Lancini Properties Pty Ltd v Savills

NEGLIGENCE - PROFESSIONAL NEGLIGENCE - BREACH OF DUTY - Where plaintiff and third party engaged defendants to determine a dispute - Where dispute affected the amount plaintiff would be paid under a contract - Where amount to be paid to be determined by formula in contract - Where value of variables in formula in dispute - Where plaintiff and third party made submissions on appropriate values - Where plaintiff claims defendants negligent in determining the dispute - Whether the defendant exercised reasonable care and skill in determining the dispute - Whether valuations fell within acceptable margin of error.

TRADE AND COMMERCE - TRADE PRACTICES LEGISLATION - IMPLIED CONDITIONS AND WARRANTIES - Where plaintiff and third party engaged defendants to determine a dispute - Where dispute affected the amount plaintiff would be paid under a contract - Where amount to be paid to be determined by formula - Where value of variables in formula in dispute - Where plaintiff and third party made submissions on appropriate values - Where plaintiff claims defendants breached warranty to exercise due care and skill - Whether the defendant exercised due care and skill in determining dispute.

CONTRACT - INTERPRETATION - Where plaintiff engaged defendants to determine a dispute - Where meaning of terms of contract unclear - Where parties made submissions on correct meaning of contractual terms - Where defendant did not accept the plaintiff's submissions on the meaning of contractual terms - Whether the meaning ascribed to contractual terms was correct - Principles for contractual interpretation discussed.

TRADE PRACTICES - MISLEADING AND DECEPTIVE CONDUCT - REPRESENTATIONS - GUARANTEE AND INDEMINITY - INDEMNITIES - CONSTRUCTION AND EFFECT - Where plaintiff and third party engaged defendants to determine a dispute - Where, prior to accepting engagement, defendants sought an assurance from parties to dispute that they would not sue the defendants - Where both parties gave said assurance in writing - Where plaintiff disputed the outcome of the determination - Where plaintiff brought action against defendants - Where defendants sought to rely on plaintiff's written assurance - Whether written assurance was a representation as to future conduct under s52 of the TPA - Whether the representation was misleading and deceptive - Whether an injunction should be granted.

TRADE PRACTICES - ESTOPPEL - Where plaintiff and third party engaged defendants to determine a dispute - Where, prior to accepting engagement, defendants sought an assurance from both parties to dispute that they would not sue the defendants - Where both parties gave said assurance in writing - Where plaintiff disputed the outcome of the determination - Where plaintiff brought action against defendants - Where defendants sought to rely on plaintiff's written assurance - Where plaintiff contends the requirement for an indemnity was contrary to s 68 of the TPA and that no estoppel can arise - Whether the requirement for an indemnity was a term of the retainer - Whether the requirements of an estoppel are satisfied.

Trade Practices Act 1974, s 74(1) and (2)

Adwell Holdings Pty Ltd v Mark Smith (2003) NSWCA 103

Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389

Cummings v Lewis [1993] FCA 96; (1993) 113 ALR 285

Hann Nominees Pty Ltd (T/As P F Hann & Co) v National Australia Bank Ltd (2000) FCA 454

Interchase Corporation Ltd (in liq.) v Grosvenor Hill (Qld) Pty Ltd (No. 3) [2003] 1 Qd R 26

Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298

Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd [2004] NSWCA 114

Pratt v Hawkins (1993) 32 NSWLR 319

Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165

Voli v Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74

Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387

Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530

[1] In March 2006 the plaintiff ("Lancini") and Ticor Developments Pty Ltd ("Ticor") engaged the first defendant ("Savills") and, through it, the second defendant (Mr Buckley) to determine a dispute between Lancini and Ticor which affected the amount of a "completion fee" that was payable under a contract between Lancini and Ticor.

[2] Lancini says that the task was performed negligently by the defendants or in breach of warranties implied by s 74(1) and (2) of the Trade Practices Act 1974 (TPA). As a result, it is alleged, Lancini received $1,178,187 less than it should have been paid by Ticor.

[3] In order to understand the task which Mr Buckley was required to perform, I will deal first with the disagreement between Lancini and Ticor.

[4] In about February 2005 Lancini and Ticor entered into two agreements. The first was for the sale by Lancini to Ticor of land at Duckworth Street, Townsville ("the Domain Central land"). The whole of the land was, at the time of sale, contained on parts of two titles which Lancini and Ticor intended would be combined later as a single holding. The Domain Central land was to comprise a number of retail warehouse buildings with associated roads and car parks. Some warehouses had already been built.

[5] The second agreement was called the "Development Agreement". Under the Development Agreement Lancini agreed, among other things, to develop Precinct B by constructing a building and entering into agreements for lease with various tenants. In return, Ticor agreed to purchase the construction and obtain possession of Precinct B by making a payment to Lancini in accordance with clause 7.4 of the Development Agreement. The payment was called a "completion fee for a project" and was to be calculated in accordance with a formula contained in the Development Agreement.

[6] The formula for calculating the relevant completion fee was contained in Annexure E to the Development Agreement. So far as Precinct B was concerned the formula was:

1. Formula for Precincts B, C, D, E, G, H, l, J, L and M

1.1 The Completion Fee for a Project in Precincts B, C, D, E, G, H, I, J, L and M is the amount calculated using the following formula:

CF = NAI - (LA x $175) - LHC - CC -LI + ACC + AFC - RCC - RFC

NAI is the Net Annual Income (as that term is defined in clause 1 of this Agreement, but modified and calculated in accordance with the notes below) of the Centre comprising the Project;

LA is the Land Area of the Project (as defined in the notes below);

LHC is the Land Holding Cost for the Project (calculated in accordance with the notes below);

CC is the Commission Cost for the Centre comprising the Project (as defined and calculated in accordance with the notes below);

LI is the Lease Incentives for the Centre comprising the Project (as defined in clause 1 of this Agreement, but modified and calculated in accordance with the notes below);

ACC is the amount of any Additional Construction Costs (as that term is defined in clause 1 of this Agreement, but modified and calculated in accordance with the notes below) attributable to the Project; and

AFC is the amount of any Additional Fitout Costs (as that term is defined in clause 1 of this Agreement, but modified and calculated in accordance with the notes below) attributable to the Project.

RCC is the amount of any Reduced Construction Costs as defined in this Agreement.

RFC is the amount of any Reduced Fitout Costs as defined in this Agreement.

[7] The formula requires, among other things, the calculation of a Net Annual Income. That concept is defined in clause 1.1(36) of the Development Agreement as follows:

"Net Annual Income means in relation to Precincts B, H and the Clive Peeters Lease only an amount represented by N in the following formula:

A = the gross rent for the Building (or Buildings, if more than one) shown in the Tenancy Return Schedule attributable to the Building(s)

D= estimated land tax on the Land (on a single holding basis) agreed between the parties or, failing agreement based on an independent valuation on (sic) the anticipated Land Tax assessment at the next assessment of the unimproved capital value of the Land which takes account of the use of the Land as multiple showrooms and/or shops

E = the outgoings for the Centre agreed between the parties or, failing agreement, resolved, as a dispute in accordance with clause 26 by an independent external property manager."

[8] Lancini and Ticor were unable to agree on the estimated land tax and outgoings for Precinct B and, therefore, could not arrive at a Net Annual Income.

[9] The Development Agreement contained a dispute resolution clause (clause 26) which provided that if the parties had any dispute or difference as to the performance of the agreement or arising out of the agreement, then it must be referred by a party for determination by a person called the "Determinator".[1]

[10] Pursuant to cl 26 of the Development agreement, Mr Buckley was appointed to resolve the dispute between Lancini and Ticor. I will deal with the terms of his appointment later in these reasons.

[11] By a letter of 29 June 2006, Mr Buckley provided his determination of the outgoings for Precinct B. He estimated the total as $215,288.

[12] Lancini pleads that Mr Buckley was negligent or that he breached the warranties with respect to four matters:

[13] Before I proceed to consider the evidence relating to each of these matters I will briefly set out the principles of law relevant to the claim of negligence and of breach of the warranties implied by the TPA.

[14] A valuer, like any professional adviser, has a duty to exercise reasonable care and skill in the course of carrying out the work required.[2]

[15] Valuers, though, are allowed a little more room to move than other professionals for the reasons explained by McPherson JA in Interchase Corporation Ltd (in liq.) v Grosvenor Hill (Qld) Pty Ltd (No. 3):[3]

"...Valuers, appraisers, surveyors and the like belong to a class whose business it is to give professional opinions or advice. Opinions about a matter as intangible and (dare one say) evanescent as market value are always likely to be contentious especially during periods of fluctuating economic conditions. As a result, in cases where their valuations serve to fix the price or consideration to be paid by one contracting party to another, they are, as has been said, liable to be "shot at by both sides": Arenson v Arenson [1977] AC 405, 418. Partly for that reason, a somewhat wider margin of error is permitted them before they are found to have been negligent in valuing the subject matter: see Holt v Cox [1997] NSWSC 144; (1997) 23 ACSR 590, 596 (Mason P, with whom Priestley JA agreed). ..."

[16] Unless there are some features which take a case outside the usual, a margin of error of about 10 per cent has often been regarded as appropriate. But a valuation which falls within a 10 per cent bracket is not necessarily protected. As Meagher JA said in Adwell Holdings Pty Ltd v Mark Smith:[4]

"[9] In Singer & Friedlander Ltd v John D Wood & Co [1977] EG 569 Watkins J said:

"The valuation of land by trained, competent and careful professional men is a task which rarely, if ever, admits of precise conclusion. Often beyond certain well-founded facts so many imponderables confront the valuer that he is obliged to proceed on the basis of assumptions. Therefore, he cannot be faulted for achieving a result which does not admit of some degree of error. Thus, two able and experienced men, each confronted with the same task, might come to different conclusions without anyone being justified in saying that either of them has lacked competence and reasonable care, still less integrity, in doing his work."

Since then, judges seem to have taken a figure of 10% (or, in some cases at least, perhaps 15%) of the true figure to constitute an area, or bracket, within which, prima facie, a valuation is not negligent. But the importance of that "bracket" notion must not be misunderstood. It is not a statement of some principle that no valuation within the bracket can, as a matter of law, be negligent. That such a valuation can still be negligent is not only a matter of common sense, but has been judicially developed in such cases as Interchase Corp Ltd v ACN 010 087 573 Pty Ltd (Supreme Court, Queensland, 520 of 1994, BC 200000188) and Lion Nathan Ltd v Coca-Cola Bottlers Ltd [1996] UKPC 9; [1996] 1 WLR 1438. Once one finds that a valuation is within the "bracket", one can infer that prima facie, but only prima facie, it is not tainted by negligence; of course, it may have been arrived at by negligence, but that fact must be proved; one can never say that purely because a figure is within the "bracket", no negligence can be involved; but, on the other hand, if one arrives at a conclusion that a particular valuation is correct, one may turn to the "bracket" test as a check." (emphasis added)

[17] The "bracket" is not confined to 10% as can be seen in the paragraph above. See also Nykredit Mortgage Bank plc v Edward Erdman Group Ltd[5] and Arab Bank plc v John D Wood Commercial Ltd [6] where 15% was accepted.

[18] In Hann Nominees Pty Ltd (T/As P F Hann & Co) v National Australia Bank Ltd[7] the Full Court of the Federal Court said:

"[26] Because a valuation does not admit of a precise conclusion, competent and careful valuers may properly differ as to a particular figure. Therefore difference of result does not necessarily mean that a valuer has been negligent. However where a valuer determines a figure which is outside a range of values which could properly be arrived at by a competent valuer the courts have taken the view that such an over-valuation affords some evidence of negligence on the valuer's part.

[27] In Baxter v FW Gapp & Co Ltd [1939] 2 ALL ER 752 at 758 du Parcq LJ said:

'It is of course quite clear that the mere fact that there is an over evaluation does not of itself show negligence ... Gross over valuation, unless explained may be strong evidence either of negligence or of incompetence. I have no doubt that there was in this case gross over valuation, and one looks to see whether or not there is any explanation of it, and whether it can be seen that the defendant has failed to take any steps which he ought to have taken or to pay regard to matters to which he ought to have paid regard.'

[28] These observations were applied by Clarke J in Trade Credits Ltd v Baillieu Knight Frank (NSW) Pty Ltd (1985) Aust Torts Reports 80-757 and both cases were referred to and applied by Lindgren J in MGICA (supra).

[29] The relevant principles were also considered by the English Court of Appeal in Merrivale Moore plc v Strutt & Parker [1999] 2 EGLR 171 at 176-177 where Buxton LJ (with whom Nourse LJ agreed) pointed out that a finding that a valuation fell outside a reasonable range or 'bracket' is not of itself sufficient to establish negligence but it substantially eases the task of the Court in deciding whether a valuer has been negligent. His Lordship was not prepared to hold in general terms that the adducing of evidence to the effect that the valuation is outside a reasonable range or bracket is a necessary precondition to a finding of negligence on the part of a valuer. He considered it may be open to a Judge, in a suitable case, to hold that a valuation figure is so far removed from what is the true value of the property that it could be regarded as a valuation that was outside the limits open to a competent valuer without specific professional evidence being given of what those limits were." (emphasis added)

[19] Savills is incorporated. It is admitted, subject to arguments about an indemnity and misleading and deceptive conduct, that s 74 of the TPA applies to it. So far as is relevant, s 74 provides:

"(1) In every contract for the supply by a corporation in the course of a business of services to a consumer there is an implied warranty that the services will be rendered with due care and skill and that any materials supplied in connexion with those services will be reasonably fit for the purpose for which they are supplied.

(2) Where a corporation supplies services (other than services of a professional nature provided by a qualified architect or engineer) to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation any particular purpose for which the services are required or the result that he or she desires the services to achieve, there is an implied warranty that the services supplied under the contract for the supply of the services and any materials supplied in connexion with those services will be reasonably fit for that purpose or are of such a nature and quality that they might reasonably be expected to achieve that result, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to rely, on the corporation's skill or judgment."

[20] I turn now to consider each of the four items with respect to which it is said that the defendants were negligent or breached the implied warranties.

[21] Mr Buckley was asked to provide a valuation of "the anticipated Land Tax assessment at the next assessment of the unimproved capital value of the Land which takes account of the use of the Land as multiple showrooms and/or shops". This was because Lancini and Ticor could not agree on the "estimated land tax on the Land (on a single holding basis)".

[22] Lancini pleads that Mr Buckley should have arrived at a figure of $6,775.00, whereas his valuation was $42,900.00.

[23] The particulars of negligence and breach alleged by Lancini were that Mr Buckley:

(a) failed to use the unimproved capital value assessment (UCV) in the Notice of Valuation of 6 June 2006 as a basis for assessing land tax;

(b) failed to accept or investigate the correctness of the assertion by Lancini in its further submissions that the said Notice of Valuation "takes effect from 30/5/2006 following consideration by the Department of Natural Resources and Mines of the past land sale to Ticor Investments Pty Ltd and the completion of Buildings H on the said Land";

(c) failed to use as a UCV for the land in Precinct B a rate of $22.75 per square metre;

(d) calculated land tax as if the proper UCV was $100.00 per square metre;

(e) had no reasonable basis to use a rate for UCV of $100.00 per square metre;

(f) had no reasonable basis for determining land tax at $42,900.00.

[24] The first three particulars above each relate to a Notice of Valuation issued by the Department of Natural Resources and Mines ("DNRM") with respect to the Domain Central land. It notified Ticor, as owner, that from 30 May 2006 DNRM regarded the UCV of the Domain Central land as being $2,800,000.00. The figure of $22.75 referred to in the particulars as the UCV of a square metre of the Domain Central land comes from dividing $2,800,000.00 by 12.31 hectares (the area of the Domain Central land).

[25] Mr Buckley made his assessment of a UCV of $100 per square metre in the following way:

(a) He read the submissions provided to him on behalf of Lancini and Ticor:

(i) Lancini's submission consisted of an assessment by Taylor Byrne Valuers. It estimated land tax for Precinct B at $10,600. It did not give an estimate of the UCV of Precinct B or of the Domain Central land but appears to have relied on a DNRM assessment for the Domain Central land of $2,500,000 (which was the assessment applicable from 8 September 2005 to 29 May 2006).

(ii) Ticor's submission consisted of an assessment by CBRE Valuers. This valuation of UCV was well in excess of the DNRM valuation referred to above. CBRE explained its methodology in arriving at $100 per square metre for Precinct B in a letter to Ticor dated 2 March 2006.

(b) He undertook RP Data searches of the site and of comparable sites;

(c) He (like CBRE) took into account the sale price of the Domain central land (including improvements) in February 2005 at a rate of about $170 per square metre.

(e) He took into account his knowledge of other bulky goods sites and the values ascribed to them.

[26] On 19 May 2006 he sent a draft valuation to Lancini and Ticor and invited responses from them. In that draft he valued the land tax on the basis of a UCV of Precinct B of $100 a square metre.

[27] On 20 June 2006 Lancini wrote to Mr Buckley. Enclosed with the letter was the DNRM valuation of 6 June 2006. Lancini submitted that, in the light of that valuation, the UCV for Precinct B should be $22.75 per square metre. I note that, in that letter, Lancini asserted that the definition of Land under the Development Agreement was the whole of the site, namely the Domain Central land.

[28] On 21 June 2006 CBRE provided a further valuation to Mr Buckley. In it they refer to the DNRM valuation and say:

"The recent assessment issued by the Department of Natural Resources and Mines on 6 June 2006 refers to a valuation date of October 2004. While we assume the date should be October 2005, this would still be prior to the sale of Domain Central and therefore purchase price and other sale evidence would not have been considered."

CBRE maintained their evaluation of the Precinct B at $100 per square metre for UCV. Their understanding of the date of valuation by DNRM was mistaken as became obvious in evidence given at the trial. They were correct, though, in assuming that the valuation which did issue on 6 June 2006 did not take into account the purchase price of Domain Central.

[29] At this point it is appropriate to examine why Lancini says that Mr Buckley should have adopted the valuation of 6 June 2006 by DNRM.

[30] In order to understand the approach taken by Lancini it is necessary to set out, in some detail, the basis of its argument. This is to be found in paragraph 115 of its written submissions:

"Lancini submits that the sensible commercial construction of the definition in "D" of cl. 1.1(36) involves proceeding on the basis that the parties were interested in making allowance for land tax for Precinct B. In that case one curiosity is the use of the word "Land" in 3 different places. The key to construction of that provision is to understand that whatever way the provision is read it does not make grammatical and literal sense. The primacy however is submitted to be plainly the desire to identify what the land tax on Lot 102 will be. That is indicated by the use of "Land" on 3 occasions as part of the formula. It is logical that the parties would be concerned with Ticor's actual outgoings rather than some theoretical or contrived basis for outgoings which would then fail to allow the Net Annual Income to be assessed. Plainly the parties were concerned about the Land Tax which would be assessed at the next assessment ie within the year in which the Net Annual Income was to be determined. On (sic) Lot 102 because that is what Ticor would pay. That assessment on the evidence would be carried out based upon the level of value which was ascertained in the 2004 valuation because the Chief Executive was not intending to make an annual valuation for 2005. Once it is understood that that was the bargain between the parties in terms of seeking to identify the net income that was to be derived for the period of a year after the completion date based on what was agreed to be paid under the leases and what the outgoings of the centre would be and what would be in the Land Tax Assessment which would issue that year, it becomes apparent that Mr Buckley's exercise has miscarried entirely. He was concerned to find a value as at October 2006, based upon an increased level of value flowing from sales evidence of increases in the market price since the previous annual valuation. Nothing is said in "D" about taking into account any increase in market value of the land. All that is required is that there be a taking into account of the use of the land as multiple showrooms and/or shops. It is possible to demonstrate what the parties' intentions were by slightly modifying "D" as follows:

1. estimated land tax on the Land (on a single holding basis)
2. agreed between the parties
3. or, failing agreement
4. the anticipated Land Tax assessment at the next assessment (of land tax) *
5. based on an independent valuation** on***
6. of the unimproved capital value of the Land
7. which takes account of the use of the Land as multiple showrooms and/or shops
8. pro rated to the Precinct.

[31] Lancini pleads (paragraph 22A, Amended Statement of Claim) that the words "Land (on a single holding basis)" in the definition of "D" in clause 1.1(36) of the Development Agreement referred to the land contained within the 10 Precincts, that is, the Domain Central land. Lancini had, in an earlier version of its pleading, alleged that the word "land" was the land contained in Precinct B, but in its amended statement of claim ("ASOC") changed that to "the 10 Precincts which included Precinct B".

[32] As noted above, in part of Lancini's written submissions, it is said that:

"The key to construction of [clause 1.1(36)] is to understand that whatever way the provision is read it does not make grammatical and literal sense."

[33] How that can be a key to construction of the clause is difficult to understand, but the submission was consistent with the balance of Lancini's argument about the construction of that clause. It required that the word "Land" be interpreted differently within the same paragraph. Nevertheless, Lancini argued that the DNRM assessment, being for all of the Domain Central land, was the land with which "D" in clause 1.1(36) is concerned. It follows, argued Lancini, that the DNRM value is, in effect, conclusive and it was negligent to Mr Buckley to not adopt it in his assessment.

[34] The extrapolation of the "parties' intent" with respect to the meaning of "D" was not supported by evidence nor was it pleaded against the defendants. Nor is it a meaning which is necessarily dictated by the rest of the terms of the agreement. Further, the insertion of the words "of land tax" in the line numbered (4) above is neither necessary nor consistent with the rest of the clause. It is the next assessment of the UCV which is spoken of in that definition.

[35] The definition of "D" in clause 1.1(36) is not as well phrased as it might have been and it is possible to point to the terms "Land (on a single holding basis)" and "Land" and find an inconsistency or ambiguity. But this is a commercial contract and the principles to be applied in the construction of such contracts are well accepted. As McColl JA said in Peppers Hotel Management Pty Ltd v Hotel Capital Partners Ltd:[8]

"[69] If the words used [in a written contract] are unambiguous the court must give effect to them, notwithstanding that the result may appear capricious or unreasonable, and notwithstanding that it may be guessed or suspected that the parties intended something different. The court has no power to remake or amend a contract for the purpose of avoiding a result which is considered to be inconvenient or unjust. On the other hand, if the language is open to two constructions, that will be preferred which will avoid consequences which appear to be capricious, unreasonable, inconvenient or unjust, 'even though the construction adopted is not the most obvious, or the most grammatically accurate': Australian Broadcasting Commission v Australasian Performing Right Association Limited [1973] HCA 36; (1973) 129 CLR 99 at 109-110 per Gibbs J (as he then was). However, in construing written contracts it should be presumed that the parties did not intend their terms to operate unreasonably. The more unreasonable the result a party's construction would produce, the more unlikely it is that the parties would have intended it. If the parties did intend an unreasonable result, it is essential that that intention be made "abundantly clear": L Schuler AG v Wickman Machine Tool Sales Limited [1973] UKHL 2; [1974] AC 235 at 251 per Lord Reid.

[70] Dealing with the circumstances where there are internal inconsistencies in a contract, Gibbs J said 'it will be permissible to depart from the ordinary meaning of the words of one provision so far as is necessary to avoid an inconsistency between that provision and the rest of the instrument.': Australian Broadcasting Commission v Australasian Performing Right Association Limited [1973] HCA 36; (1973) 129 CLR 99 at 109.

[71] Gibbs J's statement in Australian Broadcasting Commission v Australasian Performing Right Association Limited [1973] HCA 36; (1973) 129 CLR 99 at 109 that "the court should construe commercial contracts "fairly and broadly, without being too astute or subtle in finding defects", finds reflection in the statement in International Fina Services AG v Katrina Shipping Ltd ("The Fina Samco") [1995] 2 Lloyds Rep 344 at 350 per Neill LJ (with whom Roch and Auld LL.J agreed) that the primary focus is the agreement itself which "must speak for itself, but ... must do so in situ and not be transported to a laboratory for microscopic analysis".

[72] Consistently with this approach, it has been held that if detailed semantic and syntactical analysis of a written contract lead to a conclusion that flouts business commonsense the contract must be made to yield to business commonsense: Antaios Compania Naviera SA v Salen Rederierna AB [1985] AC 191 at 201 per Lord Diplock; applied by Gleeson CJ, Gummow and Hayne JJ in Maggbury Pty Limited v Hafele Australia Pty Limited, above, at 198 [43]. In Maggbury, after referring to Lord Diplock's observations, Gleeson CJ, Gummow and Hayne JJ added: 'what in respect of a particular contract comprises `business commonsense', as an apparently objectively ascertained matter, may itself be a topic upon which minds may differ and in respect of which an imputed consensus is impossible'." (emphasis added)

[36] Further, as was said by the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd:[9]

"This Court, in Pacific Carriers Ltd v BNP Paribas ([2004] HCA 35; [2004] HCA 35; (2004) 78 ALJR 1045; 208 ALR 213.), has recently reaffirmed the principle of objectivity by which the rights and liabilities of the parties to a contract are determined. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction (Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 78 ALJR 1045 at 1050-1051 [22]; [2004] HCA 35; 208 ALR 213 at 221)." (emphasis added)

[37] The surrounding circumstances known to the parties and the purpose and object of the transaction suggests to me that the definition of "D" should be read so that the "estimated land tax" relates only to the Precinct being considered. The definition of net annual income commences with the words "means in relation to Precincts B, H and the Clive Peeters lease". It would be illogical and contrary to commercial sense to create a definition of net income which had, as an expense, an amount which applied to more than the income creating entity. It would appear to be unreasonable, inconvenient and unjust to reduce the net income of a Precinct by an amount which was unrelated to that Precinct.

[38] The definition in clause 1.1 of "Land" in the Development Agreement refers the reader to the contract for the sale of the Domain Central land between Lancini and Ticor. In that contract, the particulars of land sold is described as: "The land in (sic) identified as Precincts B, C, D, E, G, H, I, J, L & M outlined on the attached plan at Domain Central, Duckworth Street, Townsville". In the special conditions attached to that contract there is a definition of "Land" which provides: "For the avoidance of doubt, does not include the land being sold by Lancini pursuant to the Boyle Contract".

[39] The former definition in the land sale contract can, in my view, be read distributively for the purposes of achieving a commercially sensible result. If it was not read in that way, then, when assessing the net annual income for each of Precincts B, H and the Clive Peeters lease, the total land tax payable on the Domain Central land would be deducted for each of those Precincts. Thus, for no apparent reason and for no reason which could be adequately explained by Lancini, the net annual income for each of those Precincts would be artificially reduced. To construe "land" as only that land which is contained within a particular Precinct is an acceptable construction of the contract and works to avoid commercial nonsense or commercial inconvenience.[10]

[40] That determination, then, identifies the area of land for which the anticipated land tax assessment must be found.

[41] The construction advanced by Lancini requires that "land" means one thing in one part of the definition and another in another part of the definition. There is no basis for that convoluted and illogical approach. In the end, though, it may not matter a great deal. In paragraph 29 of ASOC, Lancini pleads that the UCV which should have been used for the estimation of land tax was $22.75 per square metre multiplied by the land area of Precinct B. That is how Lancini arrives at a land tax estimate of $6,775 as opposed to Mr Buckley's estimate of $42,900. They both rely on the same land area but different UCV rates.

[42] Proceeding on the basis that the proper construction of "land" is that it means the land contained in Precinct B then it should follow that the DNRM assessment would be a matter to be taken into account but would not be decisive.

[43] I arrive, then, at the position where there is evidence, which I accept, that Mr Buckley engaged in an appropriate means of assessing the UCV of the Precinct B land but where there is still the argument by Lancini that his method was flawed by not simply adopting the DNRM assessment.

[44] The plaintiff called two witnesses who had been associated with the Department at or about the time that some of the valuations were made. The valuer who conducted the 6 October 2006 assessment was not called and his absence was not explained. There was no evidence to support the conclusion that the DNRM assessment took into account the sale by Lancini to Ticor of the Domain Central land. In fact, the evidence appears to be to the contrary. The evidence was called from two valuers who had been engaged in valuing or overseeing the valuation of the land in question. One of those, Mr Searston, could only talk about the valuations he had done prior to 6 June 2006. He was unable to assist with respect to the relevant valuation. I also find that it is more likely than not that the valuations which had been performed were not done on the basis of "multiple showrooms and/or shops" but on another basis. The evidence led about the way in which a DNRM assessment is arrived at means, I find, that it was not an assessment which took into account the use of the land in the way required to be taken into account in clause 1.1(36).

[45] Mr Buckley explained the disparity between his assessment of $100 per square metre and the DNRM assessment of $22.75 per square metre by saying that he could not accept, on the basis of all the other evidence which he took into account, that the DNRM assessment was correct.

[46] It is not uncommon, in a case where negligence is alleged against a professional advisor, for the plaintiff to call an expert in the relevant field to give evidence demonstrating that the defendant failed to exercise reasonable care and skill. In this case, that did not happen. The plaintiff called an expert valuer (Mr Eales) who was asked to comment upon a report provided by an expert called by the defendants (Mr Cox). Mr Eales' criticisms of Mr Cox's report did not detract from the values and method employed by him (Mr Cox) in his assessment of the matters the subject of dispute. Mr Cox's report was concerned with demonstrating that the conclusions reached by Mr Buckley were open to him. Mr Eales was engaged by Lancini to provide a report which, among other things, addressed the report by Mr Cox as to the appropriateness of the comparable sites referred to by him in his report. Mr Eales did that.

[47] Mr Eales was not asked to provide his expert opinion on the valuation given by Mr Buckley. He was not asked to undertake any assessment of the value of the relevant land. He did not give evidence to the effect that Mr Buckley was bound to adopt the DNRM valuation or that he was professionally negligent in not having done so. The failure to call evidence of that nature has been considered in the light of the principles enunciated in Jones v Dunkel.[11] In Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd,[12] Handley JA said:

"There appears to be no Australian authority which extends the principles of Jones v Dunkel to a case where a party fails to ask questions of a witness in chief. However I can see no reason why those principles should not apply when a party by failing to examine a witness in chief on some topic, indicates "as the most natural inference that the party fears to do so". This fear is then "some evidence" that such examination in chief "would have exposed facts unfavourable to the party": see Jones v Dunkel (at 320-321) per Windeyer J. Moreover in Ex parte Harper; Re Rosenfield [1964-5] NSWR 58 at 62, Asprey J, citing Marks v Thompson 1 NYS 2d 215 (1937) at 218, held that inferences could not be drawn in favour of a party that called a witness who could have given direct evidence when that party refrained from asking the crucial questions." (emphasis added)

[48] That view was adopted by Young J (as he then was) in Pratt v Hawkins[13] where he said:

"The decision of the Court of Appeal in Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389, shows that the purchaser's counsel's submissions in this regard must be accepted. In that case Handley JA said that inferences should not be drawn favourable to a party whose counsel refrained from asking a witness any question on a particular topic. Inferences cannot be drawn in favour of a party that calls a witness who could have given direct evidence on a matter when that party refrained from asking the crucial question: see also Ex parte Harper; Re Rosenfield [1964-5] NSWR 58 at 62."

[49] There was, then, no expert evidence from the plaintiff to support the contention that the assessment of land tax should have been of a different amount. As I have noted above, there is authority to the effect that it is not a necessary precondition to a finding of negligence that there be expert evidence as to the "correct" valuation. But, where a valuer is called and not asked the relevant question then the task for the plaintiff is harder. Merely establishing that the valuation is outside the "range" does not shift the burden to the defendant to establish an absence of negligence.

[50] Mr Cox gave evidence that $100 a square metre was an appropriate figure for the UCV of Precinct B. Thus, his assessment of land tax was not materially different from Mr Buckley's.

[51] The plaintiff has not demonstrated either negligence or a breach of the implied terms.

[52] This expense and the other two in dispute come within the definition of "E" - "the outgoings for the Centre". "Centre" is defined as "any of the showrooms or shop centres described as Precinct B, C, D, ...".

[53] Lancini pleads that Mr Buckley should have arrived at a figure of $31,900 for all Council rates and levies whereas his estimate was $50,139. The particulars of negligence and breach alleged by Lancini were that Mr Buckley:

(a) failed to use the UCV in the DNRM notice of valuation as a basis for assessing Council rates;

(b) failed to accept or investigate the correctness of the assertion of the plaintiff in its said further submissions that the said notice of valuation "takes effect from 30/5/2006 following consideration by the Department of Natural Resources and Mines of the past land sale to Ticor Investments Pty Ltd and the completion of buildings H on the said land";

(c) failed to use a UCV for the land in Precinct B a rate of $22.75 per square metre;

(d) calculated rates as if the proper UCV was $100 per square metre;

(e) had no reasonable basis to use a rate for UCV of $100 per square metre;

(f) had no reasonable basis for determining Council rates at $50,139; and

(g) failed to use the bases for calculation described in paragraph 34 (of ASOC).

[54] The last particular of negligence refers to an earlier paragraph in the ASOC in which another method of calculating rates for the land in Precinct B is set out. That method was never provided to Mr Buckley.

[55] In the original submission from Lancini to Mr Buckley the rates were estimated at $43,000 but there is no explanation as to how that figure was calculated. The rates notice from Townsville City Council upon which Lancini now relies was paid by it on 24 January 2006 - about one month before its first submission to Mr Buckley.

[56] In its second submission of 30 June 2006 Lancini provided Mr Buckley with a copy of the rates notice and its estimate of $31,900 for Precinct B. As noted above, it did not demonstrate how it arrived at that figure.

[57] Ticor's submission of April 2006 estimated total rates of $76,920. This was based on its estimate of the UCV of Precinct B.

[58] The basis for Lancini's assertions of negligence and breach is that Mr Buckley failed to use the UCV in the DNRM valuation. I have already dealt with the allegations concerning that valuation so far as land tax is concerned.

[59] The approach taken by Mr Buckley was explained by him in his evidence. He had been cross-examined about not using the rates notice and, in re-examination, he said:

"MR DOYLE: Mr Buckley, you were shown the rates notice that was provided to you by Lancini 's prior to the delivery of your final determination?-- That's right.

I will take you to it if you need to see it, but it's right to say, it's common ground even, you didn't use that as the basis of your calculation of rates?-- That's correct.

If you explain, please, why it is you thought it not appropriate to use that?-- Because I was required to establish what the outgoings for precinct B would be based upon the net assessment of the unimproved value, which took into account the use of the land. Rates and land tax are based off the same assessment and the assessment - the rates notices provided was of an assessment of the entire site which, in my view, had not had regard to recent sales evidence and, therefore, considered the next assessment in accordance with the agreement.

Now, in that context, my friend took you to what he described as a possible mismatch between the net annual income and the expenses. Do you recall that topic?-- Yes.

And in answer, you said something to this effect, that you were capitalising income in perpetuity?-- Yes.

Now, explain to me, please, [what] you meant by that and what relevance, if any, it has under the development agreement to the task that you undertook?-- If-----

Explain what you mean by it?-- When - in a valuation process, in assessing the market value of a property as at today, you take what is the market income or market rental for a property as at today and capitalise that, which is the multiplier by 100 divide by an appropriate factor, and that assumes that income in perpetuity. If there are known to be - if it is likely there are going to be significant changes in the income in the short-term, in the next couple of years, be it a major increase in rent, decrease in rent, increase in outgoings or decrease in outgoings, the valuer needs to establish what the market rent is today and the market outgoings are today, and capitalise that in perpetuity, otherwise you end up with a situation where someone could pay significantly too much or too little for a property based on simply what is passing."

[60] That approach was not the subject of any contrary expert evidence. The plaintiff put the rates notice forward as being virtually conclusive of the issue but did not provide any evidence to support it in the manner advanced by it in its submissions. Mr Buckley gave evidence that what he did was normal valuation practice and this was unchallenged by evidence. Mr Cox's assessment of this expense was $43,000 a year - which is about 14% less than Mr Buckley's assessment. In all those circumstances, I do not find that Mr Buckley's conduct fell short of the appropriate standard for a valuer.

[61] Lancini pleads that Mr Buckley should have arrived at a figure of $17,000 for the cost of insurance. His estimate was $30,000. In their original submissions, Lancini put forward $21,500 as the appropriate amount and Ticor submitted $37,649 as the appropriate estimate of the premium.

[62] The particulars of negligence and breach alleged by Lancini were that Mr Buckley:

(a) failed to rely upon a quotation or estimate from Northern Insurance Brokers dated 20 June 2006 showing an annual premium including all charges of $15,083.65 and expressed to be on the basis of a building cover of $8,500,000.

(b) failed to accept that quote or estimate on the basis that he believed the building cover expressed in it was less than adequate for the replacement of existing improvements;

(c) failed to make any enquiries as to the cost for the replacement of existing improvements;

(d) failed to inquire as to the premium amount to which the quote or estimate from Northern Insurance Brokers would be adjusted for a building cover of an amount Mr Buckley believed to be adequate; and

(e) had no reasonable basis for determining insurance at $30,000.

[63] Lancini called two experts to support its case on this point: one was a quantity surveyor, the other was an insurance broker. Although it did call a valuer, he was not asked to comment on this matter.

[64] Mr Buckley was criticised by the plaintiff for the paucity of his records in this area and that criticism was well founded. It was, I thought, surprising that a valuer of his experience had either failed to generate or to keep working papers on this point. But, as I ruled in relation to an objection to certain evidence, this was not a matter which had been advanced as a particular of negligence.

[65] Mr Buckley calculated his estimate of insurance costs on a square metre basis which, the evidence established, was a method consistent with industry standards.

[66] Lancini called Ian Stark, a quantity surveyor with extensive experience. He provided a report in which he estimated the replacement cost of the Precinct B building. His evidence, though, was neither referred to nor relied upon by Lancini in its submissions apart from this statement:

"Lancini called evidence in relation to these heads of claim [insurance and management] as to what the correct position was from persons who had the necessary expertise to establish what the correct result was."

As I noted above, the expert valuer called by the plaintiff did not provide any evidence with respect to insurance. The thrust of the criticism in cross-examination of Mr Buckley and of the expert valuer called for him, Mr Cox, was that a correct estimate of the cost of rebuilding should have been obtained and that such an estimate should have been used to adjust the quote for insurance provided to Lancini by Northern Insurance Brokers.

[67] So far as it was relevant, Mr Buckley appears to have considered some information provided in the Ticor submission about insurance charges for comparable centres and he made enquiries of others in his office. Mr Buckley did say that it was an ordinary part of industry practice to have regard to insurance costs expressed as a rate per square metre for comparable buildings. This was supported by the evidence of Mr Cox.

[68] Mr Cox was cross-examined in detail about whether or not a valuer should, in circumstances such as these, seek the expert assistance of a quantity surveyor with respect to the replacement cost of the building being considered. His evidence was that, whether one went to a quantity surveyor or not, depended on the circumstances of each particular case. Mr Cox's evidence was based upon his examination of insurance costs for buildings which he regarded as being comparable. He also, as a cross check, referred to building costs contained within a well-known publication - Rawlinson Australia Construction Handbook - as a means of checking the range of costs which he had ascertained. He was asked whether he agreed that, in order to be more accurate about insurance premiums, it would be desirable to find out the sum insured rather than simply relying upon a rate derived from the building area. His evidence was that, where there was an overwhelming number of examples showing a consistent figure, he would not have pursued details of the sum insured. He was pressed with respect to the quote provided by Northern Insurance Brokers in the sum of $15,083.65. He was also asked about the premium which had been charged for the adjacent and similar type of centre - the Townsville Mega Centre. He said that a reasonable valuer, when confronted by an overwhelming sample of rates per square metre well in excess of the rates in the quote from Northern Insurance Brokers or the rate provided at Townsville Mega Centre, would not find it necessary "to chase that one out-of-line offering". He said that there was so much evidence that the appropriate square metre price was $3.15 that the extremes could be ignored.

[69] As was pointed out on a number of occasions by counsel for the defendants, Ticor and Lancini had appointed a valuer to undertake the exercise required to determine the matters in dispute between them. In doing so, they had engaged a person with specific expertise in that area but not, necessarily, in other areas. It is, therefore, appropriate to take into account the expert opinion of a person in the same area which, in this case, is Mr Cox. Although his final opinion on this point differed from the result obtained by Mr Buckley, it was, so far as Mr Cox was concerned, within a tolerable margin. Mr Cox's view is not determinative but it is an assessment with which I agree and accept.

[70] Lancini pleads that Mr Buckley should have arrived at a figure of $9,000 for management fees. His estimate was $30,000. In its original submission to him, Lancini put forward $28,000 as the appropriate figure and Ticor submitted $35,052 as the appropriate estimate of management fees.

[71] The particulars of negligence and breach alleged by Lancini were that Mr Buckley:

(a) failed to use an estimate for management of $8,000 to $9,000 per annum from Knight Frank Townsville dated 20 June 2006;

(b) failed to use the figure in that estimate in the belief that it was well below a level which was reasonable and because it was unclear whether it was a net or gross fee inclusive of wages and other costs;

(c) failed to make any enquiries as to whether the fee was net or gross "inclusive of wages and other costs";

(d) failed to consider whether Knight Frank would provide reasonable management if engaged for the estimated fee;

(e) had no reasonable basis for determining management at $30,000;

(f) had no reasonable basis to believe Knight Frank Townsville could not or would not perform management services adequately for the cost in its estimate.

[72] The reference to the estimate from Knight Frank Townsville was to a brief letter from that firm to Lancini stating: "A management fee in the range of $8,000 to $9,000 per annum plus GST would be our expectation to manage building B".

[73] Evidence was called by the plaintiff from Mr Michael Quinlan, a real estate agent in Townsville and the author of the Knight Frank Townsville letter. He said that the method commonly used in Brisbane for the assessment of management fees was not used in Townsville and that they approached the exercise in a different way. The method used by Knight Frank was described in a report created by Mr Quinlan,[14] where he said:

"When our original quote was given to Lancini [on] 20 June 2006 we used a very simplistic method assuming the anticipated time to be spent on property management, taking into a (sic) consideration it was brand new, and that management in the first year would not be as time consuming as the property was to contain only 6 tenancies and with Lancini responsible for works under warranty for the first 6 months to 12 months of the management agreement. It was felt it would require limited property management time as most work would be warranty work with only some limited non warranty work supervision required (sic). We also factored in the possibility of further fees being made available to us from leasing of property in the expanded complex, along with other management fees which may eventuate for the balance of the complex."

[74] In cross-examination Mr Quinlan agreed that there are varying degrees of management levels from a basic service to a very complete service. He agreed that management fees are often reduced to cement the relationship with the owner and to secure other forms of income from the property owned by that owner. He also said that there is no clearly correct way to assess management fees.

[75] The major difference between Mr Quinlan and both Mr Buckley and Mr Cox is that Mr Quinlan does not calculate and has not seen fees calculated as a rate per square metre. That, alone, does not mean that it is necessarily wrong to proceed on that basis in Townsville or anywhere else. Operating costs assessed on that basis are published by the Property Council of Australia and are used as a means of comparing management costs of different centres.

[76] Mr Buckley gave evidence of the manner in which he approached the exercise. Once again, his record keeping leaves something to be desired but that is not a matter in issue.

[77] It is interesting to note that, had Mr Buckley accepted the original submission from Lancini as to management fees, it would have been difficult for them to assert negligence. Of course, Lancini revised its estimate in light of the quote from Knight Frank Townsville. Nevertheless, the difference between Lancini's original estimate and Mr Buckley's final estimate is only 7%.

[78] Mr Cox estimated the management fee at $26,000 per annum. That is a variation of approximately 15%.

[79] Mr Stevens gave evidence that he would have set a fee at $24,000 to $27,000.

[80] The methods used by Mr Buckley do not appear to be outside the ordinary tools used by valuers to arrive at a conclusion.

[81] Mr Quinlan in his evidence also said that his firm had adopted a new method of assessing management fees and that almost doubled his original quote.

[82] Mr Cox and Mr Stevens both said that the defendant's estimate was considered by them to be within the margins of correctness. Of course, that is not a decision for them to make. But in the absence of any contrary valuation evidence and any contrary evidence from an expert that the approach taken by Mr Buckley was negligent, I find that a variation of 15% from Mr Cox's estimate is within the margin for a case such as this and in the absence of other evidence it has not been demonstrated that Mr Buckley was negligent.

[83] The defendants plead that the determination agreement included a term by which Lancini and Ticor agreed that no action would be taken against either defendant in relation to work done pursuant to that agreement. They also plead that the circumstances giving rise to that term support a finding that:

(a) The exchanges leading up to the inclusion of that term amounted to a representation which was false and misleading and which justifies an injunction restraining the action by Lancini.

[84] The defendants after referring to the consequences of s 68 of the TPA do not now argue that it was a term of the agreement that Lancini would indemnify them against liability.

[85] The relevant exchanges were as follows. After Ticor's solicitors enquired whether Mr Buckley would be able to undertake the work, Mr Buckley (in a letter of 24 March 2006) replied:

"The timeframe I propose is to complete the draft determination within 4 weeks of receiving the submissions from each party. I would advise receipt of same to each party to ensure delays are kept to a minimum. I will require an indemnity from each party confirming no action will be entered into against myself or my employer as a result of any determination. I will also require an undertaking from each party that the fees for such determination will be paid as and when due." (emphasis added)

[86] Ticor's solicitors responded by confirming Mr Buckley's fee proposal and asked him to "start the process". In an e-mail response of 31 March 2006, Mr Buckley replied:

"Can I please confirm that both parties have also agreed to an indemnity to ensure there will be no action against myself or Savills in the role of determining valuer....

If you could confirm the indemnity would be appreciated. [sic]" (emphasis added)

[87] In an e-mail of 31 March 2006, Ticor's solicitors responded:

"Thanks. I confirm the indemnity on behalf of Ticor. I've asked Trevor Cowling to do the same on behalf of Lancini."

[88] On 3 April 2006 Lancini's solicitors sent an e-mail to Mr Buckley:

"I am authorised by Lancini Properties to confirm that it accepts your requirement for, 'an indemnity .... confirming no action will be entered into against [you] or [Savills] as a result of any determination' made by you in your role of determining valuer." (emphasis added)

[89] Mr Buckley then proceeded to carry out the task required of him.

[90] Mr Sherwood, the General Manager of the Lancini group of companies, was cross-examined on the e-mail which was sent on his instructions:

"When you read that, you understood that Mr Buckley was saying that he required of both you and Ticor an assurance that you wouldn't sue him, or Savills, as a result of his embarking upon and making the determination?-- Yes.

If you would turn to page 176. You should have there an e-mail from Mr Cowling to Mr Buckley?-- Yes.

You have told us this was sent on your instructions?-- Yes.

"When you gave instructions in March, 2006 to give an assurance to Mr Buckley, you had in mind that what you were telling him was that you, Lancini, would not sue him if he made a mistake or an error, or if you thought he made a mistake or an error, in respect of the determination he was to embark upon. That's right, isn't it?-- We gave him an indemnity that we wouldn't sue him.

Or Savills?-- Or Savills for their delivery on determination.

Yes, and you had in mind that you wouldn't sue him even if you believed he had made a mistake?-- No, I'm not saying that.

You are not saying what?-- That we wouldn't sue him if he made a mistake." (emphasis added)

"When you gave it, you intended to convey to him something to this effect: 'That Lancini will not sue you, Mr Buckley, if your determination is such that we think you have made a mistake.' That's what you intended to say to him, didn't you?-- If his determination was fair and accurate, that would

Okay, ought we understand that you were intending to say, 'Only if your determination is fair and accurate are we, Lancini, giving you an assurance we won't sue you.' Is that what his Honour ought understand you to have intended?-- Yes, yes.

Thank you. If we go back, if we can, in that bundle, to page 176. You looked at this a moment ago, Mr Sherwood. It is obvious that what is set out in this e-mail does not say that the indemnity you are giving is to be confined to circumstances where the determination is fair and accurate.

Indeed, at no time prior to Mr Buckley completing the determination on the 29th of June 2006, can we see you saying to him, orally or in writing, 'The indemnity I am giving you is only if you act fairly and accurately.' That's right, isn't it?-- That's right, yes." (emphasis added)

[92] It appears that both parties have used the word "indemnity" to represent something other than a true indemnity. I think it is clear, though, that both parties intended that there be an agreement that Lancini (and Ticor) would not take any action against either Savills or Mr Buckley as a result of any determination made in response to the request by those parties.

MISLEADING REPRESENTATION - SECTION 52 TPA

[93] Section 52 of the TPA provides:

(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

(2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).

Note: For rules relating to representations as to the country of origin of goods, see Division 1AA (sections 65AA to 65AN).

(1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.

(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

(3) Subsection (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.

[95] The defendants submit that the response by Lancini's solicitor of 3 April 2006 amounted to a representation by Lancini that it would not take any action against either defendant. Putting to one side the use of the word "indemnity" the statement that "no action will be entered into against [you] or [Savills] as a result of any determination made by you in your role of determining valuer" is an unqualified representation which would reasonably lead anyone to the conclusion that (apart, perhaps, from questions of fraud) Lancini would not sue either Mr Buckley or Savills.

[96] This confirmation was important to Mr Buckley who said in evidence:

"Q. Mr Buckley, had you not received the email from Mr Cowling at page 176, would you have proceeded with the determination? -- No, I would not.

Q. Why is that? -- Company policy in a determination is that if we don't receive an indemnity from both parties that no one is allowed to undertake such a determination.

Right. Is there anything that informs that policy? Why, in other words? -- Oh, why. You're dealing with two parties who are already in dispute and it's not unusual for them to be litigious because they're already in dispute. They've already engaged solicitors and, therefore, it is considered to be a greater risk of litigation if one of them doesn't particularly like your answer."

[97] It is clear from the answers given by Mr Sherwood that the "indemnity" that Lancini intended to exist was of a limited nature. It was one of almost no value at all as, in Mr Sherwood's mind, it only applied if Mr Buckley's determination was fair and accurate.

[98] Lancini argues that there was no representation at all in this matter and, in particular, there was no representation made as to any future matters. All that was done, it is argued, was that Lancini agreed to the inclusion of a term in the contract of retainer providing for an indemnity to the defendants, and that if there was a representation, then it was only a representation that Lancini would agree to the inclusion of such a term.

[99] That, though, is inconsistent with Mr Sherwood's evidence where he said that he understood that Mr Buckley was requiring an assurance that neither he nor Savills would be sued as a result of embarking upon and making the determination. Thus, Lancini was fixed with the knowledge that Mr Buckley did require that assurance and that assurance was given by Lancini in its email of 3 April 2006.

[100] It is then argued by Lancini that it had reasonable grounds for making the representation on the basis that Lancini had no reasons to have formed the view that litigation by it against the defendants was likely. Evidence of reasonable grounds can be established by evidence other than that of the person making the representation. A court can find that reasonable grounds existed for a representation by considering the circumstances in which it was made, the background to it and the conduct and actions of the parties prior to it being made.[15] It is difficult to make such a finding when Lancini, in its written submission, said: "It would be apparent to the parties to the retainer that there may be an issue as to whether too much or too little might have to be transferred as a result of some failing on the part of the Defendants in performing the retainer." In any case, it did not express the representation in a way which reflected its then intentions. It was asked to give an assurance - which is not uncommon in commerce - of an absolute nature. Whether it thought it would be most unlikely that it would have to take action or not is not to the point. That is not a reasonable ground for making the representation.

[101] What is being submitted on behalf of Lancini is that, provided it did not think that there was a likelihood that it would have to sue, then it could make a representation that it would not sue and that there will be no consequences flowing from that representation. I do not accept that. Mr Sherwood's evidence was that the "indemnity" only applied if the decision was "fair and accurate". In effect, the assurance was that if there was no cause of action available to Lancini it would not sue.

[102] The evidence gives rise to the following findings:

(a) Lancini made an unqualified representation that it would not sue the defendants.

(b) Lancini's intention when it made the representation was qualified - it would only refrain from taking action if the determination was "fair and accurate".

(c) The response by Lancini of 3 April 2006 was misleading - it did not disclose Lancini's true intention.

(d) Lancini has commenced this action contrary to its representation.

(e) The defendants have suffered damage as a result of having to defend the action.

[103] Those findings lead to the conclusion that s 52 of the TPA has been contravened. If I had not found that the plaintiff had failed in its action than I would have granted an injunction to prevent Lancini from taking any further steps in this matter.

[104] The defendants submit that the conduct of Lancini referred to above also gives rise to an estoppel by representation. An estoppel by representation precludes a party who, by a representation, has induced another party to adopt or accept a state of affairs and consequently to act to that other party's detriment, from asserting a right inconsistent with the state of affairs on which the other party acted.[16]

[105] Lancini relies, on this as in other areas, on the effect of s 68 of the TPA. That section provides:

68 Application of provisions not to be excluded or modified

(1) Any term of a contract (including a term that is not set out in the contract but is incorporated in the contract by another term of the contract) that purports to exclude, restrict or modify or has the effect of excluding, restricting or modifying:

(a) the application of all or any of the provisions of this Division;

(b) the exercise of a right conferred by such a provision;

(c) any liability of the corporation for breach of a condition or warranty implied by such a provision; or

(2) A term of a contract shall not be taken to exclude, restrict or modify the application of a provision of this Division or the application of section 75A unless the term does so expressly or is inconsistent with that provision or section.

[106] Of course, s 68 can only apply to the contract so far as Savills is concerned as the TPA does not, in these circumstances, apply to Mr Buckley.

[107] Lancini argues that, as the requirement for an indemnity became a term of the retainer then the defendants cannot contend that an estoppel can arise. It is put this way in the written submissions: "The difficulty for the Defendants is that they plainly were prepared to proceed with the determination if the indemnity sought became a term of the contract of retainer. They did not ask for a representation but rather sought agreement which is the language of contract. Lancini responded as to the term sought by accepting the requirement. Those concepts are referable to the terms of a contract. If Savills and Mr Buckley were content to proceed to do the work having secured such agreement then, it does not matter that they were mistaken as to the effectiveness of any such agreement because of the impact of s. 68."

[108] That submission can't be accepted because it seeks to merge the representation, which I found was made, into the contract of retainer. I have already found that, without the assurance sought, there would not have been a contract.

[109] The necessary elements for an estoppel of the type sought to be relied upon were set out by Brennan J in Waltons Stores (Interstate) Ltd v Maher[17]:

"In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that (1) the plaintiff assumed that a particular legal relationship then existed between the plaintiff and the defendant or expected that a particular legal relationship would exist between them and, in the latter case, that the defendant would not be free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt that assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff's action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise."

[110] Each of those elements has been made out. The representation was pre-contractual and is not subject to the provisions of s 68. Even if it was, it would not affect the estoppel so far as it protects Mr Buckley.

[111] If I had not found that the plaintiff had failed in its action than I would have granted an injunction to prevent Lancini from taking any further steps in this matter.

[112] The fee charged by Savills was $11,000.00 (including GST). Ticor paid its half share ($5,500) and Savills seeks an order that Lancini pay the balance. It is alleged in the Amended Defence and Counterclaim that both defendants were parties to the agreement with Lancini. That is not admitted. I find that although all the communications were with Mr Buckley the agreement was with Savills. He was a Director of that company. There is no defence to this counterclaim if Lancini fails in its action. It has failed. There will be judgment for Savills against Lancini for the sum of $5,500.

[114] I give judgment for the First Defendant on its counterclaim in the sum of $5,500.

[1] A hideously ugly and unnecessary name which is yet another carbuncle on the battered hide of the English language.

[2] Voli v Inglewood Shire Council [1963] HCA 15; (1963) 110 CLR 74

[3] [2003] 1 Qd R 26 at [21]

[4] (2003) NSWCA 103

[5] [1996] 1 EGLR 119 at 120

[6] [2000] 1 WLR 857 at [19]

[7] (2000) FCA 454

[8] [2004] NSWCA 114

[9] [2004] HCA 52; (2004) 219 CLR 165 at [40].

[10] See Zhu v Treasurer of the State of New South Wales [2004] HCA 56; (2004) 218 CLR 530 at [82]

[11] [1959] HCA 8; (1959) 101 CLR 298

[12] (1991) 22 NSWLR 389 at 418

[13] (1993) 32 NSWLR 319 at 323

[15] Cummings v Lewis [1993] FCA 96; (1993) 113 ALR 285 at 292

[16] Commonwealth v Verwayen (1990) 170 CLR 394 at 422

[17] (1988) 164 CLR 387 at 428-9