APF Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 2)
[2007] FCA 1561
•15 November 2007
FEDERAL COURT OF AUSTRALIA
APF Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 2) [2007] FCA 1561
SALE OF LAND – purchase of rural properties for growing pyrethrum – joint venture including vendors and purchasers – valuations obtained by accountants acting for purchasers – price agreed on basis of valuations – valuations based on calculation of croppable land – subsequent lease back to vendor entity of homestead block
Held:
1....... Vendors made misleading and deceptive representations and were negligent in relation to the croppable area of the properties.
2. Valuer was negligent in relation to the croppable area and value of the properties.
3. In the circumstances valuer owed a duty of care to the purchasers.
4. Valuer’s disclaimer not effective to prevent liability to purchasers.
5. No fiduciary duty owed by vendor to purchasers.
6. Lease of homestead block should not be set aside.
7.Measure of damages was difference between price paid and true value at time of purchase.
8.Damages should include consumer price index adjustment.
9.Value at time of trial was not more than price paid; even if it had been, measure of damage would not be affected.
10.Purchaser’s cause of action arose before effective date of legislation for contributory negligence and proportionate liability.
11.Valuer entitled to full indemnity from vendors.
Trade Practices Act 1974 (Cth) ss 52, 53A(1)(b), 82(1B), 82(2), 84, 87CD
Fair Trading Act 1990 (Tas) ss 14, 17(1)(b)
Wrongs Act 1954 (Tas) ss 3, 4
Civil Liability Act 2002 (Tas) ss 4, 43BJones v Dunkel (1959) 101 CLR 298 applied
Australian Communications and Media Authority v Clarity 1 Pty Ltd (2006) 150 FCR 49 cited
Spencer v The Commonwealth (1907) 5 CLR 418 at 432 cited
Henville v Walker (2001) 206 CLR 459 cited
I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 applied
Norberg v Wynrib [1992] 2 SCR 226 applied
Pilmer v Duke Group Ltd (2001) 207 CLR 165 applied
Hospital Products Pty Ltd v United States Surgical Corporation (1984) 156 CLR 41 cited
News Ltd v Australian Rugby Football League Ltd (1996) 139 ALR 193 at 311 cited
New Zealand Netherlands Society “Oranje” Inc v Kuys [1973] 2 All ER 1222 applied
Flemington Properties Pty Ltd v Raine & Horne Commercial Pty Ltd (1997) 148 ALR 271 discussed
Potts v Miller (1940) 64 CLR 282 cited
Toteff v Antonas (1952) 87 CLR 647 cited
Gould v Vaggelas (1985) 157 CLR 215 cited
Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 cited
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 cited
Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 cited
Morgan Corporate Ltd v GWG Leviny Pty Ltd (1995) ATPR 41-414 cited
Munchies Management Pty Ltd v Belperio Pty Ltd (1988) 58 FCR 274 cited
Netaf Pty Ltd v Bikane Pty Ltd (1990) 26 FCR 30 cited
Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 cited
Henderson v Amadio Pty Ltd (No 1) (1995) 62 FCR 1 cited
Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1995] QB 375 cited
Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 cited
Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 cited
Perre v Apand Pty Ltd (1999) 198 CLR 180 cited
Ta Ho Ma Pty Ltd v Allen (1999) 47 NSWLR 1 discussed
BT Australia Ltd v Raine & Horne Pty Ltd [1983] 3 NSWLR 221 applied
Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41-249 cited
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 cited
Orion Pet Products Pty Ltd v Royal Society for the Prevention of Cruelty to Animals (Vic) Inc (2002) 120 FCR 191 cited
MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 followed
Baxter v F W Gapp Co Ltd [1939] 2 KB 271 followed
Wardley and King v Yurisich (2006) 153 FCR 78 cited
Burke v LFOT Pty Ltd (2002) 209 CLR 282 appliedC J Gross Land Capability Hand Book, Guidelines for the Classification of Agricultural Land in Tasmania, (2nd ed, Department Primary Industry Water Environment 1999)
W D Duncan (ed) Joint Ventures Law in Australia, (2nd ed, The Federation Press 2005)APF PROPERTIES PTY LTD v KESTREL HOLDINGS PTY LTD, NICOLAS GRAEME ROBINSON, ROBINSON INVESTMENT CAPITAL PTY LTD, HALISBWYN PTY LTD TRADING AS MANTACH WHITMORE VALUATIONS AND HARRISON HUMPHREYS PTY LTD
TAD 27 OF 2005HEEREY J
15 NOVEMBER 2007
MELBOURNE (HEARD IN HOBART)
IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TAD 27 OF 2005
BETWEEN:
APF PROPERTIES PTY LTD
ApplicantAND:
KESTREL HOLDINGS PTY LTD
First RespondentNICOLAS GRAEME ROBINSON
Second RespondentROBINSON INVESTMENT CAPITAL PTY LTD
Third RespondentHALISBWYN PTY LTD TRADING AS MANTACH WHITMORE VALUATIONS
Fourth RespondentHARRISON HUMPHREYS PTY LTD
Fifth Respondent
JUDGE:
HEEREY J
DATE OF ORDER:
15 NOVEMBER 2007
WHERE MADE:
MELBOURNE (HEARD IN HOBART)
THE COURT ORDERS THAT:
1. Counsel bring in minutes of orders to give effect to these reasons.
2. Further hearing is adjourned to date to be fixed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TAD 27 OF 2005
BETWEEN:
APF PROPERTIES PTY LTD
ApplicantAND:
KESTREL HOLDINGS PTY LTD
First RespondentNICOLAS GRAEME ROBINSON
Second RespondentROBINSON INVESTMENT CAPITAL PTY LTD
Third RespondentHALISBWYN PTY LTD TRADING AS MANTACH WHITMORE VALUATIONS
Fourth RespondentHARRISON HUMPHREYS PTY LTD
Fifth Respondent
JUDGE:
HEEREY J
DATE:
15 NOVEMBER 2007
PLACE:
MELBOURNE (HEARD IN HOBART)
REASONS FOR JUDGMENT
TABLE OF CONTENTS
1....... INTRODUCTION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [1]
2....... APPLICANT’S CLAIMS AGAINST ROBINSONS AND MANTACH........ ........ ... [6]
(i) Agtech Representations........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [7]
(ii) Robinsons Value Representations........ ........ ........ ........ ........ ........ ........ ........ ....... [11]
(iii) Robinsons Representations to Mantach........ ........ ........ ........ ........ ........ ........ ...... [13]
(iv) Robinsons Price Representations........ ........ ........ ........ ........ ........ ........ ........ ........ . [16]
(v) Robinsons Financial Difficulties........ ........ ........ ........ ........ ........ ........ ........ ........ . [20]
(vi) Misleading and deceptive conduct of Robinsons........ ........ ........ ........ ........ ....... [22]
(vii) Fiduciary duties........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [23]
(viii) Negligence of Robinsons........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... [26](ix) Damage suffered (as against Robinsons)........ ........ ........ ........ ........ ........ ........ .... [28]
(x) Lease of Broadmoor homestead block........ ........ ........ ........ ........ ........ ........ ........ [31]
(xi) Misleading and deceptive conduct of Mantach........ ........ ........ ........ ........ ........ .. [35]
(xii) Negligence of Mantach........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... [39]
(xiii) Damage suffered (as against Mantach)........ ........ ........ ........ ........ ........ ........ ....... [41]3....... ROBINSONS’ DEFENCE TO THE APPLICANT’S CLAIMS........ ........ ........ ........ [42]
4....... MANTACH DEFENCE TO THE APPLICANT’S CLAIMS........ ........ ........ ........ .... [61]
5....... ROBINSONS’ CROSS-CLAIM AGAINST MANTACH........ ........ ........ ........ ........ . [73]
6....... MANTACH CROSS-CLAIM AGAINST THE APPLICANT........ ........ ........ ........ .. [74]
7....... MANTACH CROSS-CLAIM AGAINST THE ROBINSONS........ ........ ........ ........ . [80]
8....... APPLICANT’S DEFENCE TO MANTACH CROSS-CLAIM........ ........ ........ ........ . [85]
9....... A BRIEF NARRATIVE OF EVENTS........ ........ ........ ........ ........ ........ ........ ........ ....... [86]
(i) Earlier valuations of Robinson properties........ ........ ........ ........ ........ ........ ........ .... [87]
(ii) Negotiations for APF joint venture........ ........ ........ ........ ........ ........ ........ ........ ..... [92]
(iii) Corporate structure........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [99]
(iv) Purchase of Robinson properties........ ........ ........ ........ ........ ........ ........ ........ ....... [102]
(v) Forestry leases........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [133]
(vi) Lease of the Broadmoor homestead block........ ........ ........ ........ ........ ........ ........ [134]
(vii) Sale of Robinson properties........ ........ ........ ........ ........ ........ ........ ........ ........ ....... [139]
10..... DID THE ROBINSONS ADVISE MANTACH OF THE CROPPING AREAS FOR BROADMOOR AND LOWER WILMOT? IF YES, DID NICOLAS ROBINSON HAVE A REASONABLE BASIS TO SO ADVISE?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... [152]
11..... DID MANTACH RELY ON ADVICE FROM THE ROBINSONS AS TO CROPPING AREAS? WAS IT ENTITLED TO DO SO?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... [163]
12..... SHOULD MANTACH HAVE REQUIRED A SOIL SURVEY OR AGRICULTURAL CONSULTANT’S REPORT?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [174]
13..... SHOULD THE APPLICANT HAVE SPECIFICALLY REQUESTED AN AGRICULTURAL CONSULTANT’S REPORT FOR CONSIDERATION BY MANTACH?........ .... [177]
14..... DID MANTACH RELEVANTLY RELY ON THE AGTECH REPORT?........ .... [178]
15..... WAS THE AGTECH REPORT PROVIDED TO MANTACH FALSE AND/OR MISLEADING?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [183]
16..... DID MANTACH RELEVANTLY KNOW THAT THE VALUATIONS WERE REQUIRED FOR A PURCHASER (RATHER THAN A MORTGAGE FINANCIER)?........ ........ ....... [185]
17..... WAS ROBINSON ACTING AS AGENT FOR BOYDS OR THE APPLICANT WHEN HE MADE ANY MISREPRESENTATION TO MANTACH?........ ........ ........ ........ ........ ........ .. [195]
18..... DID MANTACH HAVE A REASONABLE BASIS FOR ITS STATEMENT AS TO THE CROPPING AREA ON BROADMOOR AND LOWER WILMOT?........ ........ ........ ........ ........ .. [198]
19..... DID MANTACH HAVE A REASONABLE BASIS FOR ITS EXPRESSION OF VALUE FOR BROADMOOR AND LOWER WILMOT?........ ........ ........ ........ ........ ........ ........ ..... [199]
20..... DID MANTACH HOLD THE OPINION OF VALUE FOR THOSE PROPERTIES AND WAS THERE SOME PROPER FOUNDATION FOR EACH OF THE EXPRESSIONS OF OPINION?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [200]
21..... WAS THE RATE PER HECTARE USED BY MANTACH FOR BROADMOOR AND LOWER WILMOT REASONABLE AND/OR WITHIN AN ACCEPTABLE RANGE?.... [201]
(i)Broadmoor........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [201]
(ii) Lower Wilmot........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [208]
22..... WHAT WERE THE CROPPING AREAS OF BROADMOOR AND LOWER WILMOT? [209]
(i) Some background........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [209]
(ii) Broadmoor........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [213]
(iii) Lower Wilmot........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ... [257]
23..... DID THE APPLICANT RELY ON THE MANTACH VALUATIONS IN ENTERING INTO AND SETTLING THE CONTRACT OF PURCHASE FOR BROADMOOR AND LOWER WILMOT?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [274]
24..... DID THE APPLICANT RELY ON MANTACH’S OPINION AS TO CROPPING AREA? [280]
25..... DID THE APPLICANT AND APF KNOW, OR OUGHT THEY TO HAVE KNOWN, BEFORE THE CONTRACTS OF SALE OR SETTLEMENTS, THAT 155 HA OR LESS WAS AVAILABLE TO GROW PYRETHRUM ON THE ROBINSON PROPERTIES?........ ........ ........ ..... [281]
26..... WOULD THE ROBINSONS HAVE SOLD THE PROPERTIES FOR LESS THAN THE MANTACH VALUATIONS?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ [283]
27..... WAS MANTACH’S OPINION AS TO THE APPLICABLE RATE PER HECTARE FOR THE SUBJECT PROPERTIES STILL AN ACCEPTABLE RATE THAT THE APPLICANT WOULD HAVE PAID ANYWAY?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ . [286]
28..... DID KESTREL AND NICOLAS ROBINSON MAKE THE AGTECH REPRESENTATIONS AS PLEADED?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ [287]
29..... DID KESTREL AND NICOLAS ROBINSON MAKE THE ROBINSONS VALUE REPRESENTATIONS AS PLEADED?........ ........ ........ ........ ........ ........ ........ ........ ... [288]
30..... DID KESTREL AND NICOLAS AND CHRISTOPHER ROBINSON MAKE THE REPRESENTATIONS AS TO PRICE AS PLEADED AND WERE THEY RELIED ON BY THE APPLICANT?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [289]
31..... DID KESTREL AND NICOLAS ROBINSON OWE FIDUCIARY DUTIES TO THE APPLICANT?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [291]
32..... DID KESTREL AND NICOLAS ROBINSON BREACH ANY FIDUCIARY DUTIES? [293]
33..... WERE THE ROBINSONS REPRESENTATIONS FALSE OR MISLEADING? [294]
34..... DID THE APPLICANT RELY ON THE ROBINSONS REPRESENTATIONS? [298]
35..... DID KESTREL AND NICOLAS ROBINSON FAIL TO DISCLOSE THE ROBINSONS’ FINANCIAL DIFFICULTIES TO THE APPLICANT?........ ........ ........ ........ ........ . [299]
36..... BUT FOR THE REPRESENTATIONS MADE TO IT WOULD THE APPLICANT HAVE AGREED TO ALLOW ROBINSON INVESTMENTS TO LEASE THE HOMESTEAD BLOCK ON BROADMOOR?........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ [300]
37..... DID THE REPRESENTATIONS OR BREACH OF FIDUCIARY DUTY CAUSE THE APPLICANT TO LEASE THE BROADMOOR HOMESTEAD BLOCK?........ ........ ........ ........ .. [305]
38..... WHAT WAS THE VALUE OF BROADMOOR AT DECEMBER 2000/ JANUARY 2001? [306]
39..... WHAT WAS THE VALUE OF BROADMOOR AT JULY 2007?........ ........ ........ . [307]
40..... WHAT WAS THE VALUE OF LOWER WILMOT AT JANUARY 2001?........ .. [312]
41..... WHAT WAS THE VALUE OF LOWER WILMOT AT JULY 2007?........ ........ ... [313]
42..... SHOULD CPI BE ALLOWED ON INTEREST OR CAPITAL?........ ........ ........ ... [314]
43..... LIABILITY OF ROBINSONS TO THE APPLICANT........ ........ ........ ........ ........ ... [317]
(i) Liability........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ..... [317]
(ii) Damages........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .... [320]
44..... LIABILITY OF MANTACH TO THE APPLICANT........ ........ ........ ........ ........ ...... [335]
(i) Duty of care........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ....... [335]
(ii) Disclaimer........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [347]
(iii) Misleading and deceptive conduct........ ........ ........ ........ ........ ........ ........ ........ .... [351]
(iv) Untruth of representations; negligence........ ........ ........ ........ ........ ........ ........ ...... [355]
(v) Was the applicant misled? Mr Wright’s role........ ........ ........ ........ ........ ........ .... [357]
(vi) Reliance and causation........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...... [361]
45..... LIABILITY OF APPLICANT TO MANTACH........ ........ ........ ........ ........ ........ ...... [364]
46..... CONTRIBUTORY NEGLIGENCE........ ........ ........ ........ ........ ........ ........ ........ ........ . [366]
47..... PROPORTIONATE LIABILITY........ ........ ........ ........ ........ ........ ........ ........ ........ ..... [370]
48..... CONTRIBUTION BETWEEN RESPONDENTS........ ........ ........ ........ ........ ........ .... [373]
49..... CONCLUSION........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ .. [379]
1. INTRODUCTION
1In 1999 members of the Robinson family owned, either directly or through the first respondent Kestrel Holdings Pty Ltd, three farming properties on the North West Coast of Tasmania. They were known as Broadmoor, Lower Wilmot and Mannings Jetty Road. For some time the Robinsons (a term which, unless the context otherwise indicates, means or includes the first three respondents Kestrel, Nicolas Robinson and Robinson Investment Capital Pty Ltd) had grown crops of pyrethrum on the properties. Pyrethrum, a perennial similar in appearance to a daisy bush, provides an ingredient used in the manufacture of insecticides. The Robinsons grew the crops under contracts to supply a company called Botanical Resources Australia Pty Ltd (BRA) which at the time had a monopoly over the production of pyrethrum in Tasmania.
2The Robinsons wished to set up a pyrethrum farming operation in opposition to BRA. They engaged a merchant banker, Mr Haydn Wright, to advise and obtain investors. Mr Wright in turn through Boyd Partners Limited (Boyds), a Melbourne firm of Corporate Financial Advisors and Chartered Accountants, obtained investment funds from Mr Andrew Cottrell and Mr Gary Andriske who had farming interests in New South Wales.
3Through a corporate and trust structure a joint venture called Australian Pyrethrum Farms (APF) was established. The individuals involved were brothers Nicolas and Christopher Robinson, Mr Wright, Messrs Cottrell and Andriske and Mr Andrew Youl whose family farmed at Symmons Plains in the Northern Midlands. The vehicle for the acquisition of the Robinson properties was the applicant company APF Properties Pty Ltd.
4On 8 August 2001 the applicant completed the purchase of the three Robinson properties for the total sum of $2,193,000 made up as follows:
Broadmoor $1,040,000 Lower Wilmot $753,000 Mannings Jetty Road $400,000
The purchase was partly financed by a commercial bill facility of $1.5 million from the Bank of Melbourne.
5In this litigation the applicant complains of misrepresentations by the Robinsons as to the value, price and available cropping area of Broadmoor and Lower Wilmot and breach of fiduciary duties and duties of care owed by the Robinsons to their joint venture partners. Negligence is alleged against the fourth respondent, a company carrying on a valuation practice as Mantach Whitmore Valuations (Mantach), in respect of valuations of those two properties provided to the purchaser. (No complaint is made about the purchase of Mannings Jetty Road.) An issue also arises as to the grant by the applicant to the third respondent of a 99 year lease over the homestead block on Broadmoor. The applicant seeks an order setting aside the lease.
2. APPLICANT’S CLAIMS AGAINST ROBINSONS AND MANTACH
6In its fourth amended statement of claim the applicant raises a number of allegations which may be summarised as follows.
(i) Agtech Representations
7On 15 January 2001 Nicolas Robinson sent to Mantach a document (the Agtech Report) described in the accompanying fax as “a report by Agtech on our properties”. The Agtech Report purported to come from a firm called Agtech Rural and Horticultural Consultants and to have been prepared for “potential joint venture partners of Australian Pyrethrum Farms (APF Ltd)”.
8The Agtech Report included statements that Broadmoor had 80 hectares of cropping land and 40 hectares of bush and that Lower Wilmot had 80 hectares of cropping land and 66 hectares of bush and pasture. The Report made comments about other matters such as soils, weed control, irrigation systems and yield projections. It was said that Agtech Rural and Horticultural Consultants specialised in giving advice to agricultural businesses on the North West Coast of Tasmania and had “extensive experience in the Agricultural and Horticultural industry”.
9In fact, the land available for cropping was 35.9 hectares on Broadmoor and 50.5 hectares on Lower Wilmot. Moreover, the entity Agtech Rural and Horticultural Consultants did not exist. The Agtech Report was the creation of Nicolas Robinson.
10The Robinsons made the representations in the Agtech Report (the Agtech Representations) fraudulently in order to induce Messrs Cottrell and Andriske and the applicant to invest in the purchase of Broadmoor and Lower Wilmot.
(ii) Robinsons Value Representations
11Between November 2000 and May 2001, in the course of negotiations for the joint venture proposal and the acquisition of the Robinson properties, the Robinsons represented (the Robinsons Value Representations) that Broadmoor was worth well in excess of $1 million and Lower Wilmot well in excess of $750,000.
12In fact the value of Broadmoor was closer to $700,000 and that of Lower Wilmot closer to $450,000.
(iii) Robinsons Representations to Mantach
13On 29 November 2000 Boyds on behalf of Messrs Cottrell and Andriske instructed Mantach to value Broadmoor and Lower Wilmot.
14In the course of Mantach’s preparing its valuations the Robinsons (a) made representations to it that there were 80 hectares of land suitable for cropping pyrethrum on each of Broadmoor and Lower Wilmot (the Robinsons Representations to Mantach) and (b) provided the Agtech Report to Mantach.
15The Robinsons intended, or knew or ought to have known (as in fact proved to be the case), that Mantach would rely on the Robinsons Representations to it and the Agtech Report in making its valuations of Broadmoor and Lower Wilmot.
(iv) Robinsons Price Representations
16Between January and May 2001 the Robinsons represented to the applicant (a) that it was necessary for the benefit of the joint venture for the pyrethrum seed to be planted at Broadmoor and Lower Wilmot without delay, (b) that Mantach and another valuer Harrison Humphreys (the fifth respondent, against whom no relief is now sought) had undervalued the two properties, and (c) that the Robinsons would not sell the properties unless they received a higher price. They also procured Mr Wright to represent on their behalf to Boyds that there were certain defects in the Mantach and Harrison Humphreys valuations and that the price of Broadmoor and Lower Wilmot ought to be higher.
17In January 2001 Christopher Robinson sent a letter to Mr Wright, with the intention that it be sent on to Boyds and their client investors, as in fact it was. In the letter Christopher stated that he was a registered valuer in Tasmania, number 1108, carrying on business as Christopher E Robinson Valuations, and that the value of Broadmoor was $1,363,686 and the value of Lower Wilmot was between $1,135,017 and $1,135,542.
18In fact, Christopher Robinson was not a registered valuer in Tasmania and did not carry on the business alleged.
19The representations alleged in [16]-[18] are herein referred to as “the Robinsons Price Representations”.
(v) Robinsons Financial Difficulties
20At the time of the negotiations for the purchase of the properties the Robinsons were indebted to the Commonwealth Bank of Australia in the sum of approximately $2.1 million.
21On 17 April 2001 the Bank appointed Paul John Cook as its agent as mortgagee in possession and as receiver and manager of the properties.
(vi) Misleading and deceptive conduct of Robinsons
22By reason of the above-mentioned Representations, and their failure to disclose their financial difficulties, the Robinsons engaged in conduct that was misleading and/or deceptive contrary to ss 52 and 53A(1)(b) of the Trade Practices Act 1974 (Cth) and ss 14 and 17(1)(b) of the Fair Trading Act 1990 (Tas).
(vii) Fiduciary duties
23As promoters of the joint venture the Robinsons owed fiduciary duties to the applicant (a) not to permit a conflict between their personal interests and their duty to carry out a task in the interests of the applicant, (b) to account to the applicant for any benefit obtained by them by use of their fiduciary position, and (c) to disclose to the applicant all knowledge relevant to the decision made by it to engage in the dealing with them.
24In breach of their fiduciary duties the Robinsons made the Representations to the applicant.
25In further breach of their fiduciary duties, the Robinsons procured for themselves prices for Broadmoor and Lower Wilmot in excess of the true value of those properties, failed to account to the applicant for that part of the purchase price which exceeded the true value of the properties and failed to disclose to the applicant their financial difficulties.
(viii) Negligence of Robinsons
26The Robinsons owed the applicant a duty of care (a) to ensure the accuracy of material facts provided by them to it which might relate to it’s decision to purchase Broadmoor and Lower Wilmot and (b) to disclose all material facts which might relate to the decision to purchase the two properties.
27The Robinsons breached their duty of care.
(ix) Damage suffered (as against Robinsons)
28In purchasing Broadmoor and Lower Wilmot, the applicant relied on the Representations.
29By reason of its reliance on the Representations and the misleading and deceptive conduct, breaches of fiduciary duty and negligence of the Robinsons, the applicant has suffered loss and damage in that it paid $303,000 and $340,000 in excess of the true value of, respectively, Broadmoor and Lower Wilmot. It has also incurred extra financing costs.
30Alternatively, the applicant claims $643,000 from the Robinsons as money had and received, being the amount paid in excess of the true value of Broadmoor and Lower Wilmot.
(x) Lease of Broadmoor homestead block
31By a lease dated 29 August 2003 the applicant leased the homestead and curtilage on Broadmoor consisting of 1.683 hectares to the third respondent Robinson Investment Capital Pty Ltd for a term of nine years with further options for a total of 99 years.
32Robinson Investment Capital knew or ought to have known that the applicant had agreed to purchase Broadmoor, and lease the homestead block, as a result of the Representations. Had it not been for those Representations the applicant would not have leased the homestead block to Robinson Investment Capital.
33In the premises Robinson Investment Capital engaged in misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act and s 14 of the Fair Trading Act.
34The lease of the homestead block contributes to the loss of value of Broadmoor and should be set aside.
(xi) Misleading and deceptive conduct of Mantach
35In valuing Broadmoor and Lower Wilmot Mantach relied on the Robinson Representations to Mantach and the Agtech Report.
36Mantach knew or ought to have known that Boyds would communicate the Mantach valuations to a client or clients who would rely on such valuations and statements in them in deciding whether to invest in or purchase the properties.
37By written valuation reports dated January 2001 Mantach represented to Boyds that:
(a)the value of Broadmoor was $1,040,000;
(b) Broadmoor had 82 hectares of cropping land available;
(c) the value of Lower Wilmot was $753,000;
(d) Lower Wilmot had 70 hectares of cropping land available.
In fact:
(a) the value of Broadmoor was closer to $700,000;
(b) Broadmoor had 35.9 hectares of cropping land available;
(c) the value of Lower Wilmot was closer to $450,000;
(d) Lower Wilmot had 50.5 hectares of cropping land available.
38In the premises Mantach has engaged in conduct which was misleading and/or deceptive contrary to ss 52 and 53A(1)(b) of the Trade Practices Act and ss 14 and 17(1)(b) of the Fair Trading Act.
(xii) Negligence of Mantach
39Mantach owed the applicant a duty to make proper and diligent enquiries to determine the land available for cropping, to exercise the care, competence and diligence of a competent valuer and to give fair and accurate advice in relation to the value of the properties and the area available for cropping.
40In breach of its duties Mantach:
(a)relied on the advice of the Robinsons and the Agtech Report to determine the area of land available for cropping;
(b)failed to make any or any adequate enquiries about the information in the Agtech Report;
(c)failed either to commission an agricultural report to accurately determine the land available for cropping or to advise Boyds or the applicant to commission such a report;
(d)relied on information contained in Tasmap 1:25,000 maps to determine the area of land available for cropping;
(e) failed to identify accurately the land available for cropping;
(f) failed to utilize accurately the comparable sales evidence available.
(xiii) Damage suffered (as against Mantach)
41The applicant has suffered the same damage as that alleged against the Robinsons.
3. ROBINSONS’ DEFENCE TO THE APPLICANT’S CLAIMS
42Unless otherwise indicated, the Robinsons put in issue the allegations made against them. In particular, they deny that any of the matters alleged against them had any causative effect on the decision of the applicant to purchase the Robinson properties or to lease the homestead block. Reliance is in issue.
43The Robinsons admit that Nicolas Robinson prepared the Agtech Report. They deny they made the Agtech Representations fraudulently. They deny that they intended the Agtech Report to be accepted as professional advice in relation to the feasibility of successful pyrethrum farming on Broadmoor and Lower Wilmot.
44They do not admit making the Robinsons Value Representations.
45They admit that Boyds, on behalf of Messrs Cottrell and Andriske, instructed Mantach to value Broadmoor and Lower Wilmot.
46They deny they made the Robinsons Representations to Mantach. They gave the Agtech Report to Mantach after it had completed its inspection and valuation and after it had, on 16 January 2001, provided its valuations to Boyds.
47They deny that Mantach relied on the Robinsons Representations to Mantach or the Agtech Report in making its valuations of Broadmoor and Lower Wilmot.
48Save that they admit that Mr Wright made representations on their behalf as to the price of Broadmoor and Lower Wilmot, they deny making the Robinsons Price Representations.
49They deny that Christopher Robinson made any representations as to valuation qualifications and say that any cause of action arising therefrom is outside “the relevant limitations period”.
50They put in issue all elements of the applicant’s claims of misleading and deceptive conduct and breach of fiduciary duties.
51As to the negligence claim, the Robinsons deny the existence of any duty of care to the applicant, that they were in breach of any such duties, or that Messrs Cottrell and Andriske or the applicant relied on any of the Representations in their decision to purchase Broadmoor and Lower Wilmot.
52Further, they say that the applicant devalued Broadmoor and Lower Wilmot by (a) granting, on 10 August 2004, forestry leases over portions of those properties and (b) requiring Robison Investment Capital to lease the homestead block on Broadmoor.
53They say the applicant imposed as a condition of sale that Robinson Investment Capital purchase the Broadmoor homestead block. Subsequently local planning restrictions made subdivision impossible and the alternative of a 99 year lease was adopted.
54They seek to set off against any amount for which they are found liable the amounts received by the applicant from Forest Enterprises Australia Ltd (FEA).
55The Robinsons raise a plea of contributory negligence. They say the applicant
(a) limited its instructions to Mantach to a request for “a formal valuation of the freehold interest”;
(b) failed to clarify with Mantach the criteria of cropping land;
(c) failed to obtain, or instruct Mantach to obtain, a suitably qualified agricultural consultant to advise as to the area of croppable land;
(d) purchased the properties when it knew or ought to have known that the area of 155 hectares or less was available to grow pyrethrum on the three properties.
56By reason of the contributory negligence of the applicant, the Robinsons are entitled to have their liability reduced by reason of s 82(1B) of the Trade Practices Act and s 4 of the Wrongs Act 1954 (Tas).
57Any loss in relation to Broadmoor was caused or contributed to by (a) the 99 year lease of the homestead block and (b) by the creation of the forestry lease.
58Any loss in relation to Lower Wilmot was caused or contributed to by the creation of the forestry lease.
59The applicant sold Lower Wilmot in August 2004 for $450,000 whereas its true market value was at least $750,000. It failed to mitigate its loss. It failed to obtain a valuation to set a reserve, failed to allow a lengthy marketing and sale period and marketed the property too late in the cropping cycle. The Robinsons rely on s 82(1B) of the Trade Practices Act and s 4 of the Wrongs Act.
60Any liability should be limited as between the Robinsons and Mantach as concurrent wrong doers having regard to their responsibility for the damage and loss under s 87CD of the Trade Practices Act and s 43B of the Civil Liability Act 2002 (Tas).
4. MANTACH DEFENCE TO THE APPLICANT’S CLAIMS
61Mantach says that on 29 November 2000 it received instructions from Boyds to value the three properties in the belief and understanding that it was to prepare a valuation for mortgage lending purposes.
62In the course of an inspection for an earlier valuation in March 1997 Nicolas Robinson represented to it that there were 80 or 82 hectares of land on Broadmoor and 70 hectares on Lower Wilmot used for cropping purposes. Those representations were repeated and/or not withdrawn by Nicolas Robinson at the time of the 2001 valuations.
63Its valuation reports in 2001 were addressed to and intended for use by Boyds for mortgage lending purposes only. Its understanding was that if Boyds wanted a lender or any other person to rely on the valuation reports they would ask that person to write to Mantach to ask that the report be addressed to that other person.
64The valuation reports were made subject to the following disclaimer:
We state that this report is for the use only of the party to whom it is addressed and for no other purpose, and no responsibility is accepted to any third party for the whole or part of its contents.
65Mantach admits it considered the Robinson Representations and considered and relied on the Agtech Report in carrying out its valuations, along with other factors and information available to it. It denies knowing that either was inaccurate.
66Any loss of the applicant was caused by its contributory negligence in:
(a) not instructing Boyds to clearly specify the intended recipient of and the purpose for which the Mantach valuations were to be used;
(b) relying on the Representations;
(c) failing to conduct due diligence regarding the ownership of the properties and regarding the joint venture;
(d) failing to instruct it to obtain an independent agricultural consultant’s report;
(e) failing to advise that the valuations were required for the purpose of potential purchases and not mortgage lending.
67By reason of the contributory negligence of the Robinsons, Mantach is entitled to have its liability reduced by reason of s 82(1B) of the Trade Practices Act and s 4 of the Wrongs Act.
68Any loss in relation to Broadmoor was caused or contributed to by (a) the 99 year lease of the homestead block and (b) by the creation of the forestry lease.
69Any loss in relation to Lower Wilmot was caused or contributed to by the creation of the forestry lease.
70Nicolas Robinson, as the agent of the applicant, knew the areas of land at Broadmoor and Lower Wilmot used for cropping purposes and was not misled as to anything to this effect in Mantach’s valuation reports. His knowledge is to be imputed to the applicant pursuant to s 84 of the Trade Practices Act and the general law.
71The applicant sold Lower Wilmot in August 2004 for $450,000 whereas its true market value was at least $750,000. It failed to mitigate its loss. It failed to obtain a valuation to set a reserve, failed to allow a lengthy marketing and sale period and marketed the property too late in the cropping cycle. The Robinsons rely on s 82(1B) of the Trade Practices Act and s 4 of the Wrongs Act.
72Any liability should be limited as between it and the Robinsons as concurrent wrong doers having regard to their responsibility for the damage and loss under s 87CD of the Trade Practices Act and s 43B of the Civil Liability Act.
5. ROBINSONS’ CROSS-CLAIM AGAINST MANTACH
73Kestrel and Nicolas Robinson seek contribution from Mantach under s 3 of the Wrongs Act.
6. MANTACH CROSS-CLAIM AGAINST THE APPLICANT
74The applicant represented to Mantach (a) that the valuations of Broadmoor and Lower Wilmot were required by the Robinsons and not for a potential purchaser of the properties, (b) that Mantach need not obtain an independent agricultural consultant’s report, and (c) that it was appropriate for Mantach to rely on the Robinsons’ statements as to the areas used for cropping purposes.
75These representations were implied from the circumstances that:
(a)the applicant was aware that Mantach had prepared the 1997 and 1999 valuations for the Robinsons for mortgage lending purposes;
(b)the 2001 Mantach valuations expressly stated that no independent soil reports were being obtained;
(c)the 2001 valuations were sent to Boyds with a compliments slip addressed to Boyds “for your client Robinson”;
(d)the applicant did not tell Mantach that it required the valuations for the purpose of purchase of the properties.
76If it is found (contrary to Mantach’s case) that the 2001 valuations were prepared for the purpose of potential purchase, that Mantach should have obtained an independent agricultural consultant’s report and/or that Mantach was not entitled to rely on the Robinsons’ statements as to the area of land used for cropping purposes, then the representations referred to in [75] were misleading.
77In reliance on the representations Mantach valued the properties. Had it known the representations were misleading it would not have done the valuations at all or would have qualified its valuation reports.
78The applicant has thus engaged in conduct that was misleading or deceptive or likely to mislead or deceive, contrary to s 52 of the Trade Practices Act.
79Mantach has suffered loss and damage because in the absence of the representations Mantach would not have valued the properties at all, or would have placed appropriate qualifications or disclaimers on the valuations. In that event this proceeding would not have been brought against Mantach and it would not have been exposed to actual or potential loss, including liability for damages interest and costs.
7. MANTACH CROSS-CLAIM AGAINST THE ROBINSONS
80In the event that the Court finds that Mantach is liable to the applicant, Mantach seeks from Kestrel and Nicolas Robinson contribution to an extent as shall seem just and equitable under s 3 of the Wrongs Act.
81Further, Kestrel and Nicolas Robinson represented to Mantach that Broadmoor and Lower Wilmot had 80 and 70 hectares respectively used for cropping purposes.
82These representations were made orally at the time Mantach carried out earlier valuations of the properties for the Robinsons in 1997 and 1999 and between 29 November 2000 and January 2001 when Mantach was carrying out the valuations the subject of this proceeding.
83The representations were also made in the Agtech Report and are also to be implied from the fact that the Robinsons did not correct the areas recorded in the 1997 and 1999 valuations provided by Mantach.
84If it is found that there were not 80 hectares of land suitable for cropping pyrethrum at Broadmoor and there were not 70 (or 80) hectares of such land at Lower Wilmot (all of which Mantach denies) then Kestrel and Nicolas Robinson were negligent and engaged in misleading and deceptive conduct contrary to s 52 of the Trade Practices Act and s 14 of the Fair Trading Act.
8. APPLICANT’S DEFENCE TO MANTACH CROSS-CLAIM
85Mantach filed its cross claim after the expiration of the limitation period prescribed by s 82(2) of the Trade Practices Act.
9. A BRIEF NARRATIVE OF EVENTS
86In this section I shall briefly outline the sequence of events. Following that I shall address the issues raised by the pleadings. The definition of legal and factual issues appearing hereafter in these reasons generally corresponds with a template prepared and agreed on by counsel at my request.
(i) Earlier valuations of Robinson properties
87In August 1992 Mr Brian Chandler of Richardson & Wrench (Tas) Pty Ltd valued Broadmoor for the Westpac Bank. The Robinsons had a copy of the valuation. It valued Broadmoor at $560,000 and included the following
Areas Cleared
Approximately 52 hectares of cropping land.
Approximately 30 hectares of grazing slopes and flats.
Balance – bush, dams and waste areas.
88In 1997 a finance broker Mr Ray Cross instructed Mantach to value the Robinson properties on behalf of the Hobart legal firm Piggott, Wood and Baker which was a prospective mortgagee. Mantach duly provided valuations of Broadmoor and Lower Wilmot dated March 1997. Mr Brian Mantach conducted an inspection of the property on 14 March 1997. He valued Broadmoor at $1,022,000. His report stated his instructions as follows:
My instructions are to establish the current fair market value of the property for mortgage security purposes. Instructions have been issued by Mr Ray Cross, Finance Broker of 88 Main Street, Sheffield, on behalf of the Robinson family. Lender is Piggott, Wood and Baker.
Under the heading “Description” there was a description of the land in the two titles which comprised the property. It was in these terms:
Description
P 0992 comprises approximately 42 ha of near level upper banks and gently sloping hillside ranging from the 150 metre contour down to the 100 metre contour. Kerrison Creek runs through this land forming a permanent water supply. The balance land in this title is steeper undulating land that remains as bush.
P 0993 contains approximately 40 ha of mostly near level banks and gentle slopes that is [sic] used for cropping purposes with the remainder of the property being undulating in nature and containing bush. The soils on the cleared land are red basalt in nature, mostly stone free and very suitable for cropping purposes. The area has an average rainfall of around 37 inches and predominant land use in the area, apart from cropping in its various forms is for dairying, fat lambs and beef cattle.
Under the heading “Site Improvements” there appeared the following:
The property is now exclusively used for cropping purposes. By scaling off a map and by discussions with the owners, there is [sic] approximately 82 ha of gently undulating banks and slopes that have been cleared and are used for cropping purposes. The remaining 40 ha of the property is bush. The boundary is fenced with standard post and wire fencing plus there is some internal fencing of a similar nature. A gravel roadway provides access through the property. [Emphasis added]
After detailing six comparable sales the valuation calculations were set out. Buildings and chattels totalled $142,000 (rounded). Land was $880,000 as follows:
82 ha of red cropping land @ $10,000/per ha 820,000
40 ha of bush @ $1,500/per ha 60,000
89A valuation also dated March 1997 for Lower Wilmot was based on inspection of that property on the same date as Broadmoor. The valuation was $753,000. It included a figure for 70 ha of “cropping land” at $8000 per hectare.
90In July 1999 Mantach provided further valuations of Broadmoor and Lower Wilmot for the Robinsons for mortgage lending purposes. The descriptions of cropping land and the values assessed were the same as in the 1997 valuations.
91In November 1999 at the request of the Robinsons, Mantach “assigned” its valuations to the Commonwealth Bank, that is to say, Mantach made the valuations available to the Bank for its use, obviously enough for security purposes. Mantach did not charge the bank but did charge the Robinsons.
(ii) Negotiations for APF joint venture
92In mid 1999 the Robinson brothers and Mr Andrew Youl commenced research into the possibility of establishing a company for the growing of pyrethrum. They had in mind securing a hybrid seed capable of producing high yields and securing holdings of 1000 ha cropping land.
93In November 1999 Mr Haydn Wright was introduced to the Robinsons as a person who might assist them to find investors. On 24 November 1999 Australian Bio-Pharmaceuticals Pty Ltd (ABP) was incorporated. The founding members were the Robinson brothers, Mr Wright, Mr Youl and Mr Nigel Blair who had experience in insurance.
94In July 2000 Messrs Cottrell and Andriske, clients of Boyds, were introduced to the project by Mr Joff Macleod of that firm. They were given an information memorandum which included two financial models prepared by Mr Wright. One was a “red” model and the other a “grey” model. The two models assumed operations on, respectively, the red soils of the North West Coast or the grey soils of the Northern Midlands.
95Messrs Cottrell, Andriske and Macleod made several visits to Tasmania and had discussions with the Robinsons. Messrs Cottrell and Andriske told the Robinsons that in their view the grey model was far superior because the land was cheaper and could be operated more profitably. However, Nicolas Robinson persuaded them that red soil was preferable because it had better drainage properties. He told them the Robinson family had been growing pyrethrum for almost 10 years, were BRA’s biggest grower and had the top yielding crop. In answer to Messrs Cottrell and Andriske’s query as to why they were needed if pyrethrum farming was so easy and so profitable, Nicolas Robinson said that they had debt against their properties and could not raise extra money to buy new properties. They wanted to buy more properties through BRA, but BRA was inherently conservative and would not allow them to do that.
96In the course of one of their trips to Tasmania, Messrs Cottrell and Andriske inspected the Robinson properties and other farming properties on the North West Coast. The Robinsons said that the price of red cropping land was about $7000 per hectare but their own land was worth more. However, no specific price was put on the Robinson land at this stage.
97By November 2000 the various parties were committed to the project. Up until this stage the Robinsons did not wish their land to be considered for the project. However, in November this attitude changed and it was agreed that the Robinson properties should be purchased by the joint venture. Broadly speaking, the scheme was that the Robinsons would run operations under the overall direction of Mr Youl. Messrs Cottrell and Andriske would provide the equity capital.
98About this time arrangements were made to import seed from a firm called Pyagra Inc in Arizona, USA. Importation was seen to introduce a note of urgency to finalise the sites for the venture.
(iii) Corporate structure
99On 5 December 2000 the applicant and APF Investments Pty Ltd were incorporated. Mr Wright was appointed as sole director of the applicant and Mr Macleod as sole director of APF Investments.
100Leaving aside, for the sake of clarity, trust arrangements, the structure of the joint venture was as follows. The operating company was Australian Pyrethrum Farms Pty Ltd. Its share capital was divided into equal numbers of A class and B class shares. The A class shares were held by APF Investments, in which the Cottrell and Andriske interests each had a 50 per cent shareholding. The B class shares were owned by ABP. That company’s shareholding was divided between the Robinsons and Messrs Wright, Youl and Blair. Holders of B class shares were not entitled to a share of profits until the return on investment to APF Investments reached 25 per cent.
101Australian Pyrethrum Farms was to lease the properties from the applicant in which the beneficial interests, again via trusts, were shared between APF Investments and ABP, but with the latter having a deferred interest contingent on APF Investments obtaining a 25 per cent return.
(iv) Purchase of Robinson properties
102In November 2000 a meeting was held at the office of Boyds in Melbourne. Present were the Robinson brothers and Messrs Wright, Macleod, Blair, Cottrell and Andriske. In his evidence Mr Cottrell described the meeting in these terms:
Right and what – was there any particular aspect of proceedings at that stage that sparked the discussion about the property purchase?---Yes, well, the discussion at that stage was that we knew we had seed coming and that they wanted to get it in straight away.
Right?---And it was pretty clear that Robinsons’ property was the only one we could practically get prepared in time to actually put the seed in, so that brought up how do we actually get the properties. It was agreed by everyone that we would buy them. It was agreed that the homestead would be subdivided as the Robinsons wanted to keep their family home, which we felt was fair enough. In the scope of what we were looking at then as well we weren’t looking at selling the property back and worrying about the homestead. That was going to be one of many properties we were going to buy over the next 12 months. We discussed the properties and the Robinsons weren’t keen on getting valuations, they didn’t like that idea, but we just couldn’t agree to just simply handing them over whatever price they wanted to put on it, and it was the only [way?] we could practically agree to getting a purchase. So it was agreed to get two valuations and it was agreed to abide by them.
103On 29 November Boyds wrote to Mantach requesting a valuation of the three Robinson properties. The letter stated (formal parts omitted):
REQUEST FOR VALUATION IN RELATION TO THE FOLLOWING PROPERTIES:
□ P.2600 Mannings Jetty Road, North Motton,
□ P 0992 & P 0993 Broadmoor RA 403 Preston Main Road,
□ UPI Nos. 1155-1159 Wilmot Road, Lower Wilmot.
We hereby instruct Mantach Whitmore Valuations to prepare a formal valuation of the freehold interest in the above properties.
We require the following issues to be considered in performing this assignment:
□The valuations is [sic] to be carried out in accordance with the definition of Market Value as defined by the International Assets Standards Committee;
□The valuation should be based on an arms length market valuation;
□The valuation reports must be signed by the undertaking Valuer and any other person duly required in relation to the Firm’s Professional Indemnity Insurance;
□We require full disclosure of the Valuation Methodology including calculations, rationale and any assumptions; and
□ The valuation is urgent and must be completed without delay.
Prior to undertaking the assignment, would you please provide an indication of your fee for our approval together with the proposed completion date.
Should you have any queries or require any further information, please do not hesitate to contact us.
104On 29 November Boyds gave instructions to Mr Andrew Cubbins of Harrison & Humphreys in similar terms.
105On 5 January 2001 Mr Wright wrote to Pyagra confirming that ABP would plant 500 acres of land in January 2001 and that the land specified had a land volume in excess of 500 acres. The letter stated that the land was “owned by the Robinson Family who are known to Pyagra”.
106On 9 January Mr Cubbins of Harrison & Humphreys wrote to Boyds advising of valuations of $820,000 for Broadmoor and $575,000 for Lower Wilmot and stating that full valuation reports would follow.
107On 15 January Mantach wrote to Boyds stating that Mr Brian Mantach had inspected the three properties and that detailed valuation reports were being prepared. Figures were given as follows:
Mannings Jetty Road $400,000
Broadmoor $1,040,000
Lower Wilmot $753,000
The letter stated that at Broadmoor “(a)bout 82 hectares of … land comprises good red basalt type soils that are very suitable for intensive cropping purposes. The balance comprises land that was until recently bush but which has now been pushed and partly cleared”. Lower Wilmot had “about 70 hectares of good cropping land”.
108On 16 January Nicolas Robinson faxed a copy of the Agtech Report to Mantach. The covering letter said:
Dear Brian,
Please find attached a report by Agtech on our properties.
Yours faithfully,
Nic
109On the same day Boyds gave instructions to Mr Noel Ware of Ware & Otlowski, solicitors, to act on behalf of Cottrell and Andriske in relation to the purchase of the three properties. The letter enclosed contracts of sale which were “subject to the vendors providing final confirmation of clear title and final price negotiation”.
110On 18 January Mr Wright emailed Boyds referring to their meeting of the same date and advising that subsequent discussions with the shareholders of ABP confirmed that the land would be sold to the applicant at $2,300,000 “unless reasonable argument can be shown to the contrary”. The email also stated that seed would be on hand within days and that ABP would commence planting “irrespective of the contemplated agreements being finalised”.
111Some time in late January Mantach sent formal valuations of the properties to Boyds. They were accompanied with a compliments slip in these terms:
With Compliments
To: J J McLeod
Enclosed please find the Valuation Report as requested for your client, Robinson
Thank you for your instructions in this matter.
Regards
Brian Mantach
The words underlined were handwritten.
112In the Broadmoor valuation under the heading “Client and Instructions” the report stated:
My instructions are to prepare a formal valuation of the freehold interest in the property. Instructions have been issued by Boyd Partners Limited.
The interest valued was stated to be “Freehold interest assuming vacant possession” and the valuation $1,040,000. The description of the land in each title was identical with that of the Mantach 1997 valuation (see [88] above), except that the title references themselves were different. The description under the heading “Site Improvements” was the same, except that the sentence italicised was replaced by “The remaining 40 ha of the property was bush much of which has recently been cleared”. Seven comparable sales showing brief details of improvements, cropping areas and price were set out. Another nine were noted in more summary form.
113Under the heading “Summation Valuation” figures were attributed to various improvements and to 82 hectares of “Red cropping land” at $9500 per hectare.
114Under the heading “Qualifications and Assumptions” it was said (par (j)) that while the valuer had “taken every reasonable care both during our inspection of the property and in making relevant enquiries, we have not undertaken or requested” a number of enquiries and searches, including “soil survey”. It was also stated (par l):
We state that this report is for the use only of the party to whom it is addressed and for no other purpose, and no responsibility is accepted to any third party for the whole or part of its contents.
115The Lower Wilmot valuation was for the same figure ($753,000) as the 1997 valuation. It contained the same qualifications and assumptions as the 2001 Broadmoor valuation.
116On 25 January Mr Wright wrote to Boyds criticising the valuations and in particular those of Cubbins. The letter concluded:
The Robinson’s [sic] have argued that a figure far in excess of the Mantach Whitmore valuation could be achieved on the open market given the cropping history and water systems on their properties would make them highly sought after. The consideration requested is $2,300,000 and this is obviously an issue that must now be dealt with to see how consensus on price can be achieved.
The letter enclosed what was described as a
separate analysis provided by Chris Robinson in respect of the comparable data noting in particular where the comparable is distinguishable by property use.
117That letter is headed “Christopher E. Robinson Valuations” and is signed under a description “Christopher E. Robinson (BBUS PROP VAL, IM) REGISTERED VALUER NO: 1108”. After noting some favourable features of the Robinson properties and criticising the valuations, particularly those of Cubbins, it included the following:
Please note there is a long history of cropping land sales that show an overall rate above $9000 per hectare. If this rate is applied to the Robinson Group’s 315.38 hectares, $2,838,420 results.
118After the Mantach and Cubbins valuations were received there was a meeting in Melbourne. According to Mr Cottrell, the Robinsons (or at least Nicolas, he could not be sure if Christopher was present) were very unhappy about the valuations. They felt they grossly under-valued their properties and that to agree to them would be to give away some of their family heritage cheaply and would be discounting all the work they had done on their farms.
119The stand taken by Cottrell and Andriske was that without some reason they could not agree to pay more than the valuations, so they would pay the (higher) Mantach valuation. The original agreement had been that the parties would get two valuations and split the difference, but as it turned out the Robinsons were not happy with either valuation. After this meeting negotiations continued between Macleod on behalf of the Cottrell and Andriske side and Wright on behalf of the Robinsons.
120On 29 January Mr Wright emailed Boyds confirming discussions to the effect that Nicolas Robinson would “need $2,300,000 [to] pay out family with reimbursement to investors at subdivision”.
121On 1 February Mr Wright wrote to Boyds referring to a recent conversation confirming purchase for the price equal to the Mantach valuations on terms of 10 per cent deposit with 30 days settlement. The letter also stated:
That the Robinson Group will purchase the homestead property together with any land required for subdivision purposes from the applicant upon achieving subdivision. The purchase price will be equal to that stipulated in the Mantach Whitmore valuations. Any cleared land that is included in the subdivision will be purchased by the Robinson Group at the valuation price of $2,500.00. Any cropping land required for subdivision will be purchased for nil consideration subject to that land being leased to the applicant on a 99- year basis.
122No mention had been made in the Mantach valuation of Broadmoor of any sale back of the homestead property. It is not suggested that this issue was raised with Mr Mantach.
123On 15 February Boyds on the letterhead of APF Investments sent to Mr Wright a letter, later referred to as the Letter of Understanding, “document(ing) the intention of the parties” in relation to the purchase of the properties by the applicant from the Robinsons for $2,193,000 made up as follows:
Broadmoor 1,040,000
Lower Wilmot 753,000
Mannings Jetty Road 400,000
The valuations were said to “reflect the values provided by Mantach Whitmore”. Settlement was to be on terms of 10 per cent deposit and balance on “not less than 30 days or as soon as practicable thereafter”. It was noted that the Robinsons had agreed to purchase the homestead on Broadmoor from the applicant, subject to a subdivision of title. The subdivided area would include the homestead and would be “the minimum amount permitted under planning restrictions”. The price was to be the value placed by the Mantach valuation on the homestead and associated improvements ($118,770) plus for any cleared land “the valuation price of $2500 per hectare”. If cropping land was included in the subdivided property it was to be leased back to the applicant for $1 per year.
124On 27 February the Pyagra seed arrived in Australia but was detained in quarantine.
125On 14 March the Commonwealth Bank notified the Robinsons that they were in default, that the Bank was seeking to end the banking relationship and would issue letters of demand shortly. The total amount alleged to be due was approximately $2,335,000. On 17 April the bank appointed Paul John Cook as receiver and manager of Kestrel and related companies.
126In March Messrs Cottrell and Andriske visited the properties again in the company of the Robinsons and Mr Wright. They discussed issues concerning BRA. The Robinsons had told BRA of the sale and the latter wanted the buyers to take over the existing contracts. Obviously that would not be possible if the buyers were to plant their own pyrethrum, so BRA wanted the crop eradicated, which ultimately occurred. The Cottrell/Andriske legal advice was that contracts of sale could not be signed until BRA confirmed they agreed to their plants being eradicated.
127On 27 March a Shareholders Agreement was executed. The parties were ABF (the Robinson, Wright and Youl interests), APF Investments (the Cottrell and Andriske interests) and Australian Pyrethrum Farms (the joint venture vehicle). The recitals included statements to the effect that the first stage of the project comprised an initial planting of 500 hectares of pyrethrum in 2001, that the parties intended to expand the project “on a prudent basis” to at least 1000 hectares, and that APF Investments agreed to fund a minimum level of 1000 hectares.
128On 27 April a meeting of the Board of APF was held at the Youl property at Symmons Plains. Those present included Messrs Cottrell, Macleod, Youl and Wright and Messrs Andriske and Nicolas Robinson as guests. Mr Wright advised that the Pyagra seed release was imminent and that BRA had no capacity to caveat or claim an interest in the Robinson land. On that basis the Board resolved to sign the purchase contracts.
129Contracts of sale were exchanged on 11 May 2001 with Cottrell and Andriske as purchasers. Subsequently Cottrell and Andriske nominated the applicant as purchaser.
130The Broadmoor contract contained a term (cl 15.2) for the sale back of the homestead “together with its relevant land and improvements when it is subdivided by the Purchaser and this area including the homestead shall be the minimum amount permitted by the relevant Planning Laws and Regulations”. The vendor undertook to “submit a Subdivision Plan to the Central Coast Council to achieve a separate Certificate of Title to the subdivided property”. The purchase price was to be equal to that stipulated for the homestead and improvements in the Mantach valuation (a total of $118,770) plus cleared land at the “valuation price of $2,500 per hectare”. It was further provided that if “cropping land (was) included in the Subdivided Property, that land must be leased back to the Purchaser for a rental of $1.00 per year”. The clause demonstrates that the parties proceeded on the assumption that all cleared land is not necessarily cropping land.
131Some problems arose with contamination of a seed bank from Pyagra.
132Ultimately the contracts were settled on 30 August 2001. In the meantime the Bank of Melbourne (Westpac) had confirmed finance for the purchasers. On 2 July Westpac emailed Mantach stating that it wished to rely on the January 2001 valuations addressed to Boyd Partners “for mortgage purposes relating to proposed Pyrethrum farming”. In a reply of the same date Mantach stated that it had provided valuation reports to Boyds in January 2001 and that the reports “are assigned to Westpac Banking Corporation and may be used and relied on by the bank for mortgage lending purposes”. The valuations were confirmed as still being current. As the reports were being assigned to Westpac “for the same client” no fee would be charged.
(v) Forestry leases
133In December 2002 the applicant granted leases over portions of Broadmoor and Lower Wilmot to FEA for forestry purposes. The areas leased were approximately 25.5 ha (Broadmoor) and 38 ha (Lower Wilmot) and the rentals were $175 per hectare per annum (Broadmoor ) and $150 per hectare per annum (Lower Wilmot). Both leases were to commence on 31 December 2002 and terminate on 31 December 2022.
(vi) Lease of the Broadmoor homestead block
134On 28 November 2001, pursuant to the Letter of Understanding and the contract of sale, the Robinsons submitted a proposal to the Central Coast Council for the subdivision of the homestead block. On 20 February 2002 the Council rejected the application on the grounds that it was contrary to the applicable Planning Scheme and the State Policy on the Protection of Agricultural Land.
135On 28 March 2003 Nicolas Robinson forwarded a proposal to Australian Pyrethrum Farms for a 99 year lease of the homestead block on payment of $123,700 ($118,770 for improvements and $5000 for five acres of land).
136The Cottrell and Andriske interests sought legal advice on the proposal. They were concerned as to the loss of functionality in that no accommodation would be available for a farm manager, and that there would be a loss of value if and when APF Investments chose to sell Broadmoor.
137Mr Noel Ware of Ware & Partners in a letter of 10 April advised that
…there is no way this condition [in the Letter of Understanding] can be read to include a 99 year lease between the parties if the Robinsons application to subdivide the homestead lot was refused, which it was.
Consequently I believe APF [Properties] has no legal obligation to enter into any form of lease 99 years or otherwise with the Robinsons for the homestead block.
If circumstances have changed since the Letter of Understanding and Contract were entered into between the parties then in our opinion APF [Properties] can either refuse to contemplate leasing the property to him or lease it to him on such terms as can be agreed.
138There was in evidence a letter dated 9 July 2003 from APF Investments to Westpac signed by Mr Cottrell which refers to extreme disappointment “due to misrepresentation of vendors and negligence of valuers”. Mr Cottrell’s evidence was that the letter was sent over a year later, in August 2004, and the date was mistakenly recorded. In any event, after some further correspondence between the Robinsons and Mr Cottrell concerning the precise area of the homestead block, a lease between the applicant and Robinson Investment Capital was executed on 29 August 2003. The area of the homestead and curtilage was approximately 1.67 hectares. The term, including options, was 99 years. The rental was $122,945 payable within three months and thereafter one dollar per annum. The lease was registered at the Lands Titles Office.
(vii) Sale of Robinson properties
139By the end of 2003 the project was in trouble. A major factor was the collapse of the market for pyrethrum. The top American insecticide manufacturer switched to a synthetic source. Kenya, the world’s leading producer, had a bumper harvest after many lean years. Management disputes also arose. In early June 2004 it was resolved to put the three properties on the market.
140Mr Robert Medwin, then with Roberts Real Estate Agency in Ulverstone, was retained as agent for the sale. Mr Medwin has worked in real estate on the North West Coast for over 40 years. He would sell about 60 rural or rural residential properties in a year. He said in evidence, and I accept, that over the years he has accumulated very specific knowledge about the North West Coast of Tasmania including but not limited to the topography, land areas, soil type, climate, land use and compatibility for varied farming purposes.
141Mr Medwin was familiar with the three Robinson properties and had been so for about 40 years. He could remember “off the top of [his] head” three preceding owners of the properties before they came into the hands of the Robinsons. In early July 2004 he met with, amongst others, Mr Bill MacDonald the CEO of APF, Mr Youl and Christopher Robinson for the purpose of inspecting the three properties.
142They commenced with an inspection of Broadmoor. Christopher Robinson told Mr Medwin that it was a 300 acre property and that 160 acres was presently planted to crops. Mr Medwin said that he could not see that there were 160 acres (64.7 hectares) being cropped. He asked Mr Robinson for a copy of the paddock plan and crop rotation details. Mr Medwin observed that Broadmoor had steep contours and a large area of the land was bush and planted with forest.
143A week or two after that meeting Mr Medwin obtained copies of the paddock plan and crop rotation plans together with aerial maps of the property held by FEA. He looked at the Tasmap 1: 25,000 map and formed the view there was “no way” that 64.7 hectares of the property was cropped or capable of being cropped. Some of the land also appeared to be of poor quality soil and would not be worth clearing. He obtained a copy of the water licence. As a rule of thumb one hectare of cropping land will require a licence for 1 ML (1 million litres) of water. The water licence for Broadmoor was 43 ML. He reached the conclusion that 40 hectares of land was capable of being used for cropping purposes.
144On the same day in early July 2004 Mr Medwin inspected Lower Wilmot. He asked Mr Robinson for the same details as he had for Broadmoor and one or two weeks later was given a copy of the paddock plan and crop rotation details. The paddock plan showed 54 hectares of cropping land. The total water allocation was 63.5 ML. Mr Medwin estimated the total area being 52 hectares. The eight paddocks shown on the paddock plan had an individual size of 54 hectares.
145In June 2004 Mr Medwin submitted a marketing proposal to Mr MacDonald. It stated that Broadmoor had “40 hectares of pine [sic] cropping land in a sort [sic] after area” and that at Lower Wilmot “52 hectares is prime cropping land”. The proposal gave estimated prices of $600,000 to $650,000 for Broadmoor and $420,000 to $460,000 for Lower Wilmot.
146The proposal recommended sale by auction with advertising over a five week period in specified Tasmanian newspapers and internet display. In his evidence Mr Medwin defended the length of the advertising campaign, saying
the longer you give purchasers, the more likely they are to procrastinate. Intensive and short advertising campaigns are more likely to attract the market.
147On 19 June 2004 Mr Medwin received an email from Mr Youl in which Mr Youl calculated the “total cropping area” for Broadmoor as approximately 40 hectares plus probably 5 to 7 hectares taken up with the dam gully, existing dam chemical storage area sheds and access roads, the balance of the 122.43 hectares being existing forest and a small mix of potential cropping land now planted with trees by FEA with the remaining steeper land not suitable for cropping now also planted out with trees. Mr Youl calculated the total cropping area for Lower Wilmot as approximately 60 hectares with the balance of 147.05 hectares taken up with existing forest and non-cropping ground now committed to trees planted by FEA, existing dam areas, ground storage areas, chemical wash down area with evaporation pit, overhead tank and access roads.
148Some time in July/August, and after he submitted his figures to Mr MacDonald, Mr Medwin received a copy of the Mantach 2001 valuations. They gave him great concern. He disagreed with them in terms of the land area available for cropping and the price.
149There was a lot of interest in Broadmoor after it was advertised. Mr Medwin took about fifteen couples over the property. Lower Wilmot did not attract the same amount of interest. Mr Medwin considered it not to be in a prime cropping area. It was further inland and relatively isolated.
150The auctions of all three properties were conducted by Michael Warren, the Manager of Roberts, at the Ulverstone Civic Centre on 10 August 2004. There were approximately 40 persons in attendance. The reserve prices supplied by Mr MacDonald the previous day were Broadmoor $1,000,000; Lower Wilmot $450,000 and Mannings Jetty Road $400,000. Mannings Jetty Road sold at auction at or about the reserve price. Lower Wilmot was passed in and sold shortly after the auction for $450,000. The sale was negotiated with the only bidder. There was no bidding for Broadmoor.
151I now turn to the factual and legal issues as defined by counsel.
10. DID THE ROBINSONS ADVISE MANTACH OF THE CROPPING AREAS FOR BROADMOOR AND LOWER WILMOT? IF YES, DID NICOLAS ROBINSON HAVE A REASONABLE BASIS TO SO ADVISE?
152The evidence of Mr Mantach was that for the purposes of the 1997 valuations he inspected the Robinson properties on 14 March 1997. He went first to Broadmoor where Nicolas and Christopher Robinson were living in the homestead. He drove around Broadmoor in the company of Nicolas Robinson. He made a file note which is headed by the words “P992 and 993”. Underneath there is a plus and minus sign and the figures and words “200 ac cleared”. The numbers P 992 and 993 refer to the two titles which made up Broadmoor. Two hundred acres referred to a statement that Nicolas Robinson made to him that 200 acres of the property had been cleared. Two hundred acres is roughly 81 hectares. Mr Robinson told him that all the cleared land was used for cropping purposes.
153At the time of his inspection Mr Mantach had with him a 1:25,000 Tasmap of the area. The map was produced in 1992 from aerial photography carried out in 1988. The Tasmap 1:25,000 maps are published by the Tasmanian Department of Environment and Planning. They are produced from aerial photographs taken at irregular intervals. They show title boundaries (although stated to be not authoritative) and topographic detail including roads and watercourses. Forested areas are coloured green. Contour intervals are 10 metres with 50 metre index contours.
154After the inspection of Broadmoor, which took about an hour, Nicolas Robinson and Mr Mantach drove to Mannings Jetty Road and then to Lower Wilmot which is about 16 kms south of Broadmoor. Nicolas Robinson told him that there was 70 hectares of cropping land at Lower Wilmot. Mr Mantach also had with him the Tasmap for this area.
155After the inspection Mr Mantach returned to his office in Launceston. On 21 March Nicolas Robinson faxed him some information. Mr Mantach said in his evidence that he has since learned that this material was extracted from a valuation report produced by Mr Brian Chandler dated 24 August 1992 (see [87] above). He never received the full version of the Chandler Report until he was given it by his solicitors in April 2007. As already noted, the Chandler Report gave an area for Broadmoor of approximately 52 hectares of cropping land and approximately 30 hectares of grazing slopes and flats. However, what was said to be the extracts from the Chandler Report faxed to Mr Mantach in March 1997 obviously come from a different document than the Chandler Report which was in evidence. They are in a different font. In the 1997 document there is the following passage:
2.7 Areas Cleared
The following land types exist on the property;
·[X] hectares chocolate loams, varying from level to sloping ground.
·[X] hectares non arable grazing land
·[X] hectares, watercourse and 3 dams.
Where the X appears a figure has been obliterated. Opposite the first dot point appears the handwritten figure 40. Opposite the other two dot points there is a bracket and the handwritten figure 6. The significance of this document and the differences between it and the Chandler Report were not explored in evidence. In any event, Mr Mantach had not requested the information faxed to him. He assumed it was taken from some other report and he already had the material in it so he did not pay much attention to it.
156In preparing his 1997 valuation report Mr Mantach used a scale rule to calculate the amount of cleared land shown on the Tasmaps for Broadmoor and Lower Wilmot. This exercise involved marking regular geometric shapes on the cleared (non-forested) area shown in the map, calculating the area of those shapes from the scale and then estimating the area of such irregular shapes as remained. This process produced in the case of Lower Wilmot an area of 70 hectares, which was consistent with the figure Nicolas Robinson had given him. However in the case of Broadmoor the scaling indicated a cleared area of 68 ha. In his witness statement Mr Mantach said:
I telephoned Nicolas Robinson to discuss the discrepancy. I specifically recall him telling me that the Robinsons had done some clearing at the edge of the bush since the time the map had been created in 1992, and that accounted for the difference. He had previously told me that all the cleared land was used for cropping purposes.
157It will be recalled in his 1997 valuation (see [88] above) Mr Mantach stated that
[b]y scaling off a map and by discussions with the owners there is [sic] approximately 82 ha of gently undulating banks and slopes that have been cleared and are used for cropping purposes.
The ordinary meaning conveyed by that sentence would be that the two sources of information, scaling off the map and discussions with the owner, produced the one consistent result. Mr Mantach’s evidence as to what happened was to the opposite effect. It should also be noted at this stage that Mr Mantach in cross-examination was unable to explain how his 82 ha was apportioned as to 42 ha on one title and 40 ha on the other.
The Coles Myer building investment scheme was like an overloaded and unseaworthy ship setting out on a long voyage. Given exceptionally fair winds and calm seas she might conceivably have reached her destination. However, she was always to be at severe risk from ordinary perils of the seas. The fact that what sunk her was a cyclone of 50-year severity hardly absolves those who caused her to be put to sea.
330By contrast, in Morgan Corporate a majority of the New South Wales Court of Appeal (Meagher and Handley JJA, Mahoney JA dissenting) held that the Potts v Miller rule applied where units in a property trust bought at 82 cents were worth about that at the time of purchase but declined over three months to three cents and were worth one cent at the time of trial. Liability flowed from the defendant’s misleading and deceptive conduct in relation to the personal liability of directors of the plaintiff. Thus the wrongdoing in the case did not involve anything in relation to future value. Meagher JA said at 40,592, speaking of a reformulation in Wardley of the Potts v Miller rule,
…one is conscious that the rule … has as its fundamental postulate that a purchaser of property can always resell it. One knows that this may not always be so. In the present case, for example, it may have been that if the company sought to resell the units once the price of the units began to slide it would have found itself in the position where it could not have sold without redeeming the mortgage yet been unable to redeem the mortgage without recourse to the proceeds of the resale, which might have been insufficient of [sic] that purpose. Suffice it to say that no such case was pleaded or proved.
331In Flemington Properties at 316 Lehane J disagreed with that statement. But as long as it is kept in mind that the Potts v Miller rule is not a rigid and inflexible one, the negotiability or otherwise of the property in question seems to be both a sensible rationale of the rule and a guide to possible exceptions.
332The second Kenny element is related to the first. It turns on the nature of a valuation. As already noted, that case concerned a market decline between transaction and trial. McHugh J at [48] pointed out that insofar as a decline in the market was reasonably foreseeable, it will already be factored into the assessment of the true value of the property as at the date of valuation. Present value cannot be divorced from future prospects: at [52]. His Honour observed (ibid):
The true value of a property on a particular day therefore reflects the likelihood of any risk that the price for the property in the reasonably foreseeable future will rise or fall on what it would have fetched the day before.
If not reasonably foreseeable, any loss arising from the decline must be regarded as outside the contemplation of the parties to the valuation arrangement and not recoverable. However, the particular arrangements in that case meant that the valuer was giving a warranty as to the value of the property over the next five years. This took the case out of the general rule: see at [58]-[62]. See also per Gummow J at [80].
333In the present case the property in question was a freely negotiable commodity, farming land in a well established farming area. True it is the purchase of the Robinson properties was part of a larger joint venture arrangement. However, this did not impose any restriction on the purchaser’s reselling.
334Unlike Henderson, Morgan Corporate, and Kenny, the present case on the respondents’ version (which, as it happens, I do not accept) is one of general market increase after the transaction. The transaction, however, was one partly caused by the respondents’ wrongful conduct. There seems to be an unfairness in a respondent mitigating or eliminating its liability in such circumstances. Had the representations or valuations been true, at the time of trial the property would have been worth more than the representors’ or valuer’s figure. This is another way of looking at the point McHugh J makes in Kenny. The “true value” at the time of purchase will include an assessment of the prospects for future increase (or decline) in value. When an increase has in fact occurred by the time of trial, it should not affect the Potts v Miller assessment of the aggrieved party’s loss: difference between price paid and true value at time of purchase. The exceptional case of unforeseeable boom between purchase or trial does not arise in the present case there is no suggestion of a property boom in North West Coast farming properties between 2001 and 2007. The evidence is all to the contrary.
44. LIABILITY OF MANTACH TO THE APPLICANT
(i) Duty of care
335Mantach points out that it was retained by Boyds. It says that the instructions from Boyds did not disclose that the report was being requested on behalf of any other person or that Boyds were acting as an agent.
336As noted ([103]) above Boyds’ letter of instruction dated 29 November 2000 is on their letterhead in which they describe themselves as “Corporate Financial Advisors and Chartered Accountants”. The letter identifies the properties and instructs Mantach to “prepare a formal valuation …of the above properties”. It nominates certain “issues to be considered” such as basing the valuation on an arms length market valuation. It is said the valuation “is urgent and must be completed without delay”. The letter does not expressly state that the valuation is being sought on behalf of a client. But nor does it state that it is being sought by Boyds for themselves.
337In Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241, a claim brought by a financier against the auditors of a borrower corporation, the High Court held that the statement of claim did not disclose a cause of action in negligence against the auditors. Brennan CJ said at 252
…that mere foreseeability of the possibility that a statement made or advice given by A to B might be communicated to a class of which C is a member and that C might enter into some transaction as the result thereof and suffer financial loss in that transaction is not sufficient to impose on A a duty of care owed to C in the making of the statement or the giving of the advice.
However his Honour went on to say:
But, in every case, it is necessary for the plaintiff to allege and prove that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff, either individually or as a member of an identified class, that the information or advice would be so communicated for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the kind that the plaintiff does enter into and that it would be very likely that the plaintiff would enter into such a transaction in reliance on the information or advice and thereby risk the incurring of economic loss if the statement should be untrue or the advice should be unsound. If any of these elements be wanting, the plaintiff fails to establish that the defendant owed the plaintiff a duty to use reasonable care in making this statement or giving advice. The statement of claim does not plead these elements.
338The significance of the pleading in that case was pointed out by Gaudron J in Perre v Apand Pty Ltd (1999) 198 CLR 180 where her Honour said at [30] that in Esanda:
…it was not pleaded that the auditors in question knew or ought to have known that a finance provider would rely on their audited statement of accounts and thus, it was held, on the pleadings, that no duty of care was owed by the auditors to the finance provider.
In the present case that matter has been pleaded in par 39A of the statement of claim.
339An identified class in the sense used by Brennan CJ would include the class of persons who were clients of Boyds and who had requested Boyds to seek the advice of valuers in relation to these particular properties, where Boyds themselves were providing other financial advice. The circumstance that a Melbourne firm of accountants was seeking valuations of farming properties in Tasmania itself tends to show that the valuations were not being sought by the accountants themselves acting as principals.
340In Ta Ho Ma Pty Ltd v Allen (1999) 47 NSWLR 1 Giles JA said at [17]:
So a valuer who puts out a negligent valuation does not incur an open ended liability to any and every financier who relies on it, even if it was reasonably foreseeable that the financier would rely on it. The particular financier may be outside the class of person to whom the valuer owes a duty to take care in making the statement in the valuation, in the same manner as Esanda was outside the class of persons to whom the auditors owed a duty of care on the case as pleaded in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241; the auditors owed a duty of care to the members of Excel, but not to Esanda.
341In Ta Ho Ma an owner of property obtained a valuation from the defendant. Some 8½ months later the owner telephoned a solicitor (apparently not the owner’s own solicitor) seeking a loan and advising of the valuation. The solicitor in turn contacted the plaintiff who advanced a loan on the basis of the defendant’s valuation which by this time was 9½ months old. The Court of Appeal held that the defendant owed no duty of care to the plaintiff because, having regard to the age of the valuation, there could be no expectation of reasonable reliance by the plaintiff: see per Handley JA at [12]-[14], per Giles JA at [18], [24], [28], per Sheppard AJA at [105].
342The case is certainly not authority for any proposition that a valuer only owes a duty of care to the client who directly retains him or her. If that were the law, there would have been a short answer to the plaintiff’s claim since the chain went from valuer defendant to owner to solicitor to lender plaintiff. On the facts, as Handley JA noted at [6], it was not a case where the valuer contemplated that a class of persons might rely on his valuation. Giles JA at [24] pointed out that where a valuer puts out a negligent valuation the class of persons to whom to whom the duty of care
…will normally be confined, apart from any other considerations, to those persons whom the valuer knows or ought to know will reasonably rely on the valuation. [Emphasis in original]
In other words, given expectation of reasonable reliance, there can be a duty owed by a valuer to a class of persons. The identification of that class will obviously depend on the circumstances.
343Perre, a decision of the High Court handed down shortly after Ta Ho Ma, demonstrates the flexibility and pragmatism of the law of negligence in identifying the class of persons to whom a duty of care is owed in a particular case and the absence of any bright line rule: see per Gleeson CJ at [7]. It was held that the defendant, which brought infected seed potatoes on to a farm in South Australia, owed a duty of care to growers within 20 kilometres of the farm because such persons would be prevented by Western Australian law from exporting potatoes to that State. The plaintiffs “were members of a class whose members, whether numerous or not, were ascertainable by (the defendant)”: per McHugh J at [50].
344In the present case there was an identifiable class constituted by clients of Boyds on whose behalf that firm was seeking the valuations in connection with some commercial dealing involving the specified properties. I do not see the reference to Robinson on the compliments slip as displacing this inference.
345Counsel for Mantach argued that it was not unreasonable for his client to take the view that the valuations were prepared for a mortgagee. But Mantach’s knowledge does not have to go to the precise use to which the valuation was to be put. In any event, the evidence shows that Mantach knew that its valuation would or might be used for some purpose other than mortgage, or at the very least was indifferent to the use. Mr Mantach cut and pasted from the 1997 valuation and in the course of doing so removed all reference to mortgage purposes. When he found that there was a purchaser he made no attempt to correct the record.
346Moreover, as already noted ([194] above), one may accept that, other things being equal, a valuation for mortgage purposes will be conservative and therefore probably lower than one for a purchaser. In the present case the claim is that the valuation was too high. Yet if Mantach says it would have acted differently had it known the valuation was for a purchaser and not a mortgagee, presumably its valuation would have been higher still.
(ii) Disclaimer
347Mantach’s valuations were accompanied by a disclaimer which as already noted relevantly provided:
We state that this report is for the use only of the party to whom it is addressed and for no other purpose, and no responsibility is accepted to any third party for the whole or part of its contents.
348A disclaimer in almost identical terms was relied on by a valuer defendant in BT Australia Ltd v Raine & Horne Pty Ltd [1983] 3 NSWLR 221. The first plaintiff (BT) was the trustee of a property trust, the second plaintiff was the custodian trustee of assets of superannuation funds of which BT was manager, and the third plaintiffs were the trustees of various superannuation funds which had invested in the trust. Wootten J at 236 held that the first part of the disclaimer impliedly accepts responsibility for the use of the valuations by BT, but not for its use for any other purpose. The second part disclaimed responsibility to any third party. The second part was to be read as not disclaiming responsibility for damage to a third party by the very use of the valuation by BT for which the valuer in the first part of the clause impliedly accepted responsibility.
349His Honour noted that the disclaimer clause was unilaterally framed and inserted by the valuer, and if it was intended to disclaim responsibility for the consequences of its use for the very purpose for which it was obtained it was reasonable to expect the valuer to say so in clear words.
350I think the same conclusion is to be reached in the present case. Also, by a slightly different route it can be said that, construing the clause contra proferentem, “the party to whom it is addressed” comprehends Boyds and also its clients, given the circumstance that, as already discussed, the obvious inference is that the firm is acting on behalf of clients.
(iii) Misleading and deceptive conduct
351As to the misleading and deceptive conduct claim ([35]-[38] above) it was submitted that Mr Mantach simply stated what he had done and what he had been told: he had scaled off the map and the owner had instructed him that the area of land used for cropping purposes was 82 ha. His statements of value were expressions of opinion. Valuation, it was said, is an art not a science.
352However, what Mr Mantach said in the valuations as to croppable area was a matter of “hard physical fact”; see John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41-249 at 41,359 cited with implicit approval by the High Court in Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at [65]. John G Glass dealt with a misrepresentation by a vendor’s agent as to net lettable area of a commercial building, something obviously analogous to croppable area of a rural property.
353An expression of opinion as to value may constitute misleading and deceptive conduct if the valuer does not in fact genuinely hold the opinion in question (not suggested in the present case) or (as is submitted) there is not some proper foundation for it: Orion Pet Products Pty Ltd v Royal Society for the Prevention of Cruelty to Animals (Vic) Inc (2002) 120 FCR 191 at [124].
354In MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 at 356 (Kenny at first instance) Lindgren J held that a valuation report in that case conveyed representations not only that the opinions expressed in them were held but also (a) that the opinions were based on reasonable grounds, (b) were the product of the exercise of due care and skill and (c), after making due allowance for their nature as opinions as to the market value of real estate at a particular time, safe to be relied upon and not outside the range of latitude properly to be allowed to them. The same can be said of the Mantach valuations in the present case.
(iv) Untruth of representations; negligence
355These representations were untrue, thereby constituting misleading and deceptive conduct. They also amounted to negligence.
356The valuations of Mr Austin, which I accept, and even Mr Cripps, establish that there was here a gross overvaluation, which in itself is evidence of negligence: Baxter v F W Gapp Co Ltd [1939] 2 KB 271 at 277, Kenny (at first instance) at 335-337. This is confirmed by what happened when the properties were put up for sale in 2004: [139]-150] above. There were also identifiable errors, especially in the assessment of the croppable areas, but also in the use of some of the comparable sales and the inherently unreliable “catch-all” approach.
(v) Was the applicant misled? Mr Wright’s role
357Mr Wright was the sole director of the applicant until 15 March 2001 when Messrs Cottrell and Andriske joined him on the Board. Counsel for Mantach argued that Mr Wright was an agent of the Robinsons; he was not misled into any error since his principals, the Robinsons, thought the Mantach valuation was too low.
358There was criticism of Mr Wright for acting where he was subject to a conflict of interest.
359However, the contracts for the purchase of the Robinson properties were exchanged on 11 May 2001 with Messrs Cottrell and Andriske as purchasers. By this time they were directors of the applicant, which they subsequently nominated as purchaser.
360Anyway, the underlying reality was that Messrs Cottrell and Andriske were the investors who were putting up the money. Authority does not need to be cited for the proposition that that recovery for economic loss caused by negligence is not limited to those in a contractual relationship with the defendant. I do not see any real basis for the criticism of Mr Wright. Having introduced Messrs Cottrell and Andriske via Boyds to the Robinsons, his role then became that of a facilitator. But however one characterises Mr Wright’s participation, it was Messrs Cottrell and Andriske who were misled into investing a large sum of money.
(vi) Reliance and causation
361This case was put as a “successful-transaction case” rather than a “no-transaction” case, cf Banque Bruxelles in the Court of Appeal at 404. The applicant’s case is that if the representations not been made, and Mantach had valued the properties at their true worth, it would have still purchased the properties, but at a lower price.
362Counsel for Mantach contended that the Robinsons were arguing for a higher price than the Mantach and Cubbins valuations and Mr Wright in the 25 January 2001 letter on their behalf ([116] above) was asking for $2.3m. It was said that Christopher Robinson’s advice ([117] above) was “the real cause of the entry into the contracts”.
363My reading of the situation in the early months of 2001 is that the parties were, so to speak, eyeball to eyeball. As already mentioned, the project was already under way, there was pressure on both sides to consummate the deal, including some considerable personal financial pressure on the Robinsons. As it happened, the Cottrell/Andriske side blinked and retreated from the earlier agreement for an average of the two valuations. But by the same token they rejected the Robinsons’ extravagant demand for $2.3m (or $2.8m). Counterfactual history has its pitfalls, but I am quite unpersuaded that Messrs Cottrell and Andriske would have settled on the Mantach valuation figure had they know.
45. LIABILITY OF APPLICANT TO MANTACH
364Mantach’s cross-claim against the applicant was filed on 4 July 2007. It would thus be outside the limitation period of six years (Trade Practices Act s 82(2)). The period runs from the date of exchange of the contracts of sale (11 May 2001).
365In any event, as already mentioned, there is no basis for any attribution to the applicant of liability for any representation made by the Robinsons to Mantach: see section 17 above.
46. CONTRIBUTORY NEGLIGENCE
366Section 82(1B) of the Trade Practices Act, inserted by Schedule 3 item 5 of the Corporate Law Economic Reform (Audit and Corporate Disclosure) Act 2004 (Cth) is concerned with claims in relation to economic loss caused by conduct in contravention of s 52. It provides for reduction of damages to the extent that the Court thinks just and equitable having regard to the claimant’s share in responsibility for the loss or damage. It altered the well-established law that contributory negligence is not available in reduction of damages for claims under Pt V of the Trade Practices Act: I & L Securities.
367However, the provision applies only to causes of action that arise on or after the day on which Sch 3 to the amending Act commenced, which was 26 July 2004. Here the cause of action arose in August 2001 when the purchases were completed and the applicant, in exchange for money, acquired properties worth substantially less than their true value. At that moment the applicant suffered actual loss, not just the possibility of future loss, however likely. The case is therefore different from cases of contingent loss such as Wardley and King v Yurisich (2006) 153 FCR 78 at [67].
368In respect of the claims under ss 14 and 17(1)(b) of the Fair Trading Act 1990 (Tas), the reduction provision in s 4 of the Wrongs Act 1954 (Tas) would apply. However, if the applicant has a non-reducible claim under the Trade Practices Act, this would have no practical effect.
369In any case, I see no factual basis for a finding of contributory negligence. As counsel for the applicant fairly put it, his client was firmly in the hands of vendors who were dishonest and professional advisors (ie Mantach) who were negligent. There was nothing to put them on notice as to these dangers. In the resale or attempted resale of the properties, the applicant acted reasonably. It retained Mr Medwin, a very experienced and reputable local agent. The marketing program was, for the reasons explained by Mr Medwin, reasonable and appropriate for properties of this kind [146-150] above.
47. PROPORTIONATE LIABILITY
370Recent Commonwealth and Tasmanian legislation provides for proportionate liability. A claimant succeeding against two or more defendants can only recover against a particular defendant a proportion of the loss that the Court considers just having regard to that defendant’s responsibility for the damage and loss. Prior to such legislation a claimant could recover the total loss from any defendant, leaving that defendant to seek contribution from other defendants.
371The Commonwealth legislation is Pt VIA of the Trade Practices Act, inserted by Schedule 3, item 6 of the amending Act. It applies to causes of action that arise on or after 26 July 2004. For the reasons already explained, the present causes of action, which arose in 2001, are not caught.
372The Tasmanian legislation is Pt 9A of the Civil Liability Act 2002 (Tas) which includes s 43B. Section 4 of that Act provides that Pt 9A does not apply to a cause of action that accrued before the commencement of the Civil Liability (Proportionate Liability) Act 2005 (Tas). That commencement was 1 August 2005. Thus this legislation is also inapplicable.
48. CONTRIBUTION BETWEEN RESPONDENTS
373The various cross-claims between the Robinsons and Mantach ([73], [80]-[84] above) can be subsumed into the issue of contribution.
374Apportionment between a misleading and deceptive vendor and a negligent professional advisor of a purchaser was the subject of the High Court’s decision in Burke v LFOT Pty Ltd (2002) 209 CLR 282. The vendor of a commercial property had made misleading and deceptive representations to a purchaser concerning the reliability and solvency of a tenant of the property. The purchaser was awarded damages of $750,000 being the difference between the price and the true value of the property at the time of purchase. The vendor sought contribution from the purchaser’s solicitor who was found to be negligent in not advising the purchaser to inquire about the financial standing of the tenant. The trial judge held that the vendor was entitled to 50 per cent contribution from the solicitor. A majority of the Full Court upheld this order but it was set aside by a majority of the High Court: Gaudron A-CJ, McHugh, Hayne and Callinan JJ, Kirby J dissenting.
375Gaudron A-CJ and Hayne J pointed out at [19] that if regard were to be had to culpability there would be “much to be said” for the view that the vendor’s culpability and its causal significance were of such a different order from the conduct of the solicitor that no contribution should be ordered. The vendor’s misleading conduct was a positive inducement to the purchaser whereas the solicitor’s omission to advise further enquiries “merely had the consequence that (the vendor’s) misleading conduct remained undetected”. In similar vein McHugh J observed at [59] that it would be “absurd” to suggest that a person who stole money and was ordered to repay it could obtain contribution from a person who negligently failed to safeguard the money. In substance, his Honour thought, there was no difference between that example and the instant case.
376A factor which much influenced the majority’s approach was that the contribution would have the effect of repaying to the vendor half of the ill-gotten gains which he had to disgorge to the purchaser: per Gaudron A-CJ and Hayne J at [22], per McHugh J at [65]. Also, as the latter pointed out at [66], contribution would be inconsistent with the policy considerations behind Pts V and VI of the Trade Practices Act. Contribution would enable a person in breach of s 52 to profit by its contravention of the Act. The vendor would be able to obtain $375,000 from the solicitor even though its misleading and deceptive conduct had misled him (as well as the purchaser).
377In the present case the application of those principles mandates a conclusion that the Robinsons, whose conduct misled and deceived Mantach as well as the applicant, are not entitled to contribution from the former.
378Mantach is entitled on its cross claim to recover from the Robinsons the amount of its liability to the applicant. However, this liability would not extend to the third respondent Robertson Investment Capital, whose only role has been the passive one of lessee of the Broadmoor homestead block.
49. CONCLUSION
379The applicant is entitled to judgment against Kestrel Holdings, Nicolas Robinson and Mantach for damages being the difference between the price paid for Broadmoor and Lower Wilmot and the true value of those properties at the time of purchase as assessed by Mr Austin, together with expenses and interest as detailed above.
380The claim to set aside the lease of the Broadmoor homestead block is dismissed.
381Mantach is entitled to a full indemnity against Kestrel Holdings and Nicolas Robinson.
382I direct counsel to bring in minutes of orders to give effect to these findings and to deal with the question of costs. Further hearing will be adjourned to a date to be fixed.
I certify that the preceding three hundred and eighty-two (382) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate:
Dated: 15 November 2007
Counsel for the Applicant: M E O’Farrell Solicitors for the : Ware and Partners Counsel for the first, second and third Respondents: W A Ayliffe Solicitors for the first, second and third Respondents: Simmons Wolfhagen Counsel for the fourth Respondent P G Cawthorn Solicitors for the fourth Respondent DLA Phillips Fox Dates of Hearing: 19 21, 22 and 30 March, 9, 10, 11, 12, 16, 17, 18, 19, 24, and 25 July 2007. Date of Judgment: 15 November 2007 SCHEDULE A
SCHEDULE B
SCHEDULE C
SCHEDULE D
SCHEDULE E
SCHEDULE F
SCHEDULE G
SCHEDULE H
SCHEDULE I
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