PCS the amount sought, as I have understood it, is said to be: 1. $5,459,840.59 for the first head of loss; plus 2. $2,077,715.90 for the loss of use claim derived by deducting from $7,537,556.49 an amount of $5,459,840.59. The figure in (a) is derived by taking into account the monies recouped from the sale of the Property in October 2016 (received on 7 February 2017), the small amounts received from the liquidators of Quinnco and Mr Quinn's trustee in bankruptcy, plus interest at the court rates specified by s100 of the CPA and the practice note made thereunder.
15. Interest is to be awarded for the purpose of compensating a plaintiff for loss or detriment suffered as a result of being deprived of his or her money: see MPB (SA) Pty Ltd v Gogic [1991] HCA 3; (1991) 171 CLR 657 at 663; Grincelis v House [2000] HCA 42; (2000) 201 CLR 321 at 328-331.
16. Since an award of interest is designed to compensate a plaintiff for loss as a result of being deprived of its money, I do not think that a plaintiff can be awarded both interest pursuant to s 100 of the CPA ("s 100 interest") and a second head based on loss of use of the money. I note here that in paragraph 6.1 of the Plaintiff's Opening Submissions the claim was correctly framed as either the profits or interest.
17. The loss therefore would be calculated as either: 1. $5,459,840.59 - see the schedule provided by the Plaintiff's solicitors, Stanton & Stanton, with their letter of 18 May 2020 (and with a further small adjustment required for interest to the date of judgment); or 2. $4,133,538.78, being the sum of: 1. $2,541,433.98, i.e. the amount advanced ($5,547,425.49) less the amount recouped from the sale of the Property ($2,951,593.23) and received as a result of the guarantees ($54,398.28); and 2. $1,990,131.00 (the real estate investment amount) less 20% for vicissitudes, i.e. $1,592,104.80.
18. It will be observed that the interest payable under s 100 of the CPA equates to $2.9M, a figure well above the real estate investment return (with or without a reduction for vicissitudes). Given that there was no argument advanced by the Defendants that there would be in effect double counting of the interest of the $2.9M when included as an addition to the return on the real estate investment scenario and, against the possibility that I have misunderstood the Plaintiff's submissions on this point, I will give the parties an opportunity to be heard further on this point before determining it on a final basis.

Conclusion

1. The Plaintiff is entitled to judgment against both Defendants, but I will defer determining the amount for which judgment should be entered until I have had the benefit of further argument on the calculations. Any issue on costs can be determined at the same time.
2. I therefore will direct that: 1. The Plaintiff provide in writing: 1. submissions on damages, including detailed calculations and interest to date of submissions with a daily rate of accrual; and 2. submissions on costs. on or before 4:00pm on Friday, 24 July 2020. 1. The Defendants to provide written submissions in reply to (1) on or before 4:00pm on Friday, 7 August 2020. 2. The Plaintiff to provide written submissions in reply by 4:00pm on Friday, 14 August 2020. 3. Solicitors for the Plaintiff to provide hardcopies of all of the submissions referred to in subparagraphs (1) to (3) above to my Associate by 4:00pm on Monday, 17 August 2020.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 August 2020