Chowder Bay Pty Ltd v Paganin

Case [2018] FCAFC 25

FEDERAL COURT OF AUSTRALIA

Chowder Bay Pty Ltd v Paganin [2018] FCAFC 25

Appeal from: Chowder Bay Pty Ltd v Paganin [2017] FCA 332
File number: WAD 184 of 2017
Judges: BESANKO, MARKOVIC, LEE JJ
Date of judgment: 26 February 2018
Catchwords:

CONSUMER LAW – whether the primary judge erred in rejecting a claim that the respondents engaged in misleading or deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) – where appellants invested in a joint venture financed by a loan facility – whether valuations prepared by the third and fourth respondents for the bank providing the facility were misleading or deceptive on the basis pleaded

CONSUMER LAW – whether the primary judge erred in finding that the appellants did not suffer loss or damage pursuant to s 82 of the Trade Practice Act 1974 (Cth) – contention as to whether appellants would have been entitled to recover a proportion of legal costs incurred in related proceedings as found by the primary judge

EVIDENCE – whether the primary judge erred in finding that there was a failure by the appellants to prove that the bank relied on representations made as to value contained in valuations – where no bank witnesses were called in the appellants’ case but business records were tendered without objection and subject to no limitation

Legislation:

Australian Securities and Investments Commission Act 2001 (Cth), s 12DA

Corporations Act 2001 (Cth), s 1041H

Evidence Act 1995 (Cth), ss 55, 59, 69, 135, 136, 140(1), 167, 169(1)

Trade Practices Act 1974 (Cth), ss 52, 75B

Fair Trading Act 1987 (WA), s 10(1)

Cases cited:

Australian Breeders Co-operative Society Ltd v Jones (1997) 150 ALR 488

Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; (2013) 250 CLR 640

Australian Securities and Investments Commission v Hellicar [2012] HCA 17; (2012) 247 CLR 345

Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200

Blatch v Archer (1774) 1 Cowp 63; 98 ER 969

Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60; (2004) 218 CLR 592

Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304

CDJ v VAJ [1998] HCA 67; (1999) 197 CLR 172

Chowder Bay Pty Ltd v Paganin [2017] FCA 332

Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82

Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526

MGICA (1992) Ltd (formerly MGICA Ltd) v Kenny & Good Pty Ltd (1996) 140 ALR 313

Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31; (2010) 241 CLR 357

Minister for Immigration and Multicultural Affairs v JiaLegeng [2001] HCA 17; (2001) 205 CLR 507

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191

Sellars v Adelaide Petroleum NL (1994) 179 CLR 332

Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR…

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AGLC
Chowder Bay Pty Ltd v Paganin [2018] FCAFC 25
Case
[2018] FCAFC 25
Decision Date

CaseChat Overview and Summary

Chowder Bay Pty Ltd and others appealed against a decision of the primary judge in the Federal Court of Australia, which dismissed their claim for misleading or deceptive conduct under the Trade Practices Act 1974 (Cth) by the respondents, Egan Valuers and Mr Smith. The appellants argued that the valuations prepared by Egan Valuers and Mr Smith for the bank providing the loan facility were misleading or deceptive. The respondents argued that the appellants did not suffer any loss or damage, and that the appellants did not prove that the bank relied on the representations made in the valuations. The court had to decide whether the primary judge erred in rejecting the claim of misleading or deceptive conduct and in finding that the appellants did not suffer loss or damage.

The court found that the primary judge did not err in rejecting the claim of misleading or deceptive conduct. The court found that there was no evidence that the bank relied on the representations made in the valuations. The court found that the appellants did not call any bank witnesses, and did not object to the admissibility of the business records that were tendered as evidence. The court found that the primary judge properly considered the evidence and made no error in finding that the bank relied on the representations in the valuations. The court also found that the primary judge did not err in finding that the appellants did not suffer loss or damage, and that the appellants did not prove that the bank relied on the representations made in the valuations.

The appeal and cross-appeal were dismissed, and the appellants were ordered to pay the respondents' costs of the appeal, except for any costs incurred by the first respondent in relation to the notice of contention filed by the first respondent on 17 July 2017. The cross-appellants were ordered to pay the cross respondents' costs of the cross-appeal.

Orders

Orders of the court

1. The appeal be dismissed.

2. The cross-appeal be dismissed.

3. The appellants pay the respondents’ costs of the appeal (except for any costs incurred by the first respondent in relation to the notice of contention filed by the first respondent on 17 July 2017).

4. The cross-appellants pay the cross respondents’ costs of the cross-appeal.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

Not only was no objection taken to admissibility, no application was made to limit the use to be made of the evidence. It is also notable, in circumstances where specific complaint is made by Egan Valuers and Mr Smith that the makers of representations were not called to give evidence, that no request was made in relation to the evidence of previous representations contained in documents, pursuant to s 167 of the EA, for the appellants to call, as witnesses, the Bank officers who made the previous representations relied upon. Of course, if a request of this type had been made and refused, an application could have been made (s 169(1) of the EA) that the representations relied upon in the business records to prove reliance should not have been admitted. Irrespective of the making of an anterior request, an application could have been made at the time of tender by the respondents for discretionary exclusion under s 135 of the EA, or limitations as to use of the representations under s 136 of the EA. The respondents took none of these steps and, as a consequence, the evidence admitted in the business records was admitted, and was admitted for all purposes.D.3 Consideration of Evidence as to the Bank’s Reliance As the appellants submitted, the documents in evidence demonstrate the way in which the Bank used and relied upon the representation as to value in the First Valuation in considering, and then giving, indicative approval to the Facility. No reference was made in the reasons of the primary judge to these documents (including the approval document of 16 September 2008 and the previous submission documents). The appellants also submitted, correctly, in relation to the Later Valuation, that the 10 November 2008 letter of offer and the internal bank drawdown documents demonstrate express reliance upon the existence of the representations as to value contained in the Valuations, in the sense that the fact of the representations as to value (at an acceptable level) were a material cause of the Bank deciding to lend and proceed with the Facility. Further reference is made to these documents at [83]-[84] below. What is apparent from the contemporaneous record makes intuitive sense: why were the Valuations obtained unless the representations as to value conveyed in them were to be relied upon by the Bank? The submissions made on behalf of Egan Valuers and Mr Smith fall into the error of suggesting that the question of reliance dealt with by the primary judge was to be decided by reference to what evidence might possibly have been adduced by the appellants from Bank officers, rather than by an analysis of the evidence relevant to Bank reliance that was adduced. Properly analysed, the only possible relevance of the fact that the appellants did not call a Bank witness was if: (a) there was some insufficiency in the evidence of reliance by the Bank on the representations as to value in the contemporaneous business records (which there was not); or (b) some sort of inference could be drawn, unfavourable to the appellants, by reason of the failure to call such a witness. This latter contention is unsustainable as the relevant witnesses were no more in the camp of the appellants than they were in the camp of any other party to the proceeding.

Decision

Reasons for decision

These communications on 3 and 4 November 2008 are, to use the expression of Senior Counsel for the appellants, the ‘culmination’ or final point of the dealings between Egan Valuers (through Mr Smith) and the Bank (through Ms Gilbey), being the point at which the Bank made it explicit that it knew about the investor presales being non-arm’s length dealings but, in that context, made a direct enquiry of Egan Valuers as to the valuation provided and asked, in terms: can the Bank rely? The response of Egan Valuers stated that the Bank could rely. Indeed, on appeal, the contention advanced was that the conclusions of the primary judge that the Valuations were rendered inoperative or did not become operative because of the Presales Qualifications cannot be reconciled with this final exchange, expressly confirming, following direct enquiry, the suitability of reliance upon the Later Valuation for the purposes of mortgage security. C.5 Conclusions as to the Conduct of Egan Valuers and Mr Smith Reference was made in [33] above to the key passages of his Honour’s judgment where he characterised the conduct of Egan Valuers and Mr Smith. Read literally, it might be thought that these passages elide two matters which are separate: the analysis of assessing whether conduct is misleading or deceptive (a question of fact objectively determined: see Campbell at 341-342 per Gummow, Hayne, Heydon and Kiefel JJ), with the distinct issue of causation which, in many cases, is determined by reference to answering whether individual reliance is established. The appellants made a similar point by submitting that the primary judge conflated two questions: (a) what did the valuations communicate to the Bank; with, (b) what use did the Bank make of the valuations? Read fairly, however, no such error is evident. The primary judge, in this part of his reasons, was making clear that there was no subjective evidence of the Bank to detract from the conclusion otherwise available that the Bank knew the true position involving the Syndicate (a contextual matter relevant to the assessment of the relevant conduct). On the question of characterisation (as distinct from reliance), his Honour was also making the point that no evidence was called from the recipient on the question of fact as to whether particular conduct was misleading or deceptive. Although it is true that the characterisation of conduct as misleading or deceptive is objective, it is uncontroversial that subjective evidence that an erroneous conclusion was formed is admissible and may be persuasive in establishing that the conduct was misleading or likely to mislead, as may evidence of acts or omissions resulting from erroneous belief: see Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 at 87 per Bowen CJ, Lockhart and Fitzgerald JJ. The primary judge was noting that this type of evidence from a Bank officer was not adduced. More generally, no error is demonstrated in the primary judge’s conclusion that the “As if Complete” value was a statement of opinion which was expressed as being held on the basis of the assumptions and subject to the qualifications set out in the Valuations. One such assumption was that there were presales as set out in the “Gross Realisation ‘As if complete’” table. The statement of opinion as to value conveyed that the opinion was held on the basis of certain express assumptions and qualifications. Read as a whole, what Egan Valuers and Mr Smith were communicating was that the Bank ought to satisfy itself as to the correctness of the assumptions. Given it was expressly stated that the presale contracts had not been sighted, viewed as a whole and contextually, a communication to the recipient was being made that the opinion as to value may be unreliable unless the presale contracts were verified or were authentic.

Ratio Decidendi

Legal Principle Established

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