WHETHER CLAIMS STATUTE BARRED
92Consideration of the respondents' defence that Mr Tomasetti and TSF's claims are statute barred is strictly unnecessary as their claims have failed for other reasons. Nevertheless I express my views concerning that defence as far as it would apply to them as follows. The defence is not relevant to Ms Cordony's claims as her causes of action arose, if at all, after the dates referred to in the next paragraph.
93The appellants filed their Statement of Claim on 14 June 2009. It was common ground both at first instance and on appeal that to the extent that any of the appellants' alleged causes of action in negligence or under the Fair Trading Act arose prior to 15 June 2003 or 23 August 2003 respectively, those causes of action were statute barred (see Limitation Act 1969 s 14, Fair Trading Act s 68(2) and the transitional provisions in Clause 11D, Schedule 5 to the Fair Trading Amendment Act 2003).
94The respondents alleged that both categories of cause of action were complete upon payment by Mr Tomasetti and TSF of the initial costs of the investments recommended by Mr Brailey and/or upon their assumption at substantially the same times of an obligation to pay the balance. The suffering of damage, and therefore completion of their causes of action, prior to the limitation dates referred to above would have resulted in their claims in respect of the 2000, 2001, 2002 and, so far as the Fair Trading Act claims were concerned, 2003 investments being statute barred.
95After careful analysis of relevant authorities, the primary judge rejected the respondents' limitations defence, stating:
"721 The submission for the plaintiffs that there is no evidence of loss at the time of entering into the investments is significant. No attempt has been made to value the interests they acquired at the time of acquisition or at any later time until recent years. It is certainly the case that there is no evidence that what they acquired had any lesser value than the amount paid. In other words, there is no evidence of loss being occasioned at any time before the relevant limitation dates.
...
723 ... I am not satisfied that damage has been shown to have arisen prior to the relevant limitation dates. There has been no contention that at any time in 2003 or before the agribusiness investment schemes were performing in a way anything other than anticipated. There has been no contention that forecast returns were any less, and the timing of returns was any later, at any time in 2003 or prior. There is evidence of such matters subsequent to 2003".
96On appeal, the respondents emphasised that Mr Tomasetti claimed immediate tax deductions for the initial payments for the investments and that "the appellants' claims were structured on the basis that they were entitled to recover damages, and interest, from the time of the initial payment for each investment" (Respondents' Written Submissions [67]). They proceeded to say:
"... The deductions in question were claimed, and allowed, on the basis that they were losses suffered by the taxpayer in the relevant financial year as a result of the taxpayer carrying on business as a grower. It might be that in later years the profits to be gained from the forestry operations would ultimately have exceeded the losses suffered, but that does not make the loss suffered in the first year any less of a loss. It would also be wrong in principle if the appellants could claim damages and interest from the inception of the investment if at that time their cause of action had not arisen" (Respondents' Written Submissions [71]).
97The respondents contended that these submissions were supported by the High Court's decision in Wardley Australia Ltd v State of Western Australia [1992] HCA 55; 175 CLR 514, particularly observations in that case about the Full Federal Court decision in Jobbins v Capel Court Corporation Ltd [1989] FCA 538; 25; FCR 226.
98In Wardley, the respondent was induced by the appellants' misleading and deceptive conduct to grant an indemnity to National Australia Bank Ltd in relation to a facility granted by the bank to Rothwells Ltd. The High Court held that the respondent first suffered loss, not when it granted the indemnity, but subsequently, when it was first obliged to make a payment under the indemnity. As a result, the respondent's claim against the appellants was held not to be statute barred. The plurality (Mason CJ and Dawson, Gaudron and McHugh JJ) observed:
"When a plaintiff is induced by a misrepresentation to enter into
an agreement which is, or proves to be, to his or her disadvantage,
the plaintiff sustains a detriment in a general sense on entry into the agreement. That is because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff. But, as will appear shortly, detriment in this general sense has not universally been equated with the legal concept of 'loss or damage'. And that is just as well. In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events. In such a situation, there would be an ever-present risk of undercompensation or overcompensation, the risk of the former being the greater" (at 527).
99Their Honours then referred to Jobbins, in which the applicant had been induced by misrepresentation to enter into an agreement to invest in a film. They noted that in the view of the Full Federal Court "the investment from its inception lacked the qualities which it had been represented as having and was therefore less valuable than it would have been if the representations had been true" (at 528).
100Having also referred to Forster v Outred & Co [1982] 1 WLR 86, the plurality then said:
"Jobbins is not explained quite so easily. That is because the Full Court of the Federal Court failed to specify whether the applicant first suffered loss or damage on entry into the agreement on or about 24 March 1986 or on payment on 9 April 1986 pursuant to the agreement of the sum of $60,000, each of which occurred more than three years prior to the filing of the applicant's statement of claim. The decision itself may be supported by reference to the payment alone. What is more, the applicant's loss and damage, as pleaded in the statement of claim, consisted in the payment of $60,000 on 9 April 1986. But we have difficulty in accepting that the applicant suffered loss or damage on entry into the agreement merely because the investment was alleged to lack the represented qualities. On this aspect of the case, the question was whether the investment was worth less than the applicant contracted to pay for it and, if so, when the applicant first sustained loss or damage. How that question could be answered in the absence of evidence is not evident to us. Although the investment lacked the represented qualities, it may have been worth no less than the consideration provided by the applicant" (at 529).
101Their Honours concluded that where a plaintiff enters into a contract which exposes him or her to a contingent loss or liability:
"the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred" (at 532).
102The respondents in the present case submitted that the plurality's statement in Wardley that the decision in Jobbins "may be supported by reference to the payment alone" supported their submissions because that payment was analogous to the initial payments made in the present case.
103The plurality's observation is not, in my view, determinative of the present case first, because it was neither fully explained nor essential to the reasoning in the case. One would have thought that the plurality's reasoning denying the character of a loss to the entry into the agreement (that is, the absence of evidence as to the value of the investment) would have applied equally to the payment made soon after because until the value of the investment was known, it presumably could not be determined whether the payment constituted a loss by exceeding the consideration provided for it and the value of the obligations assumed by the applicant. Secondly, Jobbins was a very different case from the present. As noted in Magman International Pty Ltd v Westpac Banking Corporation [1991] FCA 41; 32 FCR 1, Jobbins involved "a once and for all dealing" (at [18]), as distinct from the present case in which the parties were involved in an ongoing relationship over a substantial period of time and the success or failure of the venture was unlikely to be discernable until the venture was well advanced.
104Apart from the comment about Jobbins, Wardley is against the respondents' limitations defence. There, the fact that the loss was contingent meant that it was not suffered until the contingency occurred, notwithstanding that there was a "likelihood, perhaps the virtual certainty, that there would be a loss, in the light of Rothwells' actual financial position as it stood when the indemnity was executed" (at 524 - 5). The primary judge's findings (see [95] above) suggested that there was no such likelihood here. The present transactions were of the type envisaged by the Wardley plurality when it observed that "[i]n many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent" (at 527).
105As the High Court noted in Murphy v Overton Investments Pty Ltd [2004] HCA 3; 216 CLR 388, the "risk of loss is not itself a category of loss ... if a plaintiff enters a contract which exposes the plaintiff to a contingent loss or liability, that plaintiff 'sustains no actual damage until the contingency is fulfilled and the loss becomes actual'" (at [46], quoting Wardley at 532). In Murphy, the appellants leased a unit in a retirement village owned by the respondent. Prior to signing the lease, the respondent gave the appellants a misleading estimate of the amount of outgoings they would be required to meet. The court held that the appellants suffered loss, not when they entered into the lease (there being no evidence that the price exceeded the market value), but when the respondent began to charge the higher amount of outgoings. Accordingly, "the appellants suffered no loss as a result of undertaking the obligations ... unless and until the contingency which the representation hid (that items other than those used to form the estimate were then being incurred and could be charged as outgoings) was first realised ... Wardley requires the conclusion ... that it was only when the contingency came to pass that the appellants sustained loss or damage" (at [55]).
106The High Court's decision in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; 217 CLR 640 is also against the respondents' limitations defence. In that case, a valuer failed to advise the purchaser of a shopping arcade ("the Plaza") of the effect on its market value of the construction of competing premises nearby. The Court held that the plaintiff suffered loss when it contracted to purchase the Plaza, not merely when it was reasonably ascertainable what effect the competing premises would have ([25]). The Court considered that "the risk of the catastrophic effect on rent levels of the Plaza after March 1999, to which the defendant had not alerted the plaintiff, had already had an impact on the value of the Plaza by April 1997 [when the plaintiff agreed to purchase it]" (at [30]). Unlike the appellants in the present case, "[t]he plaintiff could have found out at once that it had bought something which was worth less than that which it had agreed to pay and did pay" (at [28]).
107The respondents in the present case noted that many of the recommended investments were still on foot at the date of the trial and submitted in relation to those:
"Admittedly the projected returns as at [the date of trial] were less than had been expected and were unlikely to exceed the appellants' expenditures on the projects. But it is difficult to see this fluctuation in expected future profit as a category of damage at all, and even if it were a category of damage it is not damage which was caused in any real or practical sense by any advice from Mr Brailey" (Respondents' Written Submissions [73]).
108The respondents gave as an example of damage not attributable "in any real or practical sense" to Mr Brailey's recommendations, the failure of one of the investment projects because of a pest infestation, which they described as "a rare and perhaps even unforeseeable event" (ibid).
109I do not accept these submissions. First, there is no reason why the primary judge could not, as he purported to do, determine whether the investments were loss-making as at the date of trial. Courts are commonly required to undertake such assessments. By the time of trial, the investment projects were well advanced and their prospects could be sensibly assessed. The position was otherwise at the date the investments were made. As the primary judge pointed out, there was "no contention that at any time in 2003 or before [that] the agribusiness investment schemes were performing in a way anything other than anticipated" (Judgment [723]).
110Secondly, it is no answer to a claim for damages for inducing entry into a transaction by misrepresentation for the defendant to say that an investment the subject of the transaction failed for reasons unrelated to the matters misrepresented (Toteff v Antonas [1952] HCA 16; 87 CLR 647). In any event, it is by no means clear that for such reasons the investments in the present case failed to achieve their expected value. The appellants claimed that Mr Brailey failed to apprise them of multifarious risks associated with the investment projects, including their speculative nature. Arguably, it was the materialization of risks falling within the ambit of those broadly described risks that prevented the expected value from being realised.
111In their Supplementary Written Submissions of 22 October 2012, the respondents relied upon Winnote Pty Ltd v Page [2006] NSWCA 287; 68 NSWLR 531 at [61] - [62] to contend that payment of the initial investment costs and interest on borrowings to fund the investments constituted losses because they produced no commensurable benefits.
112In Winnote, a client entered into a lease of land in order to extract peat, relying on advice from solicitors who failed to advise that peat extraction required a mining licence. A third party subsequently obtained a mining licence over the peat deposit. The Court held by majority (Basten JA dissenting) that the client first suffered damage when it entered into the lease and received a bundle of rights inferior to those it would otherwise have received absent the firm's conduct. In the view of the majority:
"From the outset, Winnote [the client] got significantly less than it should have, in consequence of the solicitors' 1988 negligence. The 'goods were damaged' to use Lord Walker's terms. This is demonstrable when one compares the rights secured under the real property lease with the rights that ought to have been secured under mining tenements from the outset" (at [60]).
113The majority then referred to various expenses that were incurred in obtaining, and under, the lease and observed that "[a]ll of these were items of wasted expenditure that did not produce any proven commensurable value" (at [61]).
114The majority's reference to wasted expenditure not producing "any proven commensurable value" must be read in the context of its view that by entering into the lease the client suffered an "immediate actual loss of a measurable kind" (at [59]). No such loss was found to have been suffered in the present case and initial payments were not intended to produce immediate benefits. Whether benefits flowing from them ultimately matched (or exceeded) their amount could only be ascertained as the investment projects progressed. The situation was as envisaged by Brennan J in Wardley:
"A transaction in which there are benefits and burdens results in loss or damage only if an adverse balance is struck. If the balance cannot be struck until certain events occur, no loss is suffered until those events occur" (at 536).
115Contrary to the respondents' submission (see [96] above), I do not consider that the appellants' inclusion in their claims of amounts calculated by reference to initial and other payments made by them prior to the relevant limitation dates indicates that their causes of action must have arisen prior to those dates. Their causes of action arose when it became ascertainable that they had suffered an overall loss on each investment. When that occurred it became clear for the first time that the earlier payments constituted losses. Those payments were thereafter properly included in the appellants' calculations of loss.
116The respondents pointed out that the identification of the dates upon which it became apparent that the appellants had suffered losses on each investment was a difficult exercise, with room for widely differing views. Whilst true, this does not assist the respondents because it is clear that such losses were not ascertainable prior to the limitation dates in 2003 yet were ascertainable at the date of the hearing at first instance. Further, there was no basis for concluding that if those losses were ascertainable at the date of the hearing, they were not also ascertainable when the appellants commenced their proceedings in 2009, with the consequence that the appellants had complete causes of action at that time. It is unnecessary for these proceedings to determine when in the period between 2003 and 2009 the losses became ascertainable.
117The respondents also submitted that it was significant that the appellants claimed interest at the rates applicable to awards of interest under s 100 of the Civil Procedure Act 2005 on amounts expended prior to the relevant limitation dates. They submitted that as the Court's power to award interest under s 100 is confined to the period commencing when the relevant cause of action arose, the formulation of the appellants' claims demonstrated that their causes of action had arisen prior to the relevant limitation dates. However, as the appellants assert, their use of those rates did not indicate that s 100 was necessarily the basis of their claim for interest. Rather, the appellants were arguably entitled under the general law to interest by way of damages on the basis of the principles stated in Hungerfords v Walker [1989] HCA 8; 171 CLR 125, using the rates applicable to s 100 awards as a convenient reference point. Thus, the nature of the appellants' claims was not inconsistent with their causes of action arising after the limitation dates.
118For these reasons I consider that if the appellants otherwise had viable causes of action, they would not be statute barred.