Valcorp Australia Pty Ltd v Angas Securities Limited

IN THE FEDERAL COURT OF AUSTRALIA SOUTH AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION SAD 59 of 2011

BETWEEN: VALCORP AUSTRALIA PTY LTD (ACN 008 147 671)

AND: ANGAS SECURITIES LIMITED (ACN 091 942 728)

JUDGES: JACOBSON, SIOPIS AND NICHOLAS JJ DATE: 9 March 2012 PLACE: ADELAIDE

REASONS FOR JUDGMENT THE COURT: 1 In August 2007, Mr Kent Opie and Mrs Nicole Opie of Glenelg North, South Australia, were in some financial difficulty. The Opies had loans with La Trobe Investment Services Australia Pty Ltd (La Trobe) and related companies, which were due for repayment. These loans were secured by mortgages over the property, owned by Mrs Opie, in which they resided. The property was a penthouse four bedroom apartment in the apartment block known as "The Moorings", located in Glenelg North, which is approximately nine kilometres south-west of the central business district of Adelaide. The total amount owing by the Opies was in the order of $2.55 million. The Opies needed to obtain finance from an alternative source in order to repay La Trobe. 2 In July 2007, the Opies applied to each of Angas Securities Limited (Angas), Barker Mortgages Pty Ltd (Barker) and KWS Capital Pty Ltd (KWS) for loans in order to discharge the debt to La Trobe. In November 2007, each of Angas, Barker and KWS advanced monies to the Opies on the security of the apartment at "The Moorings". The total amount advanced by the three companies was $2.88 million. The amount of $2,340,000 loaned by Angas was repayable after 12 months and secured by a first mortgage over the apartment and included one and a half months prepaid interest. The amounts of $360,000 and $180,000 loaned by Barker and KWS respectively, were repayable in six months and included an amount for six months prepaid interest. Each of these loans was secured by a second mortgage and third mortgage over the property respectively. 3 Prior to advancing the monies to the Opies, Angas engaged the appellant, Valcorp Australia Pty Ltd (Valcorp), a company providing property valuation services, to provide a valuation of the Opies' property. Mr Alfonso Taormina, one of the directors of Valcorp, having inspected the property on 26 September 2007, prepared a valuation report in which he expressed the opinion that the fair market value of the property for mortgage security purposes was $3.6 million. 4 In February 2008, the Opies were unable to pay the monthly interest payment due that month under the Angas loan agreement and, thereby, defaulted. On 11 December 2008, Angas took possession of the property. 5 On 4 July 2009, Angas entered into a contract to sell the property for a price of $1.75 million. This amount was substantially less than the valuation of the property made by Valcorp. On settlement of the contract, Angas received the amount of $1,686,971.47. Barker and KWS did not receive any proceeds from the settlement of the contract. 6 In 2009, Angas, Barker and KWS commenced a proceeding in this Court against Valcorp in respect of the valuation report which Valcorp had issued. Each of Angas, Barker and KWS contended that Valcorp had been negligent and had engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) and s 56 of the Fair Trading Act 1987 (SA). Each of Angas, Barker and KWS claimed compensation for the loss of the principal advanced and consequential loss. 7 The primary judge found that Valcorp had, in issuing the impugned valuation report, engaged in misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act and had breached its duty of care. The primary judge awarded an amount of damages in favour of each of Angas, Barker and KWS, which included an amount in respect of the loss of the principal advanced and consequential loss for the loss of the opportunity to earn interest and other fees on the monies advanced to, but not repaid by, the Opies. 8 The primary judge also found, however, that each of Angas, Barker and KWS was guilty of contributory negligence by failing to make proper inquiries about the capacity of the Opies to service the loans. The primary judge held that each of Angas, Barker and KWS had, by reason of its contributory negligence, contributed to the loss each had suffered, to the extent of 25%. The primary judge, accordingly, reduced the damages awarded to each of Angas, Barker and KWS in that proportion. The primary judge awarded damages to each of Angas, Barker and KWS in the sums of $973,797.09, $458,510.31 and $256,595.15 respectively. 9 Valcorp appeals from the primary judge's decision in relation to contributory negligence and the award of damages for consequential loss. The respondents cross-appeal from the primary judge's decision that the damages awarded to them should be reduced by 25% on account of their contributory negligence.

background 10 The first respondent, Angas, carries on, as it did in 2007, business as primarily a money lender. Angas lends money on the security of a first mortgage. It applies a loan to valuation ratio of 70% and does not lend on the security of second mortgages. 11 In 2007, Mr Matthew Hower and Mr Robert Morton were directors of Angas. Mr Hower was, also, Angas's managing director, and a member of its credit committee and audit risk management committee. Mr Morton was in 2007, chairman of Angas's credit committee. 12 At all material times, Angas raised the monies that it loaned, from members of the public through the issue of debentures. From time to time, Angas published a prospectus whereby investors were invited to subscribe funds. The investors received a fixed rate of return and the loans made by the investors were secured by a floating charge held by a trustee over the mortgages and other assets of Angas. 13 The relevant prospectus in this case was Prospectus No 8. Angas stated in its prospectus that it lent monies to borrowers who "do not deal with traditional lenders such as banks or who may not meet the lending criteria of such lenders". In its prospectus, Angas described the typical class of borrowers as "[b]usiness proprietors, self-employed or investors in property which does not generate income" and "credit impaired and those seeking debt consolidation". Angas, also, stated in the prospectus that it typically advanced loans for shorter periods than did traditional lenders and that loan terms were generally for one year and never for longer than three years. The prospectus went on to state that the nature of the borrowers and the short terms for which loans are advanced, can lead to loan defaults at a higher rate than traditional lenders experience. 14 The prospectus stated that Angas lent money on the security of a first mortgage at a loan to valuation ratio of no higher than 70% for residential land The prospectus, also, contains the following statement: The analysis of the mortgage loan applications by the Company involves consideration of the real property that the Company will take as prime security together with any collateral security and an assessment of the credit worthiness of the borrower and any other transacting parties to the loan. Angas Securities Limited obtains current valuations, credit reference reports, undertakes general reference checking, reviews financial statements and assesses the impact of any other borrowings. This analysis is undertaken to assess the likelihood of recovering the loan advance that is to be made. The outcome of such analysis will determine whether or not the Company will make a loan at all, the amount of any such loan in terms of the maximum LVR and the length of the loan term. 15 The interest rates which Angas charged were higher than the rates charged by traditional lenders such as banks. 16 At the material time, the second respondent, Barker, acted as the manager of two trusts which provided mezzanine property finance. In 2007, Mr Hower and Mr Morton were the directors of Barker, as well as being directors of Angas. Mr Hower was, also, the managing director of Barker. At the relevant time, Barker operated in a complementary fashion to the business of Angas, advancing mezzanine property finance to borrowers from Angas, where additional funds are required beyond the loan to valuation ratio which is acceptable to Angas. Barker ordinarily advanced funds on the security of a second mortgage ranking behind Angas, the first mortgagee. Angas and Barker shared the same staff and resources. 17 KWS, the third respondent, as the trustee of two superannuation funds, M&T Superannuation Fund, and the RVH Super Fund, also conducted business making loans. At all relevant times, Mr Hower was the sole director and secretary of KWS. KWS, also, operated in a complementary fashion to the business of Angas, advancing mezzanine property finance to borrowers from Angas or Barker, or both, in cases where additional funds are required beyond the loan to valuation ratio which was acceptable to Angas or Barker. Where KWS advanced monies to the same borrower as Angas and Barker, the security which KWS took ranked behind the security granted to Angas and Barker. 18 On 9 July 2007, Mr Tony Fimeri, on behalf of the Opies, made an application to Angas for loan finance. Mr and Mrs Opie had engaged the services of Mr Fimeri who conducted a business called "creditlogic Finance Solutions", to assist them in securing finance in order to refinance their loans with La Trobe. 19 At the material time, Angas had an operations manual which prescribed standards and procedures to be applied, in dealing with lending and loans management. The operations manual referred to a maximum loan to valuation ratio of 70% in the case of residential land and the need for a current valuation from a licensed valuer. The operations manual also stated that a loan was not to be for a period in excess of one year without the express approval of the board. 20 Clause 2.4 of the operations manual set out, what was described as, "the basic criteria". The criteria nominated included: 2.4.1 First mortgage security; 2.4.2 External cash-flow to generate better than 1.25 x Interest cover is preferred but not essential. (Pre-paid interest is sometimes drawn-down as part of the loan proceeds); 2.4.3 A signed valuation from our panel valuer and relative to our brief; 2.4.4 Signed or audited financials; 2.4.5 Personal (signed) Statements of Position of borrower(s)/guarantor(s); 2.4.6 Guarantees from Directors and from any Associated Companies as required by the Credit Committee; 2.4.7 Provision of "Family Tree" if applicable; 2.4.8 Satisfactory credit reference; 2.4.9 Minimum up front application fee payable on acceptance of loan approval. 21 The operations manual, also, specified the information to be collated for the purpose of a submission to the credit committee. Clause 3.1.13 provided as follows: General Information concerning the Applicant Supporting documentation attached to the application can vary depending on the security type being offered and the purposes of the funds. However, the Proposal should include: Signed/dated Assets and Liability Statements from all individuals (whether borrowers or guarantors) Family Tree for all companies involved Financial Statements (including Profit & Loss Account) for all companies involved Confirmation of any relevant historical issues Evidence of satisfactory conduct from current lender (if re-finance is proposed). 22 Clause 3.1.17 provided as follows: As a lender for short duration terms Angas Securities is primarily concerned with security rather than loan serviceability. Whilst LVR is crucial to any loan application, all details as to servicing the loan should be included in the Proposal. If the assets are not income producing and there is no external source of regular cash-flow then Angas Securities will usually require substantial or total pre-payment of interest at drawdown. The proposal must specify how the applicant proposes to repay the loan at the conclusion of the term, example, sale of the property, refinance and so on. 23 The operations manual, also, contained a clause dealing with what is called "Credit Assessment Criteria". That clause provided as follows: The decision on whether to provided [sic] credit will take account of a range of factors including: Loan Purpose Employment stability Applicant's income and expenditure Credit History Applicant's accumulation of wealth These factors are a discretionary element of the loan approval process. They are over and above the LVR and security considerations which are mandatory issues. 24 The application for finance submitted to Angas on behalf of the Opies, by Mr Fimeri, stated that the Opies had loans with La Trobe and related companies, and that these loans were secured by mortgages over the Opies' penthouse apartment. It was said that the registered owner of the property was Mrs Opie and the total amount owing was in the order of $2.55 million. The application stated that Mr Opie was under pressure from La Trobe as their loans had expired and that the Opies were looking to refinance their loans with La Trobe. The Opies wished to borrow $2.76 million in order to discharge existing liabilities in relation to the property, and consolidate some other private debts. 25 The application, also, stated: Kent is also CEO of a company known as HR3D which is a technology company that has developed a software package that has been launched over the past year and has recently been awarded contracts in the UK and France as well as very strong interest from the USA. His income from this source is $250,000 per annum. Potential income from the sale of technology is expected to be in the many millions of dollars. 26 The application went on to state that Mr Opie was a shareholder in HR3D Pty Ltd, through another company, CMAH Pty Ltd. 27 The application for finance, also, included a valuation report of the Opies' penthouse apartment from Savills (SA) Pty Ltd (Savills). The date of that valuation report was 18 May 2007 and the report valued the property at $3.25 million. The loan sought by the Opies was approximately 85% of the valuation of the property by Savills. 28 On 7 August 2007, Mr Morton of Angas examined the Opies' application for finance. He was prepared to recommend a loan by Angas and Barker of an amount not exceeding 75% of the value of the property on the basis of a check valuation to be conducted by Valcorp. 29 Mr Morton recommended that the loans be approved subject to the production by the Opies of a signed and dated joint statement of position of the Opies, which would include "all worth including any equities in companies", the assignment of the Savills valuation report and establishment of the Opies' servicing capacity. In the document recording his recommendation, Mr Morton noted that the income of $250,000, which was stated as Mr Opie's income, alone would not be sufficient to service the debt. Further, said Mr Morton, that income should be established by documentary proof. 30 On 8 August 2007, the credit committee of Angas approved loans to the Opies totalling $2.43 million, on condition that this amount did not exceed 75% of the value of the Opies' property based on a check valuation by Valcorp. 31 A letter of offer was sent to the Opies on 9 August 2007 from each of Angas and Barker. On 17 August 2007, KWS, also, sent a letter to the Opies offering to advance further monies. 32 The letter of offer from Angas which offered to lend the Opies the sum of $2.112 million for a term of 12 months, contained a number of special conditions which are relevant to the matters the subject of this appeal. The letter provided that there was to be an assignment of the Savills valuation report and a check valuation by Valcorp, Angas's panel valuer. The maximum LVR was nominated as 65% of this valuation. The letter of offer, also, set out the following conditions: 5.8 You are to provide loan statements or written advice from current mortgagee/private lenders (caveatees) to confirm debt level and satisfactory conduct of account. All existing encumbrances are to be discharged at settlement. 5.9 You are to provide the signed and dated joint Statement of Position to include all assets as well as any equity in companies. Application from broker states that Kent Opie is CEO of a company known as HR3D Pty Ltd and he is one of the numerous shareholders through his company, CMAH Pty Ltd, however, ASIC search reveals that this company was deregistered 13/5/2007. Please provide details to clarify. 5.10 Servicing capacity is to be established. In this regard, borrowers are to provide copies of most recent tax returns and company financials (if any) to demonstrate serviceability. Kent Opie's income is stated as $250,000 pa which alone would not be sufficient to service Angas Securities and Barker Mortgages loans. Letter from your accountant is to be provided to confirm that both the Angas and Barker loans are serviceable within your cash flow. 33 The letter of offer from Barker offered to lend $325,000 for a term of six months. It provided that the loan was to be secured by a second registered mortgage and that the offer was subject to obtaining an independent valuation with Angas's and Barker's loans combined not to exceed 75% of the valuation. The letter of offer, also, included the conditions referred to in the preceding paragraph. 34 The letter of offer from KWS offered to lend $130,000 for a term of six months secured by a third registered mortgage. The letter also required that there be an independent valuation and that the loans of Angas, Barker and KWS combined, were not to exceed 79% of the valuation. This letter, also, contained conditions similar to those set out in Angas's letter of offer and set out at [32] above. 35 The total amount offered by Angas, Barker and KWS was $2.567 million, which was less than the $2.76 million that the Opies were seeking. 36 On 24 August 2007, Mr Fimeri, on behalf of the Opies, wrote to Angas indicating the Opies were seeking to borrow more funds than they had been offered by the respondents. The August letters of offer were not accepted by the Opies and they lapsed. However, it is apparent that the Opies remained eager to borrow monies from the respondents, even after the lapse of the offers. 37 On 26 September 2007, Ms Esther Yong, assistant lending manager of Angas, sent Mr Taormina an email seeking a fair market value for first mortgage purposes of the Opies' property. Mr Taormina inspected the property on 26 September 2007 and then prepared a valuation report. In the report, Mr Taormina expressed the opinion that the fair market value of the property for mortgage security purposes at the date of inspection was $3.6 million. The report went on to state that: On a forced sale basis the property would be "readily saleable" within a normal marketing period of say eight weeks and could be expected to warrant only a marginally reduced value of say $3.2 million. 38 Valcorp provided a certificate of valuation to Angas on or about 5 October 2007. 39 On 16 October 2007, a letter offering to advance monies was sent to the Opies by each of Angas and Barker. On 19 October 2007, KWS sent a letter to the Opies offering to lend money to them. Angas offered to lend $2.34 million which was 65% of the valuation provided by Valcorp. Barker offered to lend $360,000, which was 10% of the valuation; and KWS offered to lend $180,000 which was 5% of the valuation. The total amount of $2.88 million offered as loans by the respondents to the Opies, was 80% of Valcorp's valuation. 40 Each of the letters of offer by each of the three respondents, contained similar special conditions relating to the establishment of the financial position and servicing capacity of the Opies, as were set out in the letters of offer made by each of the respondents in August 2007, which are set out at [32] above. 41 In response to the special conditions in the letters of offer relating to the financial position and servicing capacity of the borrowers, Mr Fimeri on behalf of the Opies, sent a facsimile letter to Mr Hower attaching a number of documents. The covering letter from Mr Fimeri, also, stated that Mr Opie asked whether he could pay $4,000 of the $8,100 loan acceptance fee, which was then payable, prior to settlement, with the balance of the fee to be drawn from the settlement proceeds. 42 In one of the documents attached to Mr Fimeri's letter, Mr Opie stated that he had contacted the Australian Securities and Investments Commission (ASIC) and informed it that he wished to reinstate CMAH Pty Ltd. 43 Another document attached to Mr Fimeri's letter, was a letter signed by Mr Opie responding to the loan condition that the Opies provide a loan statement or written advice from the current lenders to confirm debt level and the satisfactory conduct of the Opies' account. Mr Opie's letter did not demonstrate a satisfactory payment history, but rather the existence of a dispute in the Supreme Court of South Australia between La Trobe and the Opies, arising from the failure of the Opies to discharge a debt when due. 44 There was, also, attached to Mr Fimeri's letter, an unsigned statement of the assets and liabilities of the Opies as at October 2007. The document stated that liabilities totalled $2.745 million and assets totalled $7.17 million, and included the penthouse property valued at $3.6 million and a $3 million asset referred to as "hr3d". 45 Also, included amongst the documentation sent by Mr Fimeri, was an email from a chartered accountant which stated: The Consulting Income received by KCO Investment Trust for the year ended 30 June 2007 per the Business Activity Statements lodged was $387,200 GST inclusive. Kents taxable income per his 2006 income tax return was $nil. 46 There was, also, a document on the letterhead of HR3D Pty Ltd dated 12 October 2007, signed by the executive director operations (Mr Ewald Hafer), which stated: I wish to confirm that Kent Opie is employed on a full time basis by HR3D Pty Ltd for a remuneration of $275,000 per annum. Mr Opie has been in the employ of HR3D for a period of 2 years. Please do not hesitate to contact me if you have any further questions regarding the above. 47 On 6 November 2007, the Opies signed each of the three letters of offer indicating, that as borrowers and guarantors, they accepted each of the offers. 48 Shortly thereafter, the Opies submitted a second assets and liabilities statement. That statement refers to the Opies' assets and liabilities as at 12 November 2007. The total liabilities are shown as $2.73 million and the total assets are shown as $18.07 million. The principal change from the first personal assets and liability statement, is in the value of "hr3d". The second statement refers to "Shares HR3D" as being worth $14 million, compared to $3 million in the first statement. 49 On 21 November 2007, the Opies signed a separate loan agreement with each of the respondents. 50 In late November 2007, Mr Paul McCarthy, a member of the credit committee of Angas, received information that he considered would lead the credit committee to question Valcorp's valuation report of the property at $3.6 million. As a result, the credit committee asked Mr Taormina to attend a meeting at the office of Angas. Mr Taormina attended the meeting. Mr Hower's note of the meeting, which the primary judge accepted as accurate, was to the effect that: Fred's view is unchanged from the report that he did for the three incoming mortgagees and believes that if the market was tested that the price would achieve greater than $3.3 million and if market over [sic] a normal period $3.6 million and possibly higher. 51 Following the meeting, Mr Taormina sent a letter dated 27 November 2007 to Mr Hower of Angas, in which he confirmed that his valuation report dated 26 September 2007 could, also, be relied upon for mortgage security purposes by Barker and KWS. Prior to advancing the monies, Angas, also, took out insurance against the failure of the Opies to repay the monies advanced. 52 On 27 November 2007, Mrs Opie, the registered owner of the property, signed a mortgage memorandum in favour of each of Angas, Barker and KWS. The loans were drawn down on the following day. 53 The loan from Angas to the Opies was for a period of 12 months and required the payment of interest (at a non-default rate) of $19,500 monthly in advance. At settlement, an amount representing the prepayment of interest of $33,426.64, which covered interest due for the rest of November, December and a part of January 2008, was deducted from the amount advanced to the Opies. 54 The loan from Barker to the Opies was for a period of six months with interest to be paid in advance for the term of the loan. 55 The loan from KWS to the Opies was for a period of six months with interest to be paid in advance for the term of the loan. 56 The first payment of interest from the Opies' resources to Angas, was for the second part of January 2008. It became due in January 2008 and was paid by the Opies, albeit late. However, as mentioned, the Opies were unable to make the interest payment for the month of February 2008, which became due on 1 February 2008. A notice of demand was sent by Angas to Mrs Opie on 15 February 2008. This demand was not complied with. 57 On 25 February 2008, a notice of default and intention to sell was served on the Opies by Angas. Angas issued proceedings in the Supreme Court of South Australia, and by 20 May 2008, had obtained a warrant of sale in respect of the property. 58 However, Angas did not immediately thereafter, take possession of the property and gave the Opies further opportunity to sell the property. 59 In September 2008, Angas received a bank cheque for $40,000 from the Opies and agreed to give them further time, until 9 December 2008, to sell the property or to refinance. This did not occur and on 11 December 2008, Angas took possession of the property. On 4 July 2009, Angas signed a contract of sale for the property. 60 On 6 April 2010, the insurer made a payment to Angas of $597,627 pursuant to the insurance policy against default by the Opies.

the primary judge's findings on valcorp's valuation 61 In his valuation report, in a schedule of "comparable sales", Mr Taormina referred to a number of sales of apartments in a number of suburbs of Adelaide, including, but not exclusively, Glenelg. However, Mr Taormina made his valuation of the Opies' property primarily by reference to the sale price of $3.9 million obtained in February 2007, for penthouse apartment number 139 at the Air Apartments, 220 Greenhill Road, Eastwood. The price obtained for that penthouse apartment reflected a rate of $10,400 per square metre. Mr Taormina, also, referred to two penthouse apartments under construction in Place on Brougham. In assessing a fair market valuation of the Opies' penthouse apartment at Glenelg North, Mr Taormina applied a rate of $10,450 per square metre. That rate was $50.00 per square metre more than the top of the range of his schedule of comparable sales. 62 The primary judge characterised two aspects of Mr Taormina's evidence as being "unsatisfactory". The primary judge preferred the evidence of Ms Joanne Gaetjens, an expert valuer, called by the respondents, to that of Mr Taormina. However, the primary judge rejected the criticisms made by Ms Gaetjens that in making his valuation, Mr Taormina had not applied the direct comparison method of valuation. The primary judge stated that he was not persuaded that Mr Taormina had not attempted to do that. 63 The primary judge found on the evidence of Ms Gaetjens, that Mr Taormina erred because he had included the sale of apartment 139 at the Air Apartments, as a "comparable sale". The primary judge said that the sale of apartment 139 was an anomalous sale. It was an "outlier". This was because the price of $3.9 million obtained for apartment 139 in February 2007, was substantially higher than the price obtained for that apartment a year earlier and, also, considerably more than the price obtained for another apartment, number 134, in the same building in January 2007. 64 The primary judge accepted the evidence of Ms Gaetjens that the Glenelg coastal apartments market was a separate market and was a market which was saturated and falling, and found that Mr Taormina had, also, erred because he had failed to identify Glenelg (including Glenelg South and Glenelg North) as a separate market. 65 The primary judge stated that when the sale price of apartment 139 at the Air Apartments was removed, the average rate per square metre for apartments above 250 square metres in the Glenelg area, was $6,109 and for all areas $6,861. 66 The primary judge, also, said that at a rate of $10,105.60 per square metre, based on the sale price of a penthouse apartment in Place on Brougham, was to be disregarded because this was, also, not a comparable sale. 67 The primary judge concluded that by reason of these errors, Mr Taormina had not conducted the valuation in accordance with the standard of a reasonably competent valuer. The primary judge went on to say: The sales Mr Taormina placed greatest reliance on were not comparable sales. Mr Taormina should have prepared his valuation on the basis that the most comparable sales were in the Glenelg area. 68 Further, the primary judge placed no significance on the fact that Savills had produced a valuation report dated 18 May 2007, which valued the Opies' property at $3.25 million, because the author of the report had not been called to give evidence.

the primary judge's findings on contributory negligence 69 At the trial, Valcorp pleaded that each of Angas, Barker and KWS had engaged in what the primary judge referred to, as "pre-transaction contributory negligence" and "post-transaction contributory negligence". The latter complaint was that Angas failed to exercise its rights as a mortgagee sufficiently promptly; and that Angas had accepted an amount upon the sale of the property which was below its market value at the time. The primary judge dismissed Valcorp's claim that Angas was guilty of post-transaction contributory negligence. Valcorp does not appeal against the primary judge's finding to this effect. 70 The relevant sections which permitted a reduction in the damages to be made on account of contributory negligence were s 82(1B) of the Trade Practices Act and subs 7(2) of the Law Reform (Contributory Negligence and Apportionment of Liability) Act 2001 (SA). The primary judge recognised that each of these statutory provisions used different language, but said that none of the parties had contended that each of the provisions required the application of a different legal test. The primary judge said that he would proceed on the assumption that they did not involve different legal tests. None of the parties contended otherwise before this Court. 71 As to the pre-transaction contributory negligence, Valcorp advanced before the primary judge, two major contentions. 72 First, Valcorp contended that Angas failed to carry out an adequate assessment or consideration of the means and the ability of the Opies to repay any principal loan, interest and other charges. 73 Secondly, Valcorp contended that each of Barker and KWS failed to carry out an assessment or consideration, other than that undertaken by Angas. It was accepted at the trial, that each of Barker and KWS did not carry out any such additional inquiry, assessment or consideration. However, Barker and KWS contended that the exercise undertaken by Angas was sufficient for each of them. 74 The primary judge put to one side the question as to whether the content of the obligation to make a proper assessment of the Opies' ability to service the loan would be affected by the fact that there was a prepayment of interest, or that Angas did not operate in the same market as a traditional bank, and so treated the value of the security as the primary consideration, and serviceability, as a secondary consideration. The primary judge said that the important point was that Angas had held out to its investors in its prospectus that it would make a proper assessment of serviceability and that it was under an obligation to do so. 75 The primary judge then went on to consider what a proper assessment of serviceability required in this case. There was no evidence before the Court from an independent expert as to what a proper assessment of serviceability by a reasonably prudent lender required. However, the primary judge found that the statements that Angas made in its prospectus, the provisions of its operations manual and the special conditions relevant to serviceability referred to in the October letters of offer from Angas, Barker and KWS, all provided the necessary evidence. 76 The primary judge found that in August 2007, Angas was of the view that on the material provided to it, the Opies did not have the capacity to service the loan, and that that remained Angas's view until, at least, late October 2007, as evidenced by the special conditions in both the August 2007 and October 2007 offer letters. 77 The primary judge then went on to identify three matters which occurred in November 2007, which he held "would have heightened the concern of a reasonably prudent lender, not allayed it". 78 The first matter was the revaluation of Mr Opie's interest in HR3D which was reflected in the second statement of assets and liabilities sent to Mr Hower by the Opies. The primary judge observed that in the second statement, the interest was said to be worth $14 million, not long after it had been said in the first statement, to be worth $3 million. The primary judge said that Mr Hower, on behalf of Angas, was not entitled to ignore the change in asserted values. The primary judge found that this information suggested that none of the information provided by the Opies could be relied on, and called for further inquiry by Angas. 79 The second matter was that CMAH Pty Ltd, the company through which Mr Opie held his interest in HR3D, was deregistered and this was known to Angas. The primary judge observed that Mr Opie had said that he would reregister the company, but when Angas conducted a further search on 27 November 2007, the company still had not been reregistered. 80 The third matter was the unsatisfactory nature of the letter from Mr Opie about his payment history with La Trobe, which, said the primary judge, raised more concerns than it answered, and that Mr Hower, in his cross-examination, had seemed to accept as much. 81 The primary judge, also, referred to the email which Angas received from Mr Opie's chartered accountant and, also, the letter from Mr Hafer, of HR3D, referred to at [46] above. The primary judge noted that the accountant's email stated that consulting income received by KCO Investment Trust for the year ended 30 June 2007 from business activities statements lodged, was $387,200 and that Mr Opie's taxable income "per his 2006 income tax return was $nil". The HR3D letter, on the other hand, stated that Mr Opie's annual salary was $275,000. 82 The primary judge found that these documents raised questions as to the detail of the KCO Investment Trust and the distributions that it made, and, also, as to why Mr Opie's taxable income was "nil" and how he had earned both the income referred to as the "consulting income" and the salary referred to in the letter from HR3D. 83 The primary judge, also, found that there was no evidence that the letter from HR3D stating that Mr Opie earned an annual salary of $275,000, could possibly have been sufficient to support the view that further inquiries were unnecessary. 84 At [160]-[161] of his reasons, the primary judge observed: I do not think Angas (and therefore, having regard to the way the case was argued, Barker and KWS) made sufficient inquiries about the Opies' ability to service the loans or formed a proper assessment of the matter. All the information they did receive reinforced the need to make further inquiries. The failure to make proper inquiries and form a proper assessment will only be relevant in terms of contributory negligence if those failures were the cause of the applicants' loss and damage. The applicants submitted that it had not been established that any further inquiries would have made a difference. I do not accept that submission. It is true that I do not have any direct evidence of the Opies' financial position. However, I think I can draw an inference on the balance of probabilities from the fact that the Opies went into default almost immediately that upon proper inquiry they would never have been able to establish an ability to service the loan. The applicants are guilty of contributory negligence. 85 The primary judge then considered and rejected Valcorp's claim in respect of post-transaction contributory negligence, and concluded as follows (at [164]): Based on Angas' pre-transaction contributory negligence, I would apportion responsibility for the applicants' loss and damage at 75 per cent to the respondent and 25 per cent to the applicants.

appeal and cross-appeal in respect of the primary judge's findings on contributory negligence 86 The findings of the primary judge in relation to contributory negligence gave rise to grounds one and two of Valcorp's notice of appeal, and the respondents' notice of cross-appeal. 87 By ground 1 of the notice of appeal, Valcorp challenged the finding of the primary judge that the contribution of each of Angas, Barker and KWS to their respective losses by its contributory negligence was 25%. In particular, Valcorp contended that the primary judge erred by failing to provide reasons for his decision to apportion responsibility for the losses in that proportion, and, in any event, by apportioning the responsibility for each loss inconsistently with the finding that "had the inquiries been made the loan would not have been made". 88 Further, by ground 2 of the notice of appeal, Valcorp challenged the finding of the primary judge that the apportionment made in respect of the contributory negligence of each of Barker and KWS was the same proportion as that of Angas. Valcorp contended that the primary judge had not given adequate reasons for that finding, and that the finding was inconsistent with the finding that neither of these two companies had carried out any additional inquiries to those carried out by Angas. 89 By their notice of cross-appeal, each of Angas, Barker and KWS, appeals against the primary judge's finding that its damages should be reduced by 25% on account of its contributory negligence. It is convenient to deal with the cross-appeal and then Valcorp's appeal.

the cross-appeal of Angas, barker and kws 90 At the hearing of the appeal, senior counsel for the respondents advised the Court that the respondents did not press ground 1.4 of the notice of cross-appeal. 91 The remaining grounds of the cross-appeal complained about the primary judge's finding that a failure by the respondents to make inquiries as to the Opies' capacity to service the loans was a cause of the loss suffered by the respondents. The respondents contended that there was no evidence of the Opies' financial position at the time of the making of the loans, and that the primary judge erred by relying solely upon the Opies' subsequent default in servicing the Angas loan, to draw an inference that further inquiries by the respondents would have revealed that the Opies were not capable of servicing the loans. 92 In support of their contention, the respondents referred to observations by French CJ and Gummow J in the case of Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361 (Kuhl). In that case, Mr Kuhl was injured in an industrial accident and sued his employer for damages. The tenor of the observations of French CJ and Gummow J relied on, is to the effect, that, in the absence of evidence as to the circumstances in which the industrial accident had occurred, it was not possible for the High Court to draw the inferences necessary to establish what caused the injury to Mr Kuhl. 93 In our view, the cross-appeal is to be dismissed. It was clearly open to the primary judge, in the circumstances of this case, to draw the inference, even in the absence of evidence of the Opies' true financial position, that had inquiries been made in November 2007 by the respondents, the loans would not have been made, because the inquiries would have shown that the Opies were not capable of servicing the loans. Contrary to the respondents' contention, it was not the simple fact that the Opies had defaulted in the making of an interest payment to Angas, which founded the basis on which the primary judge drew the inference. What weighed with the primary judge, was, the timing of the default. The default occurred when the Opies were called upon to meet the first full monthly interest payment out of their own resources - only a matter of some two months after the draw down of the loans to the Opies. 94 The evidentiary background before the primary judge, was much more illuminating than that described by French CJ and Gummow J in their observations in Kuhl, relied upon by the respondents. In our view, that evidentiary background in this case provided a sufficient basis for the primary judge to draw the inference which he did.

valcorp's appeal in respect of contributory negligence 95 Valcorp contended that the primary judge had not given reasons for his assessment of 25% contribution to its loss by each of the respondents. Valcorp said that the primary judge had given detailed reasons for the conclusion that each of the respondents was guilty of contributory negligence, but, by contrast, there was an absence of factual findings and reasons to explain the apportionment of the responsibility between Valcorp and each of the respondents of 25%. 96 Further, said Valcorp, the logical inference from the primary judge's finding that, had the respondents made proper inquiries about the Opies' financial position, the loans would not have been made, was that the failure of each of the respondents to make such inquiries was the sole cause of the loss. Therefore, said Valcorp, the claim for damages by each of the respondents should be dismissed. This is because, according to Valcorp's contention, the apportionment should have been 100% to each of the respondents, and 0% to Valcorp. 97 Valcorp, also, argued that the position of each of the three respondents in respect of contributory negligence should have been considered separately, and that Barker and KWS undertook no independent inquiries in relation to the proposed loans to the Opies. Valcorp went on to contend that because each of Barker and KWS was at a higher risk of suffering a loss in the event that the borrowed sum was not repaid, it was required to take more rigorous steps to protect itself, than Angas. Valcorp said that the primary judge did not explain why he chose to treat each of the respondent's culpability as if it was common to each of them and without distinction. Valcorp went on to refer to the reference by the primary judge, to the way in which the case was conducted in [160] of his reasons (see [84] above), in support of his finding of like apportionment of responsibility for each of the respondents. Valcorp contended that the way the respondents chose to conduct their case was a matter for them, but it did not bind Valcorp. Therefore, said Valcorp, in the event that the Court was to find that Angas's responsibility was less than 100%, the responsibility of each of Barker and KWS should be apportioned at the higher percentage than that of Angas's responsibility. 98 Therefore, contended Valcorp, this Court should allow the appeal and dismiss each respondent's claim, alternatively, make an assessment of contributory negligence in respect of each party in a proportion which was just and equitable and which attributed a higher percentage of responsibility to each of the respondents for the loss that each suffered, than the 25% apportioned by the primary judge. 99 The respondents contended that the question of apportionment in relation to contributory negligence by a trial court was a matter of "individual choice or discretion, as to which there may well be differences of opinion by different minds". The respondents referred to the decision of the High Court in Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALR 592 (Podrebersek). This Court, said the respondents, should, therefore, act with great restraint before interfering in an assessment of contributory negligence. 100 As to the complaints that the primary judge did not give adequate reasons for the apportionment of 25% to Angas, Barker and KWS and 75% to Valcorp, the respondents contended, that the explanation for the apportionment was to be implied from the reasons given by the primary judge when assessing the liability of Valcorp and the contributory negligence of Angas, Barker and KWS. The respondents contended that the primary judge had found that there was a "gross overvaluation" between the stated value of $3.6 million and the true value; and that he had found that the valuation fell "well short" of the standards of a reasonably competent valuer. Also, the respondents said that the rationale for the extent of the apportionment was to be inferred from the fact that the primary judge took into account that the respondents operated outside the traditional bank market, and were lenders which placed primary reliance upon property as security, and regarded the ability of the borrower to service the loan, as a secondary consideration. 101 As to the complaint that the position of Barker and KWS was not considered separately, the respondents contended, that Angas, Barker and KWS shared a common director and there was no further inquiries that were needed to be made by the person or persons concerned. 102 It is the case that an appeal court will not lightly interfere with a finding by a trial court as to the apportionment of responsibility on a just and equitable basis, in relation to contributory negligence. That principle of appellate restraint was stated by the High Court in Podrebersek and repeated more recently in the case of Liftronic Pty Ltd v Unver (2001) 179 ALR 321. 103 However, that does not, of course, mean that an appeal court will not interfere in cases where there has been error by the primary judge and it is, therefore, appropriate to exercise an appellate jurisdiction. 104 An example of appellate intervention is to be found in the High Court case of Pennington v Norris (1956) 96 CLR 10 (Pennington). In that case, Mr Pennington brought an action in the Supreme Court of Tasmania against Mr Norris claiming damages for personal injuries when Mr Pennington, a pedestrian, was struck at night by a motor vehicle driven by Mr Norris. The accident occurred on a road in the vicinity of several hotels shortly after closing time. The primary judge found that the defendant driver was negligent in failing to keep a proper look out, but also found that the plaintiff, Mr Pennington, was guilty of contributory negligence by failing to keep a proper look out. The primary judge apportioned responsibility equally between the plaintiff and the defendant. 105 On appeal, the High Court observed at 15-16: Much latitude must be allowed to the original Tribunal in arriving at a judgment as to what is just and equitable. It is to be expected, therefore, that cases will be rare in which the apportionment made can be successfully challenged. But, giving full weight to these considerations in the present case, we are unable to avoid the conclusion that, in apportioning the responsibility equally, his Honour must have overlooked certain features of the case, and that the amount by which he reduced the assessed damages cannot really be supported. 106 The High Court went on to observe at 16: What has to be done is to arrive at a "just and equitable" apportionment as between the plaintiff and the defendant of the "responsibility" for the damage. It seems clear that this must of necessity involve a comparison of culpability. By culpability, we do not mean moral blameworthiness but the degree of departure from the standard of care of the reasonable man. 107 The High Court then embarked upon a comparison of culpability between the two parties. The High Court observed at 16-17: Here, in our opinion, the negligence of the defendant was in a high degree more culpable, more gross, than that of the plaintiff. The plaintiff's conduct was ex hypothesi careless and unreasonable but, after all, it was the sort of thing that is very commonly done : he simply did not look when a reasonably careful man would have looked. We think too that in this case the very fact that his conduct did not endanger the defendant or anybody else is a material consideration. The defendant's position was entirely different. The learned judge found only that he was negligent in not keeping a proper look-out, but there were several other important elements in the case, as Mr Wright pointed out. We think, indeed, that the equal allocation of responsibility by his Honour must have proceeded from an overlooking of these elements. The first matter is his speed. It could not on the evidence have been found to be less than thirty miles per hour. Again, there was a large number of people in the vicinity,-the defendant himself says that he noticed "quite a number of people about". The hotels, of which there were three in the immediate vicinity, had closed a very short time previously. It was a misty night, and the road was wet. Visibility must have been impaired by these factors, and it was further impaired by mistiness on the inside and outside of the windscreen. To drive at thirty miles per hour in a town at night under these circumstances seems to us to have been to do an obviously dangerous thing, and to have amounted to negligence of far greater culpability than anything that can possibly be attributed to the plaintiff. Having regard to these factors, and to all the circumstances of the case, we are of opinion that a fair and reasonable allocation of the responsibility for the damage done is to attribute it, as to eighty per cent to the defendant and, as to twenty per cent to the plaintiff. The appeal should be allowed, and the judgment of the Supreme Court of Tasmania varied so as to give effect to this apportionment. (Original emphasis.) 108 In the case of Podrebersek, Mr Podrebersek, the plaintiff, brought an action against his employer, Australian Iron and Steel Pty Ltd, the defendant, for damages for personal injuries. Mr Podrebersek was employed as a gas regulator and was engaged in cleaning gas pipes when an explosion of gas caused the injuries in respect of which he brought his claim. The jury determined that the plaintiff had been responsible for the damage suffered to the extent of 80%. Before the High Court, Mr Podrebersek complained that the primary judge had not properly instructed the jury on the question of apportionment in relation to contributory negligence. At 532-533, the High Court said: The making of an apportionment as between a plaintiff and a defendant of their respective shares in the responsibility for the damage involves a comparison both of culpability, ie of the degree of departure from the standard of care of the reasonable man (Pennington v Norris (1956) 96 CLR 10 at 16) and of the relative importance of the acts of the parties in causing the damage: Stapley v Gypsum Mines Ltd [1953] AC 663 at 682; Smith v McIntyre [1958] Tas SR 36 at 42-49 and Broadhurst v Millman [1976] VR 208 at 219, and cases there cited. It is the whole conduct of each negligent party in relation to the circumstances of the accident which must be subjected to comparative examination. The significance of the various elements involved in such an examination will vary from case to case; for example, the circumstances of some cases may be such that a comparison of the relative importance of the acts of the parties in causing the damage will be of little, if any, importance. 109 The High Court found that the primary judge had not instructed the jury in accordance with the appropriate principles, but dismissed the appeal because of the effluxion of time between the accident and the appeal, and the fact that it would have been open to the plaintiff to correct the primary judge at the time that the direction was given. 110 In each of Pennington and Podrebersek, the claim made against the defendant was in negligence. Therefore, in comparing the degree of culpability between the plaintiff and the defendant there would have been no difficulty in applying the standard described in the observations made in those cases which referred to the "degree of departure from the standard of care of a reasonable man". However, there may be cases when some adjustment may need to be made to the application of those observations, where an apportionment for contributory negligence is made pursuant to s 137B of the Competition and Consumer Act 2010 (Cth) (previously s 82(1B) of the Trade Practices Act). This is because a party may contravene s 52 of the Trade Practices Act, even in the absence of negligence. 111 In this case, however, the question of whether, and, if so, how, to adapt the observations, did not arise. This is because the respondents impugned Valcorp's conduct as contravening s 52 of the Trade Practices Act, on the basis that Valcorp's conduct comprised a representation that the valuation was based on reasonable grounds and was the product of due care and skill, which was misleading or deceptive. The respondents, also, claimed that Valcorp was negligent in making the impugned valuation. The primary judge made an assessment of the conduct of Valcorp, both in respect of the statutory and common law causes of action, by reference to the standard of a "reasonably competent valuer". 112 As is emphasised by the authorities, much latitude must be given to a primary judge in arriving at the judgment as to what is just and equitable. However, the authorities, also, state that the assessment in relation to apportionment is to made by reference to a comparison of the relative culpability of each of the applicant and the respondent, and the causative potency of the impugned conduct of each party. 113 In considering whether a judge has erred in failing to provide adequate reasons, it is not appropriate to have regard only to a part of the judge's reasons. It is the reasons as a whole that must be examined. 114 In this case, it is clear that the primary judge was aware of the criteria by which to apportion liability in relation to contributory negligence. The primary judge referred specifically to the observations in Podrebersek, which are set out at [108] above. However, the primary judge did not explicitly engage in an analysis of the relative culpability of each of Valcorp and the respondents of the nature undertaken by the High Court in Pennington, or of the relative causative potency of the impugned conduct of each of the parties. 115 The question, then, is whether it is possible, as the respondents contended, to discern from the reasons for decision, the primary judge's rationale for finding why, on application of the test in Podrebersek, it was just and equitable to make an apportionment of 25% responsibility for the loss suffered, in respect of the contributory negligence of each of the respondents. This is a finding which implied that Valcorp's default was more than twice as responsible for the respondents' loss than the respondents' own default. 116 The primary judge's reasons, do not distinguish between the causal potency of each of the respective party's conduct. The primary judge found in respect of each party that, but for its default, the loans would not have been made. The primary judge's findings do not, in our view, provide a basis upon which to discern the rationale for a conclusion that the causal potency of Valcorp's default was more than twice as potent as each of the respondent's default. 117 As to the question of relative culpability of the parties, as mentioned, at the heart of the primary judge's decision that Mr Taormina fell short of the standard of a reasonably competent valuer, was his finding, set out at [67] above, namely, that Mr Taormina failed to confine his valuation to a comparison of the sale price of properties in Glenelg, which was a separate market in which prices were falling, rather than by reference to the January 2007 sale price of penthouse apartment 139 in the Air Apartments, Eastwood, and a penthouse apartment in Place on Brougham, North Adelaide, which the primary judge found not to be comparable sales. 118 The primary judge did not find that Mr Taormina was grossly negligent. The primary judge, however, did refer in his reasons, to the respondents' contention at trial, that he should find that Mr Taormina's valuation report was negligently prepared because of the "gross disparity" between the stated value and what they contended to be the true value of the property at the time, namely, $2.4 million. The primary judge said that such an approach was open to him, but he did not need to adopt it, because he was able to conclude that the valuation report was prepared without reasonable care. The primary judge, then, went on to find that Mr Taormina's valuation report was prepared negligently for the reasons already referred to at [61]-[68] above. In our view, the primary judge's observations do not give rise to the inference that the primary judge regarded the departure by Mr Taormina from the standard of a reasonably competent valuer as being of a gross dimension. The primary judge's reference to a "gross disparity", was made in the context of explaining why he was not going to adopt the approach being advocated by the respondents at trial, of inferring negligence from the extent of the disparity between the valuation and the true value of the property; and the observations were made before he embarked upon the assessment of Mr Taormina's conduct. 119 Further, there is no finding made by the primary judge that the conduct of Mr Taormina fell "well below" the standard of a reasonably competent valuer. The primary judge used those words when recording the respondents' submission to that effect. In our view, the primary judge went no further in characterising the default of Mr Taormina, than that it fell below the standard of a reasonably competent valuer. 120 The respondents, also, referred to the primary judge's observations, made when dealing with the question of the contributory negligence of the respondents, that the respondents operated outside of the traditional bank market, primarily as asset-based lenders, which viewed security as the principal consideration and serviceability as a secondary consideration. In our view, it is not at all apparent that the primary judge treated these factors as relevant in determining the extent of the culpability of the respondents. In our view, in assessing the extent of the obligation of the respondents to make a proper assessment of serviceability, the primary judge, in [151] of his reasons, put those matters to one side. The primary judge assessed whether the respondents had complied with the obligation to investigate serviceability, by reference to the standards which the respondents had prescribed for themselves. 121 In our view, the primary judge went no further in characterising the default of each of the respondents, than that it fell below the standards of a reasonably competent lender. 122 In our view, the primary judge's reasons do not permit this Court to discern the basis for a conclusion that the appellant's responsibility for each respondent's loss should be twice that of each respondent's responsibility for such loss. In particular, there is nothing in the primary judge's reasons to indicate that his Honour considered that the appellant's departure from the standards expected of a reasonably competent valuer was greater than each respondent's own departure from the standards expected of a reasonably prudent lender. In our view, in this respect, the primary judge erred. 123 For the following reasons, it is our view, that it cannot be concluded, on the findings of the primary judge, that the negligence of Mr Taormina reflected a substantially greater degree of departure from the conduct of a reasonably competent valuer, than did the negligence of each of the respondents reflect a departure from the conduct of a reasonably prudent lender. 124 The essence of the primary judge's finding that Valcorp was negligent was that Mr Taormina valued the property by reference to the wrong market, namely, a wider Adelaide market, rather than the Glenelg market, which was a falling market, and by reference to sales which were not comparable. This determination was made on the basis of the primary judge preferring the expert evidence of Ms Gaetjens to that of Mr Taormina. This kind of negligence is in the nature of a professional misjudgment by Mr Taormina. 125 The negligence of the respondents was of a different character. It was not necessary for the primary judge to have regard to expert evidence and to prefer the opinion of one professional to another. The primary judge found, in essence, that the respondents were aware as late as October 2007, that on the information that they had, the Opies would not be able to service the loans, but, nevertheless, lent money to the Opies without taking steps to allay their concerns, in circumstances when their concerns should have been heightened, not allayed. The primary judge found, that information which Mr Opie provided in response to the respondents' conditions of offer, was so plainly inadequate as to raise questions as to the reliability of the information provided by Mr Opie. The character of that negligence reflected an indifference by the respondents as to whether Mr Opie was reliable and as to whether the Opies had the financial capacity to service the loans, and, therefore, an indifference to the protection of its own interests and, in Angas's case, to the integrity of the representations it had made in the prospectus. 126 In assessing the relative culpability of the parties, the indifference shown by the respondents, reflected a serious failure to comply with the standards of a reasonably prudent lender. In our view, it reflected a departure from those standards, at least as serious as the departure by Mr Taormina from the standards of a reasonably competent valuer. 127 Accordingly, having regard to our findings in relation to the relative culpability of each party, and applying our view that the reasons of the primary judge do not disclose a basis to distinguish between the causal potency of the impugned conduct of each party, it is, in our view, just and equitable that each of the parties should be found to have been equally responsible for the loss suffered by each of the respondents. We, therefore, find that each of the respondents is guilty of contributory negligence to the extent of 50%. 128 Valcorp did not found its appeal on a complaint that the primary judge's discretion miscarried. However, it would have been our view, as it was the High Court's view in Pennington, that in making the apportionment that he did, the primary judge must have left one or more relevant circumstances out of account in coming to his view that Valcorp was more than twice as responsible for the loss and damage as each of the respondents. 129 It is apparent from our findings, that we do not accept the argument of Valcorp that each of Barker and KWS should be held guilty of contributory negligence in a greater proportion than that which applied to Angas. It is the case that Barker and KWS engaged in riskier lending practices than did Angas. This is reflected in the substantially higher interest rates charged by each of Barker and KWS when compared to Angas. However, as mentioned, the primary judge put to one side the question of whether the riskier nature of the lending practices engaged in by each of the respondents by lending monies to borrowers who fall into the sub-prime category, affected the nature of the obligation on the respondents to investigate the capability of the Opies to service the loans. Rather, the primary judge assessed negligence by reference to the standards which they set for themselves. In their letters of offer made in October 2007, each of Barker and KWS, also, imposed conditions requiring the establishment by the Opies of serviceability. In our view, the primary judge did not err in approaching the question of the contributory negligence of Barker and KWS in the way that he did. 130 There was, also, a complaint that the primary judge did not make a finding under s 7(1) of the Law Reform (Contributory Negligence and Apportionment of Liability) Act, namely, that each of the respondents was, by reason of its contributory negligence, 100% responsible for its loss. It was said that this was the logical consequence of the primary judge's finding that if the inquiries as to serviceability had been made, the loans would not have been made. 131 In our view, it does not follow axiomatically, from the primary judge's finding that, but for the respondent's contributory negligence, the loan would not have been made, that each respondent is responsible for its loss to the extent of 100%. It was open to the primary judge to find, as he impliedly did, that the impugned conduct of each of the parties was causally connected to the loss.

the primary judge's findings in relation to loss of opportunity damages 132 Angas's claim for damages for loss of opportunity comprised a claim that during the period 27 November 2007 to 6 April 2010, Angas would have lent the monies that it advanced to the Opies, to other borrowers and would have earned interest thereon at the rate of 13.53% per annum. The date of 6 April 2010, is significant because on that date, Angas received an insurance payment of $597,627 in respect of the insurance it had taken out against the risk of the Opie's default. 133 Barker claimed loss of opportunity damages from 27 November 2007 to the date of judgment at the interest rate of 22.67% per annum. KWS, also, claimed loss of opportunity damages from 27 November 2007 to the date of judgment at the interest rate of 23% per annum. All three of the respondents, also, claimed the loss of opportunity to earn other fees, such as application, documentation and inspection fees, in respect of the other loans they would have made to other borrowers. 134 The primary judge referred to the High Court case of Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 (Sellars). The primary judge adopted the following principle at [194] of his reasons: Where a claim is made for the loss of a commercial opportunity, the Court must, before it awards damages in respect of such a claim, be satisfied on the balance of probabilities that a commercial opportunity of some value was lost. Once that is done the Court assesses the value of the opportunity by reference to the degree of probabilities or possibilities. 135 The primary judge also adopted the following observations of Kiefel J (with whom Hayne and Bell JJ agreed) in Tabet v Gett (2010) 240 CLR 537 at [124]: So long as an opportunity provides a substantial and not merely a speculative prospect of acquiring a benefit, it can be regarded as of value and therefore loss or damage. 136 The primary judge, also, referred to a recent Full Court decision, La Trobe Capital & Mortgage Corporation Limited v Hay Property Consultants Pty Ltd (2011) 190 FCR 299 (La Trobe). 137 In that case, the applicant, La Trobe Capital & Mortgage Corporation Limited, advanced funds to a borrower which defaulted. The loan was secured by a first mortgage. Prior to making the loan, La Trobe sought a valuation of the property from the respondent, Hay Property Consultants Pty Ltd. After the borrower defaulted, La Trobe took possession of the property and sold it for an amount substantially less than the valuation provided to it by Hay. La Trobe brought a claim for damages against Hay for negligence and for damages under s 82 of the Trade Practices Act. 138 La Trobe claimed damages for the loss of opportunity to use the funds advanced to the borrower to make loans to other borrowers who would have met the contractual loan obligations. 139 The Full Court found that it was not essential in order to prove loss of opportunity damages for La Trobe to demonstrate a loss of opportunity by reference to evidence of particular transactions which were lost. The Full Court held that the evidence adduced before the primary judge, which did not address any particular transaction or transactions lost, was sufficient to demonstrate on a balance of probabilities that La Trobe had lost an opportunity to make alternative advances using the monies that it had advanced to the defaulting borrower. In assessing the value of the lost opportunity, Finkelstein J adopted a formula to take into account the contingencies which he saw as relevant in making that assessment. At [97], Finkelstein J observed as follows: Calculating the value of the lost opportunity [97] It is convenient to calculate the value mathematically. This is not to suggest that the assessment of damages in this kind of case can be precise; rather the aim is to provide an analytical framework for the assessment. [98] It is helpful to begin with some definitions: Let "LO" be the lost opportunity Let "P" be the probability of realising the opportunity Let "V" be the value of the opportunity LO = P x V [99] The next step is to calculate V: V = M x (1 - C) where M = the maximum value of the opportunity and C = the value of any contingencies M = net income from a substitute loan M = interest that would have been earned on a substitute loan less the 1.25% management fee M = $652,143.24 x 0.9875 M = $643,991.45 C = the risk of default. According to La Trobe's product disclosure statements the value of loans in arrears as a percentage of total loans is between 1.07-1.27% for the 2002-03 and 2003-04 financial years. Some arrears may have been rectified and some may not. Of those that are not, in most cases La Trobe would recover all its capital and outstanding interest payments and would, consequently, suffer little or no loss. Accordingly the risk of loss on default is de minimis and C = 0% Therefore, V = $643,991.45 [100] The next step is to calculate P: Based on Mr Gidman's evidence it is a near-certainty that La Trobe would have lent $2,400,000 to one or more borrowers on the same terms as it lent to Jet. I will allow 5% for the possibility that an alternative loan may not have been entered into. Therefore, P = 95% [101] The final step is to calculate LO: LO = P x V LO = 0.95 x $643,991.45 Therefore, LO = $611,791.88. [102] This shows that La Trobe lost an opportunity worth $611,791.88. 140 In La Trobe, Jacobson and Besanko JJ, also, used the formula although they applied different figures to the integers to reflect a higher degree of risk of realising the lost opportunity. 141 At the trial, the respondents adduced evidence from Mr Hower in support of its claim for loss of opportunity damages. 142 Mr Hower swore two affidavits. Mr Hower deposed in his second affidavit that from his examination of the financial records of Angas and his knowledge of the lending opportunities available to Angas, Angas had at all times since November 2007, a substantial demand for its loan funds. He said that he was a member of the Angas credit committee and he was aware of opportunities for Angas to make loans on its usual terms which had not been taken by Angas as it did not have sufficient funds available. Mr Hower gave similar evidence in relation to Barker and KWS, stating that he was aware of opportunities since November 2007, for each company to make loans which were not able to be taken up, because of insufficient funds being available. 143 Mr Hower, also, said that the demand for loans increased significantly after the effects of the global financial crisis, which had led to a tightening of liquidity by a majority of lending organisations such as Australian banks. 144 Mr Hower, also, deposed that, throughout the period in question, there was always a prospectus on issue from Angas inviting the subscription of further funds from the public, and that Angas advertised on the radio for the subscription of further funds. 145 Mr Hower produced three categories of financial records, namely, liquidity reports, weekly statistics reports and loan applications pending reports. It appears that a liquidity report was produced about every five days or so. The liquidity report stated the amount of unlent debenture funds available to Angas at the date of the report, and a projection of the loans to be made to borrowers within the period specified in the report, normally, within the next few weeks of the date of the report. 146 The weekly statistics report, also, reported on the liquidity of the debenture fund and set out the amounts that were available for lending at the date of the report for Angas and each of the Barker Performance Trust No 1 and Barker Performance Trust No 2. 147 The loan applications pending report was a record which reflected under the heading, "LOO accepted", the potential borrowers who had accepted letters of offer, and under the heading "LOO not yet accepted", applications for loans which had either not yet been approved by the Angas credit committee, or, if approved, not yet accepted by the potential borrower. 148 There was, also, evidence that under its trust deed, Angas was required to maintain a liquidity reserve of 5%, and that, in addition, the Angas board of directors from time to time, required an additional amount to be retained as reserved funds. Thus, for example, in November 2008, when the loan to the Opies would, but for their default, have been due to be repaid, the additional funds required by the Angas board to be held in reserve, was $10 million. 149 In his affidavit, Mr Hower set out charts derived from the information contained in the liquidity reports, which summarised the liquidity position of Angas from time to time, by reference to the net liquidity position after taking into account the amount to be set aside as reserved funds. 150 In cross-examination, Mr Hower accepted that the net liquidity figure which was derived from the liquidity reports and reflected in the chart in his affidavit, reflected a sum which was, on the date in question, available to lend. Thus, during cross-examination, Mr Hower was taken to an entry in the chart in his affidavit which reflected the net figure of $3.657 million. The following exchange occurred: Does the $3.657 million figure there mean that in addition to the liquidity reserve, and in addition to the then-applicable prudential reserves set by the directors, there was 3.657 million, or thereabouts, available to lend?...Yes. Right. You agree with me that's greater than the amount of the Opie loan?...Yes. You will see that that pertains for the next two - that is, an amount in excess of the Opie loan?...Yes. There are others, for example, 31 October 2008, you'll see?...Yes. Yes. Throughout this table where there are funds which according to your surplus exceeded the amount available - sorry, exceeded the amount of the Opie loan and were available to lend?...Yes. To the point where, if you look at the top of page 11, on 11 December 2009, you had a surplus of $23 million?...Yes. 151 The net figures in the charts reflecting the amount available to lend, varied from time to time from a negative sum to a substantial sum, such as, for example, $23 million. 152 Mr Hower, also, conceded during cross-examination, that the prudential limit was not strictly adhered to and there were times when monies which were part of the prudential reserve were used as loan funds. This is what had occurred, said Mr Hower, on those occasions when the net figure in the chart reflected a negative balance. 153 Mr Hower accepted in cross-examination, that between 30 November 2007 and 14 March 2008, Angas had $10 million more in surplus funds than Mr Hower originally thought because he had made an error about the prudential limit imposed by the board, applying during that period. 154 Mr Hower, also, said in evidence that Angas managed its lending so that it could meet or satisfy the demand for loans, by deferring the approval of loans, and managing the settlement process. 155 Mr Hower and Mr Morton stated in their evidence-in-chief, that documentation in relation to unsuccessful loan applications was not maintained. However, each admitted under cross-examination that electronic information concerning unsuccessful loan applications may be available. 156 Further, Mr Hower said that Angas had incurred two bad debt expenses since its incorporation, namely, a debt of $25,000 in 2006, and $391,000 in 2007. He, also, advised that Barker had incurred one bad debt expense which was in 2008, of $3,500 and KWS had not incurred any bad debt expenses. 157 Valcorp contended before the primary judge, that the respondents' evidence on the question of lost opportunity to lend the monies advanced to the Opies, to a reliable borrower, established no more than a "speculative prospect". Valcorp contended that the evidence did not establish on a balance of probabilities, that any applicant for a loan had been turned away by the respondents because of insufficient funds being available for the loan. 158 The primary judge found that on the authority of La Trobe, it was not essential that each of the respondents adduce evidence of a particular transaction foregone in order to establish that it lost an opportunity to use the monies it had advanced to the Opies, to earn interest at the contract rate. 159 Further, it is apparent, that, notwithstanding the criticisms, made by Valcorp of Mr Hower's evidence (which are repeated in Valcorp's appeal ground 3), the primary judge accepted the substance of Mr Hower's evidence. Further, the primary judge found that the fact that Angas always had a prospectus on issue, constituted "fairly powerful evidence in support of a perception by Angas that there was a strong demand for loans". 160 At [214] of the reasons, the primary judge observed: I am satisfied on the balance of probabilities that each of the applicants lost a commercial opportunity of some value. Their businesses were successful ones and there was a considerable demand for loans, particularly after the global financial crisis began to take effect. The value of the opportunity must be considered by reference to the probabilities or possibilities. 161 The primary judge then adopted the formula used by the Full Court in La Trobe to take into account the risk that there would have been a default on any alternative loan and, also, the possibility that an alternative transaction may not have been entered into at the same time and for the same period. 162 The primary judge said that he would allow 5% for the risk of default, namely, integer C, and 80% for the probability of realising the opportunity, namely, integer P, in order to take into account the possibility that an alternative transaction may not have been entered into at the same time and for the same period. The primary judge applied integer M (being, the interest foregone) based on the figures provided by the respondents. 163 In a supplementary judgment, the primary judge found that the loss of opportunity to earn fees associated with the making of an alternative loan, was to be dealt with in the same way.

valcorp's appeal in relation to loss of opportunity damages 164 Grounds 3 and 4 of Valcorp's notice of appeal related to the primary judge's findings in relation to the question of loss of opportunity damages. 165 In ground 3 of its grounds of appeal, Valcorp contended that the primary judge erred in finding that each of the respondents lost a commercial opportunity of some value, despite having made the following findings: (a) Angas was prepared to allow its prudential fund to fall below the limit fixed by the board of directors, in the period 30 November 2007 to 18 March 2007; (b) Angas had an additional $10 million in surplus funds available; and (c) no particular loan application had been identified by any of the respondents as having been refused because of the absence of funds, in circumstances where the evidence established that electronic information may be available concerning unsuccessful loan applications. 166 In support of ground 3 of the notice of appeal, Valcorp contended that the primary judge had erred in finding that the evidence advanced by the respondents discharged the burden of proving, on a balance of probabilities, that there were eligible applicants for loans whose loan applications were refused by reason of insufficient funds being available to Angas, or the other two respondents. Valcorp, also, contended that the primary judge had erred in assessing the evidence, by applying the "approach" in La Trobe, when he should have applied the "approach" adopted in St George Bank Ltd v Quinerts Pty Ltd (2009) 25 VR 666 (Quinerts). 167 Further, during the argument before this Court, Valcorp directed the Court's attention (by the production of a schedule) to the number of occasions where the net balance of funds available for lending recorded in the Angas liquidity reports, exceeded the amount of the loan made to the Opies. There were eight such periods identified by Valcorp - the duration of some of the periods exceeded three months. 168 In our view, the primary judge did not err in finding that the respondents had established a loss of opportunity to relend the monies advanced to the Opies, which was of some value. 169 First, we do not accept that there is any inconsistency in the "approach" adopted by the Full Court in La Trobe, to that adopted by the Victorian Court of Appeal in Quinerts. That was recognised specifically in the joint judgment of Jacobson and Besanko JJ in La Trobe at [114]. Neither of these cases seek to prescribe a universally applicable means by which a party is to prove a loss of opportunity of some value. The nature of the evidence which will discharge the burden of proving a loss of opportunity, will vary from case to case. At [112] in La Trobe, Jacobson and Besanko JJ observed: It seems to us that the question is whether an applicant has established on the balance of probabilities that there was another commercial opportunity of some value or there were other commercial opportunities of some value. An applicant who is able to establish a particular opportunity which has been lost as a result of contravening conduct will no doubt have an easier path to establishing what is necessary for the purposes of recovery. At the same time, an applicant in a case such as this who can do no more than point to the fact that he or she is in the business of lending money and was making loans at the time of the improvident loan is likely to fail to establish the loss of a commercial opportunity of some value. 170 Secondly, in our view, it was open to the primary judge to find on Mr Hower's evidence, and on the documentary evidence, that the respondents had lost an opportunity of some value. 171 The evidence comprised by the business records, demonstrated during the period in question, that there was a fluctuation in the amount of funds which was available for lending by Angas. It is the case, as was demonstrated by Valcorp's schedule, that there were periods of not inconsiderable length, when there were funds available for lending, which exceeded the amount lent to the Opies. However, these records, also, demonstrated that there were occasions when the balance of funds available for lending was less than the amount loaned to the Opies. Thus, although parts of Mr Hower's evidence in his affidavit, was expressed in terms of some generality, the business records put into evidence by the respondents, provided some further illumination to those statements, and in our view, provided support to the primary judge's finding that there was a loss of opportunity of "some value". 172 In our view, the evidence derived from the business records, that there were periods when the funds available for lending exceeded the amount loaned to the Opies, does not demonstrate the absence of loss of an opportunity of some value. Rather, it is relevant to the question of the contingencies in assessing the value of the opportunity lost. 173 Thirdly, support for the primary judge's finding is, also, to be found in the inference he drew that there was unmet demand for loan funds from the fact that there was always a prospectus on issue and Angas was soliciting funds for that purpose. 174 Fourthly, we are not persuaded that the fact that there were times when Angas did not strictly adhere to its internally imposed prudential limits, assists Valcorp's contention because it does not negate the proposition that, if Angas had available the monies it lent to the Opies, it would have used those funds in preference to resorting to the reserved funds. 175 Fifthly, it is not immediately apparent how the fact that Mr Hower accepted in cross-examination that there may have been electronic records of unsuccessful loan applications, assisted Valcorp's case. If anything, that evidence, albeit contrary to the evidence-in-chief, could be construed as assisting the respondents' case that there were a number of unsuccessful applicants. But, in any event, the primary judge specifically referred to this matter and, no doubt, took it into account in making his assessment of Mr Hower's evidence. 176 Ground 3 of Valcorp's notice of appeal is dismissed. 177 The fourth ground of appeal is as follows: The trial judge erred in law in calculating the respondents' damages for loss of opportunity by sole reference to the application of a mathermatical formula and to the extent that this was determined by La Trobe Capital [&] Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4, that decision is wrong. 178 In our view, the Full Court in La Trobe, did not prescribe that the only means by which the value of a lost opportunity in cases of this kind, was to be assessed, was by reference to the formula described by Finkelstein J. In La Trobe, the Full Court had regard to the contingency that an alternative borrower may have defaulted on the loan, and, also, that the alternative transaction may not have been entered into at the same time and for the same period. The Full Court used the formula as a means of assessing these contingencies for the purpose of determining the prospect of realising the opportunity foregone. 179 The use of the formula was simply a means of undertaking this process, and the process could have been quite properly undertaken without the application of the formula. What was important was that there should be an assessment of the relevant contingencies in order to assess the value of the lost opportunity, and the Full Court undertook that assessment. 180 Therefore, the question of whether La Trobe was wrongly decided does not arise. 181 Ground 4 of the grounds of appeal, challenged the findings of the primary judge only on the basis that he erred in using the formula as the means to assess the contingencies. For the reasons set out above, it was open to the primary judge to use this formula to assess the contingencies, but it was not necessary for him to do so. 182 We record that the grounds of appeal did not, however, seek otherwise to impugn the assessment made by the primary judge of the contingencies in determining the value of the lost opportunity. Valcorp, by its grounds of appeal and proposed orders, did not invite the Court to come to a different assessment of the value of the lost opportunity. 183 Ground 4 of Valcorp's notice of appeal is dismissed. 184 It follows that the appeal is allowed in part, but is otherwise dismissed. I certify that the preceding one hundred and eighty-four (184) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jacobson, Siopis and Nicholas.