Proposed paragraphs 44 and 45 to 47
56 By those paragraphs, the respondents say that Mr and Mrs Khoury would have suffered the claimed loss because they would have granted the mortgage in any event and would have done so whether or not they knew the truth of the relevant matters, and the applicants suffered the claimed loss partly as a result of their failure to take reasonable care to protect their economic interests because: they failed to read the draft Deed and cl 1.1 of the mortgage enclosed with the letter to them of 8 September 2008 and letters to their lawyers of 8 September 2008 and 9 September 2008, and cl 1.1 of the mortgage; they failed to heed the advice of Ms Boyd that if $190,000 was not repaid by 24 October 2008, Mr and Mrs Khoury would be responsible for that sum plus interest at the rate of 1% per month plus costs and expenses; they failed to heed the advice of Ms Boyd and another solicitor as to the effect of the draft Deeds enclosed in the relevant letters; they failed to ensure that the making of the contended further advance (para 10.3 of the representations) was reduced to a binding written commitment in the applicants' mortgage or the Deed or otherwise; they failed to satisfy themselves that Monty Khoury could fulfil the conditions of the Deed; and they failed to take sufficient security from Monty Khoury to cover any monies they might pay, or be required to pay, to the respondents under their mortgage.
57 It follows, the respondents say, that the loss and damage recoverable by the applicants against them ought to be reduced to the extent to which the Court thinks appropriate.
58 The applicants contend that leave ought not to be given to plead these matters as these facts do not give rise, as a matter of law, to a ground (or even an arguable ground) on which the amount of the loss suffered by the applicants might be reduced especially having regard to the decisions of the High Court in Henville v Walker (2001) 206 CLR 459 and I & L Securities v HTW Valuers (2002) 210 CLR 109. That result follows, it is said, because the claim is one for compensation under s 87 of the TP Act and s 12GM of the ASIC Act and the considerations arising under s 82(1B) of the TP Act concerning a claim made under s 82 of that Act, and s 12GF(1B) concerning a claim under s 12GF of that Act, have no application in the exercise of the discretion conferred under s 87(1), s 87(1A) or s 87(2)(d) of the TP Act or ss 12GM(1), 12GM(2) or 12GM(7)(e) of the ASIC Act.
59 That question will be examined by reference to the TP Act provisions. The same considerations govern the parallel provisions of the ASIC Act.
60 The TP Act was amended in 2004 after the decisions of the High Court in Henville v Walker and I & L Securities v HTW Valuers so as to introduce a scheme of proportionate liability concerning claims made under s 82 in relation to economic loss or damage to property caused by conduct of another person in contravention of s 52: Corporate Law Economic Reform Program (Audit Reform and Corporate Disclosure) Act 2004 (Cth). By that Act, s 82(1B) was inserted into the TP Act. Section 82, of course, provides for a particular formulation of the right of action. By s 82(1) "a person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV, IVA, IVB or V or section 51AC may recover the amount of the loss or damage" by action against that person or those involved in the contravention. Section 82 is cast in broad terms, is unconfined by analogues drawn from the common law and is capable, by its terms, of being adapted to accommodate approaches to the assessment of damages that provide proper compensation in all circumstances provided the particular approach serves the purpose of doing justice and equity in the circumstances of the case: North East Equity v Proud Nominees [2010] FCAFC 60; (2010) 269 ALR 262 at [124] (and the authorities noted at that paragraph).
61 Section 82(1B) provides that despite subsection (1), if a person makes a claim in relation to economic loss or damage to property caused by conduct of another person that was done in contravention of s 52 (that is, one specific provision of one Part) and the claimant suffered the loss or damage as a result partly of the claimant's failure to take reasonable care and partly of the conduct of that other person, the damages the claimant may recover in relation to that loss are to be reduced to the extent to which the Court thinks "just and equitable having regard to the claimant's share in the responsibility for the loss or damage", provided the defendant did not intend to cause the loss or damage and did not fraudulently cause the loss or damage.
62 No claim is made in these proceedings under s 82.
63 In these proceedings, the applicants contend that they suffered loss measured by the payment of interest to QDF and ACC, the loss of $190,000 and the payment of further interest and costs (paid or payable) to the Commonwealth Bank, by conduct of the respondents in contravention of s 52 of the TP Act and they seek to recover the amount of that loss (which might otherwise be characterised as "economic loss") by action against the respondents for orders under s 87 of the TP Act.
64 By s 87(1), where the Court finds that a person who is a party to a proceeding instituted under Part VI has suffered, or is likely to suffer, loss or damage by conduct of another person engaged in, in contravention of a provision of Part IV, IVA, IVB, V or VC, the Court may, whether or not it grants an injunction under s 80 or makes an order under s 82 (or ss 86C, 86D or 86E), make such order or orders "as it thinks appropriate" against the person who engaged in the conduct (or those involved in the contravention) if the Court considers that the order will compensate the claimant in whole or in part for the loss or damage or will prevent or reduce the loss or damage.
65 Section 87(1A)(a) confers power on the Court upon the application of a person who has suffered or is likely to suffer loss or damage by conduct of another person engaged in, in contravention of Parts IVA, IVB, V or VC, to make such order as the Court thinks appropriate against the relevant person if the Court considers that the order will compensate the applicant, or any persons on whose behalf the application was made, in whole or in part for the loss or damage or prevent or reduce the loss or damage suffered or likely to be suffered by the relevant person or persons.
66 Section 87(2) provides that the orders referred to in subsections (1) and (1A) are those contemplated by paras (a) to (g). The orders that may be made include but are not limited to s 87(2) orders: I & L Securities v HTW Valuers per Gaudron, Gummow and Hayne JJ at [52]. The Court may make such orders as it thinks appropriate upon being satisfied of the compensatory effect required by s 87(1) and s 87(1A) as framed by those sections. Section 87(2)(d) provides for:
(d) an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage.
67 Section 87 confers a "very wide" discretion (I & L Securities v HTW Valuers per McHugh J at [106]) to make an extensive range of orders (described by McHugh J in I & L Securities at [117] as a "smorgasbord" of remedies) that serve the statutory purpose of compensating the claimant in whole or in part for the loss or damage suffered by conduct in contravention of the relevant provision of the identified Parts, or orders that will prevent or reduce the loss or damage: I & L Securities per Gaudron, Gummow and Hayne JJ at [52] and [53]. The phrase "in whole or in part" does not suggest that the combination of orders that a court makes under s 87 should do less than "provide for the full compensation for all the loss and damage that is not prevented by the making of the court's orders": I & L Securities per Gaudron, Gummow and Hayne JJ at [53]; McHugh J at [120]. Nor is there any warrant for construing s 87 as "conferring upon a Court a discretionary power to take away, or modify, the right conferred by s 82" per Gleeson CJ, I & L Securities at [20]. The Chief Justice also observed at [20] that "when regard is had to the wide range of circumstances to which s 87 might apply, it is not necessary to treat the power in s 87 to make an order for part compensation as qualifying s 82 in order to give that power ample scope for practical application".
68 These proceedings do not involve any question of a discretionary modification of the right conferred upon Mr and Mrs Khoury by s 82. They have chosen not to exercise a remedial right under s 82 and had they done so, s 82(1B) would be expressly in issue. The question to be determined in the case on the footing of the proposed amendments to the defence at least as to this issue, is what order under the power conferred by s 87 will properly compensate Mr and Mrs Khoury for the economic loss suffered by them by conduct in contravention of s 52, or prevent or reduce the economic loss they say they are continuing to suffer (assuming a contravention is made out). An order under s 87 for compensation less than the full amount of that economic loss may, upon the trial of the action, be thought appropriate by the Court having regard to the statutory purpose, as the full measure of a compensatory order. The statutory purpose may be served by recognising that the amount of compensation a court might direct the respondents to pay ought not exceed the amount of the loss or damage Mr and Mrs Khoury may recover had they sought recovery by way of "damages" under s 82 in the light of the considerations required by s 82(1B), provided those matters are made out by the respondents.
69 If the recoverable amount of loss and damage under s 82 is to be reduced by what is demonstrated to be just and equitable having regard to the share of the claimants in the responsibility for their loss, is it appropriate in all the circumstances that the applicants recover a greater amount by order under s 87?
70 In exercising the broad discretion conferred by s 87(1) or s 87(1A) to make an order contemplated by s 87(2)(d) directing the respondents to pay the applicants the amount of the economic loss suffered by reason of conduct in contravention of s 52 "as [the Court] thinks appropriate", it is arguably relevant, it seems to me, to have regard to the consideration that had the applicants' claim for recovery of the full amount of the economic loss they suffered by conduct of the respondents in contravention of s 52 been made under s 82, the amount they may recover would be reduced to the extent the Court thinks just and equitable having regard to their share in the responsibility for that economic loss (provided the statutory integers at s 82(1B)(b) and (c) are satisfied). In determining what order might be appropriate under s 87 to compensate the applicants for the amount of the economic loss they suffered (and might further suffer), it is relevant to consider whether the same claim (that is, the substantive elements of the claim notwithstanding that the claim is not made under s 82) if framed under s 82 would be susceptible of just and equitable reduction having regard to Mr and Mrs Khoury's share in the responsibility for the loss.
71 That consideration arises not because s 87 expressly provides for a reduction of compensation in like terms to that of s 82(1B) adapted to s 87, but rather, the discretion under s 87 is a broad discretion to frame and make orders which provide compensation for the amount of the loss suffered as the Court considers appropriate, in all the circumstances, that is, as justice requires. If recovery of the entire amount of the loss, if made the subject of a claim under s 82, is constrained by the factors discussed, the exercise of the discretion as to whether and if so in what amount, compensation might be payable to the applicants under s 87, for the amount of the same economic loss, ought to take into account as a factor, the extent to which Mr and Mrs Khoury share in the responsibility for that loss.
72 For present purposes, on an application for leave to amend the defence, the question is simply whether the contention that the exercise of the discretion under s 87 is to be informed by the factors discussed, is an arguable contention. I am satisfied that the matter is arguable and that leave ought to be given to plead the facts relevant to that matter. As to these matters generally see Woods v De Gabriele & Ors [2007] VSC 177 per Hollingworth J; cf BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No. 2) [2008] FCA 1656 per Finkelstein J.
73 Accordingly, leave will be given to amend the defence to plead paras 45 to 47 of the proposed amended defence.