Crown & Gleeson Business Finance Pty Limited v Walster

[2008] NSWSC 865

CITATION:	Crown & Gleeson Business Finance Pty Limited v Walster and Anor [2008] NSWSC 865
HEARING DATE(S):	4 August 2008, 5 August 2008, 6 August 2008, 7 August 2008
JUDGMENT DATE :	25 August 2008
JUDGMENT OF:	Johnson J at 1
DECISION:	1. Verdict and judgment on the cross-claim for Mr Walster against Mr Petts in the sum of $575,000.00. 2. Mr Petts is to pay Mr Walster’s costs of the cross-claim.
CATCHWORDS:	MORTGAGES - cross-claim by mortgagor against finance broker - mortgagor induced to mortgage home to assist employer to obtain high interest rate bridging finance for business purposes - default under mortgage - claim of being induced by misleading or deceptive conduct and/or negligent misrepresentation to mortgage home - representation made that long-term finance had been arranged - no reasonable basis for representation - relief granted
LEGISLATION CITED:	Fair Trading Act 1987 Civil Procedure Act 2005
CATEGORY:	Principal judgment
CASES CITED:	Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186 Concrete Constructions (NSW) Pty Limited v Nelson [1990] 169 CLR 594 Plimer v Roberts (1997) 80 FLR 303 Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Limited (1978) 140 CLR 216 Butcher v Lachlan Elder Realty Pty Ltd [2004] 218 CLR 592 Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 149 CLR 191 Collins Marrickville Pty Limited v Henjo Investments Pty Limited (1987) 72 ALR 601 Henjo Investments Pty Limited v Collins Marrickville Pty Limited (No. 1) (1988) 39 FCR 546 Alami v Langov [2008] NSWSC 812 Gipps v Gipps [1978] 1 NSWLR 454 Australian Competition and Consumer Commission v Samton Holdings Pty Limited (2002) 117 FCR 301
PARTIES:	Crown & Gleeson Business Finance Pty Limited (Plaintiff) William Frank Walster (First Defendant and Cross Claimant on Second Cross Claim) Susan Carole Walster (Second Defendant) Mr NR Petts (Cross Defendant on Second Cross Claim)
FILE NUMBER(S):	SC 12899/06
COUNSEL:	Mr MW Young (Plaintiff) Mr BC Kasep (Defendants and Cross Claimant on Second Cross Claim) Mr NR Petts (Cross Defendant on Second Cross Claim) (in person)
SOLICITORS:	Bransgroves Lawyers (Plaintiff) Truman Hoyle Lawyers (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
POSSESSION LIST

Johnson J

25 August 2008

12899/06 Crown & Gleeson Business Finance Pty Limited v William Frank Walster and Anor

JUDGMENT

1 JOHNSON J: On 4 August 2008, I commenced to hear proceedings involving a claim by the Plaintiff, Crown & Gleeson Business Finance Pty Limited (“Crown & Gleeson”) against the Defendants, William Frank Walster and Susan Carole Walster. At the same time, the hearing proceeded of cross-claims brought by Mr Walster against Crown & Gleeson and a finance broker, Neil Robert Petts.

2 On 7 August 2008, the fourth day of the hearing, and in the course of closing submissions, I was informed that settlement had been reached as between Crown & Gleeson and Mr and Mrs Walster on both the claim and the cross-claim. No settlement was reached on the cross-claim brought by Mr Walster against Mr Petts. Accordingly, this judgment contains my reasons for determining that cross-claim.

The Crown & Gleeson Proceedings

3 I note that Crown & Gleeson instituted separate proceedings (15171/06) against Ruth Buchanan, Plastech Australia Limited (“Plastech Australia”) and Provident Capital Limited (“the Buchanan proceedings”). In 2007, Hislop J ordered that the two sets of proceedings be heard together. Thereafter, Ms Buchanan was declared bankrupt. Ms Buchanan’s trustee in bankruptcy indicated that he did not intend to participate in the proceedings either to defend the Crown & Gleeson claim against Ms Buchanan or to prosecute cross-claims brought by Ms Buchanan against Crown & Gleeson, Mr Petts and Mr Anthony Zofrea. On 2 July 2008, Ms Buchanan’s cross-claim against Mr Zofrea was dismissed by consent. At the commencement of the hearing on 4 August 2008, Mr Young, counsel for Crown & Gleeson, indicated that no relief was sought in the Buchanan proceedings. Crown & Gleeson’s claim for possession of property in the Buchanan proceedings had been overtaken by the first mortgagee taking possession of the property. Ultimately, I was asked by Mr Young and Mr Petts to make orders dismissing Crown & Gleeson’s proceedings against Ms Buchanan and others and also dismissing all extant cross-claims in those proceedings. On 7 August 2008, I made orders to that effect (T234-235).

4 It is appropriate to recite the substance of the settlement between Crown & Gleeson and Mr and Mrs Walster. The measure of damages that Mr Walster claims by way of cross-claim against Mr Petts is the amount of the judgment entered against Mr Walster in favour of Crown & Gleeson. Orders made pursuant to the settlement were to the following effect:

(a) judgment be entered for Crown & Gleeson against Mr and Mrs Walster for possession of the land known as 7 High Street, Willoughby;

(b) judgment be entered for Crown & Gleeson against Mr Walster for the sum of $575,000.00;

(c) there be no order as to costs in relation to the claim by Crown & Gleeson against Mr and Mrs Walster;

(d) the first cross-claim by Mr and Mrs Walster against Crown & Gleeson be dismissed with no order as to costs.

5 The terms of settlement noted the agreement between the parties that, provided Mr Walster paid to Crown & Gleeson the sum of $575,000.00 by 8 March 2009 (with time of the essence), Crown & Gleeson will not enforce the judgments in orders (a) and (b) above. The terms of settlement noted further matters which it is not necessary to recite in this judgment.

6 Accordingly, Mr Walster seeks judgment on the cross-claim against Mr Petts in the sum of $575,000.00.

7 Mr Kasep of counsel appeared for Mr Walster at the hearing of the cross-claim. Mr Petts appeared for himself. It is appropriate to note that Mr Petts’ Defence to the Second Cross-Claim (to which further reference will be made) was filed on 6 June 2008 by his solicitor at a time when Mr Petts was legally represented for the purposes of these proceedings. On 29 July 2008, the solicitor for Mr Petts was granted leave to withdraw from proceedings and Mr Petts appeared for himself at the hearing before me. I observe that Mr Petts performed capably in appearing for himself at the hearing.

Factual Background to Mr Walster’s Cross-Claim Against Mr Petts

8 It is appropriate to place Mr Walster’s cross-claim against Mr Petts in its factual context. What follows in this part of the judgment (at [9]-[23]) is not controversial.

9 Mr Walster was born in 1952. In the mid-1980s he graduated with a Bachelor of Business with a major in Accounting from the University of Technology, Sydney. At about that time, he moved into the cost accounting department with an oil company and carried out various management, reporting, budgeting, product costing and supervisory roles. In 2001, Mr Walster left that full-time employment and, between 2001 and 2005, he worked in a number of jobs on a contract basis doing financial and management accounting for various employers.

10 In June 1989, Mr Walster and his wife purchased the property at 7 High Street, Willoughby for the sum of $240,000.00. Thereafter, they lived at that address. In December 2005, the property was valued at about $800,000.00 and there was a mortgage registered over the property securing the balance of a loan of about $20,000.00 from Permanent Custodians Limited.

11 In early June 2005, Mr Walster’s tax accountant, Ms Buchanan, offered him a position with Plastech Operations Pty Limited (“Plastech Operations”). Plastech Operations operated a hazardous and toxic waste management business and had approximately 12 employees with an annual turnover of about $1.6 million. It had been operating since about July 2004, and its principal place of business was 66 Lynx Road, St Marys, with an office also located at Crows Nest. Ms Buchanan had been Mr Walster’s tax accountant since about 1998 and she was the managing director of Plastech Operations.

12 On 27 June 2005, Mr Walster commenced employment as an accountant with Plastech Operations at a base salary of $76,000.00 per annum.

13 Plastech Operations and Plastech Solutions Limited (“Plastech Solutions”) were both wholly owned and operated by a holding company, Plastech Australia (defined at [3]), of which Ms Buchanan was also the managing director. From time to time in this judgment, I will refer to these three corporations as the “Plastech Group”.

14 From June 2004, Plastech Australia was looking to raise long-term funding to purchase a Plasma Converter system from Startech Environmental Corporation (“Startech”), a United States corporation. According to the evidence, the Plasma Converter system safely and economically destroys waste and turns it into useful and valuable products. In November 2004, Ms Buchanan secured a $50 million finance package for Plastech Australia to fund the entire Plasma Converter system project. That finance was placed on hold in December 2004 when George Hatzimihalis, the principal chemist and managing director of Plastech Australia, withdrew from the Plastech Group.

15 Initially, Ms Buchanan employed Mr Walster to do costing and project management for the new Plasma Converter project. However, when Mr Walster started work, Plastech Operations at St Marys needed accounting work carried out, in particular by way of putting all accounts payable into MYOB from paper, reconciling the bank account and calculating accruals so that financial accounts could be prepared for Plastech Operations.

16 As part of an exclusive distribution agreement between Plastech Solutions and Startech, Plastech Australia was required to order and pay the deposit on at least one system by the end of December 2005. The deposit required to be paid to Startech by the end of December 2005 amounted to $US453,000.00.

17 The distribution rights for the Plasma Converter system extended to the territories of Australia, New Zealand and Oceania under a distribution agreement. Mr Walster understood that the Plasma Converter system was the “first of its kind” to operate in Australia.

18 In mid-2005, Ms Buchanan requested Mr Walster to become a director of the Plastech Group of companies. He was to be “a stand-in director as there were not sufficient directors at the time” (Buchanan, T99). Ms Buchanan told Mr Walster that she wanted someone as director who “will not get in the way of [her] running Plastech as is happening now” (Walster affidavit, 16 February 2007, paragraph 28). Mr Walster did not initially agree to this and postponed his decision, but eventually the time came to update the company’s ASIC details and he agreed to become a director. He was appointed a director of Plastech Australia, Plastech Operations and Plastech Solutions (Exhibit B, pages 150, 155, 158). Although Mr Walster was a director, he was not included in the decision-making process for the Plastech Group. In effect, he had no responsibilities as a director (Buchanan, T99).

19 When Mr Walster commenced employment with Plastech Operations in June 2005, Ms Buchanan informed him that she had funding in place for the Plasma Converter system. It appears that this funding fell over as a consequence of the impact of Hurricane Katrina which struck the southern part of the United States in August 2005 (Buchanan, T105; Walster, T160). It became necessary for Ms Buchanan and the Plastech Group to secure other funding for the Plasma Converter system.

20 In about October 2005, Ms Buchanan was referred to a finance broker in Melbourne who referred Ms Buchanan to Mr Petts. Ms Buchanan was informed that Mr Petts was a finance broker who specialised in short-term caveat finance and long-term development funding.

21 In November 2005, Ms Buchanan contacted Mr Petts and arranged to meet him to discuss finance for the Plasma Converter system project. At this time, Mr Petts was a finance broker consulting with Widescope Finance, a mortgage broking business owned and operated by Mr Zofrea.

22 Ms Buchanan met with Mr Petts on or about 7 November 2005. Ms Buchanan informed Mr Petts that the Plastech Group needed $US4.69 million (about $A6 million) for the purchase price of the Plasma Converter and that the distribution agreement required that an order be placed and a deposit of $US453,000.00 be paid by the end of December 2005.

23 By early December 2005, finance had not been obtained either for the substantial sum required to purchase the Plasma Converter, nor for the lesser sum required to be paid by 22 December 2005 by way of deposit to ensure that the Plastech Group did not lose the project. During December 2005, Ms Buchanan was experiencing great pressure from Startech to pay the initial deposit. At the same time, she was “experiencing enormous pressure from Plastech’s angry shareholders who wanted to ensure that Plastech did not lose the Startech distribution rights” (Buchanan affidavit, 5 July 2007, paragraph 17).

Events in December 2005 Leading to The Crown & Gleeson Loan

24 The events of December 2005 are controversial in a number of respects and it will be necessary to resolve certain factual disputes to determine Mr Walster’s cross-claim against Mr Petts. What follows in this part of the judgment (at [25]-[66]) represents facts found by me unless I state to the contrary.

25 A number of witnesses swore affidavits and gave oral evidence at the hearing of Crown & Gleeson’s claim and the cross-claims. Not all the evidence bears upon the determination of Mr Walster’s cross-claim against Mr Petts. However, the evidence of Warren Kenneth Lee, Kasey Michelle Garnham, Ms Buchanan, Mr Walster and Mr Petts is relevant to the outstanding cross-claim.

26 It appears that CMS Asset Solutions (“CMS”) issued a type of pre-approval for the sum of $US453,000.00 in December 2005 by way of leasing finance for a term of 36 months. However this finance was not approved when CMS realised that the Plasma Converter system would be constructed in the United States (Buchanan affidavit, 5 July 2007, paragraphs 14-16, Annexure A; Buchanan T109-110).

27 Around mid-December 2005, Mr Walster became aware that Ms Buchanan was working with Mr Petts to obtain finance for instalments on the Plasma Converter. Ms Buchanan informed Mr Walster in around mid-December 2005 that Mr Petts had “arranged a loan facility of AU$6 million with a company called CMC [sic] which is secured by a charge over Plastech Solution’s distribution rights over the machine, a charge over Plastech Australia and caveats over three real estate properties” owned by Ms Buchanan (Walster affidavit, 16 February 2007, paragraph 39).

28 Mr Walster first met Mr Petts on about 19 December 2005 when Mr Petts attended the Plastech Group’s offices at Crows Nest to meet with Ms Buchanan. After Mr Petts departed on that day, Ms Buchanan informed Mr Walster that Mr Petts was “having problems getting the $6 million finance through before Christmas” (Walster affidavit, 16 February 2007, paragraph 40).

29 In about mid-December 2005, Mr Petts telephoned Mr Lee, a director of Crown & Gleeson. Mr Petts informed Mr Lee that short-term finance was required for a client and explained the client’s requirements in the following way (Petts affidavit, 1 August 2008, paragraph 10):

“It’s for a company called Plastech. My contact is Ruth Buchanan who is the CEO. Plastech have purchased the exclusive distribution rights to a machine called a Plasma Converter from a company in America called Startech and Ruth is looking for some short-term finance for the instalment payment due before Christmas. I have arranged the long-term finance but that wont [sic] settle until mid January 2006 , and Plastech just need some short-term finance until then. Ruth’s 3 properties can be used as security.” (my emphasis)

30 As will be seen, of particular significance to the cross-claim is that, on Mr Petts’ own account, he told Mr Lee that he had “arranged the long-term finance but that wont [sic] settle until mid January 2006”.

31 During a telephone conversation between Ms Buchanan and Mr Petts on or about 16 December 2005, Mr Petts said words to the effect “I have managed to secure long-term funding for Plastech, but unfortunately the money will not be available until late January 2006” (Buchanan affidavit, 5 July 2007, paragraph 18). In the same conversation, Mr Petts said he would try to arrange short-term finance to cover the deposit due in December 2005, in response to which Ms Buchanan expressed her dissatisfaction concerning possible use of short-term finance.

32 According to Ms Buchanan, in a further telephone conversation with Mr Petts on or about 20 December 2005, he informed her that he had secured short-term finance for the Plastech Group to enable the December 2005 deposit to be paid. Ms Buchanan states that Mr Petts persuaded her to accept the short-term finance with an assurance that long-term finance would be in place by late January 2006 and by stating “I would really like to take care of this before Christmas as I wanted to be able to spend the Christmas break with my girls” and that he would be “back by the end of the first week in January and will sort out the long-term finance then”. I accept the evidence of Ms Buchanan that Mr Petts used words to this effect. Ms Buchanan asserts that she accepted this state of affairs given the need to pay the deposit by 22 December 2005. Mr Petts stated that Ms Buchanan’s property would be used as security for the loan and that Crown & Gleeson required a charge over the assets of the Plastech Group as well. He stated that the loan would include interest and all related expenses (Buchanan affidavit, 5 July 2007, paragraph 19).

33 It is apparent that Crown & Gleeson was provided with information concerning available security for the loan and that some assessment was made concerning the extent of that security. Mr Lee contacted Mr Petts and informed him that the Plastech Group did not have enough equity for a $600,000.00 loan, but only for a $300,000.00 loan (Petts affidavit, 1 August 2008, paragraph 13).

34 It is common ground between Mr Petts and Ms Buchanan that Mr Petts spoke to Ms Buchanan by telephone and informed her that the Plastech Group was “$300,000.00 short” (Petts affidavit, 1 August 2008, paragraph 14; Buchanan affidavit, 5 July 2007, paragraph 20). There is conflict between the evidence of Mr Petts and Ms Buchanan concerning what happened next. Mr Petts maintains that Ms Buchanan volunteered that Mr Walster had his home as possible security and that she would speak to Mr Walster about it. Ms Buchanan maintains that, although she informed Mr Petts that Mr Walster was a director of the company, she instructed Mr Petts not to speak to Mr Walster about further security and informed him that Mr Walster had no financial interest in the company (Buchanan affidavit, 5 July 2007, paragraph 20).

35 There is no issue that what next occurred was a telephone conversation between Mr Petts and Mr Walster. According to Mr Petts, Mr Walster telephoned him and explained that Ms Buchanan had spoken to Mr Walster about the question of using his house as security (Petts affidavit, 1 August 2008, paragraph 15; Petts, T180-181). According to Mr Walster, Mr Petts telephoned him at home and initiated discussion with him concerning the possible use of his home as security for the Crown & Gleeson loan (Walster affidavit, 16 February 2007, paragraph 42; Walster, T168).

36 Mr Petts was adamant that he did not request (and did not have) Mr Walster’s home telephone number.

37 I am satisfied on the balance of probabilities that Ms Buchanan proposed the possible use of Mr Walster’s property as security for the loan. There are a number of reasons why I have reached this conclusion. By 20 December 2005 it was apparent that the deposit due on 22 December 2005 could not be paid other than by way of a short-term loan from Crown & Gleeson and that this loan would not be advanced without security in the form of Mr Walster’s property. Ms Buchanan was under great pressure at that time from Startech and her own shareholders to ensure that the deposit was paid so that the project was not lost. Having observed Ms Buchanan giving evidence, it is apparent that she is a forceful and determined person who would take such steps as appeared necessary to her to advance the interests of the Plastech Group and herself, including proposing to Mr Walster that his property should be used as security for the Crown & Gleeson loan. Having observed Mr Walster give evidence, I am satisfied that he was a loyal and compliant employee of the Plastech Group who would be inclined to respond favourably to a request from Ms Buchanan. Further, it seems to me to be a highly improbable scenario that Mr Petts would defy Ms Buchanan’s instruction by approaching Mr Walster direct to seek his property as security. Rather, the more probable explanation for this was that a somewhat desperate Ms Buchanan proffered Mr Walster and his property to Mr Petts and facilitated contact between the two men for this purpose. On this issue, then, I accept the evidence of Mr Petts that it was Mr Walster who contacted him and who explained that Ms Buchanan had approached Mr Walster for this purpose. I am conscious that care must be taken in attaching weight, or excessive weight, to demeanour in the process of fact finding: Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186 at 191 [27]. I have had regard to the probabilities and consistency with other relevant evidence in making this finding.

38 The acceptance of Mr Petts’ account on this issue, however, does not greatly assist him on the determination of the cross-claim. The evidence of both Mr Petts and Mr Walster concerning the conversations which followed between the two men portrays Mr Walster, accurately, as a reluctant participant in the arrangement. Mr Walster struck me as a cautious man. Although I am satisfied that Ms Buchanan initiated the process which saw Mr Walster speaking to Mr Petts about the topic, I am satisfied that it was the persuasion of Mr Petts in a number of respects which convinced Mr Walster that he and his wife should mortgage their home as security for a short-term loan in which the Walsters themselves had no actual financial interest. With respect to the tenor and content of the conversations between Mr Petts and Mr Walster, I accept Mr Walster’s version over that of Mr Petts. Once again, I have had regard to the probabilities and consistency with other relevant evidence, together with the demeanour of witnesses, in making this finding. I accept that Mr Petts said words to the following effect in a telephone conversation with Mr Walster on 20 December 2005 (Walster affidavit, 16 February 2007, paragraph 42):

“… There is very little risk involved to you. I have some short term finance arranged which would only be for one month, two months maximum and I’ll have some other funding in place by then. I am using Ruth’s properties and Plastech’s assets, but I’m still short by about $300,000.00. What do you think?”

To which Mr Walster replied:

“I don’t think it’s a good idea. I don’t think my wife would agree. Sorry, no I can’t do it.”

39 I am satisfied that Mr Walster then spoke to his wife about the topic to the following effect (Walster affidavit, 16 February 2007, paragraph 43):

“Mr Walster: Sue, Plastech need to borrow our house for this loan. I would like to help them if I can. I’ve got a good job there, and I want the business to do well. Neil said there wasn’t really any risk.
Mrs Walster: Well, I don’t think it’s a good idea.”

40 I accept Mr Walster’s evidence that there was thereafter a further telephone conversation between Mr Petts and Mr Walster to the following effect (Walster affidavit, 16 February 2007, paragraph 44):

“Mr Petts: There really is no risk of you losing your house and I have back up finance available. In the worst possible scenario, I could easily arrange a $300,000 loan for you. I’ve just lost my marriage, and I want to see my kids over Christmas. This is only bridging finance till January when I will have the funds sorted by then.
Mr Walster: Well, what do you think of the plasma converter project?
Mr Petts: I think it’s a great proposal. But Ruth doesn’t have enough security to get finance unless you put your house up as well. The deal will fall through otherwise.
Mr Walster: Well, alright, but I’ll have to see what my wife says.”

41 Mr Walster then spoke once again with his wife who remained cautious about the proposal.

42 I accept the evidence of Mr Walster that a conversation to the following effect took place with Mr Petts on 21 December 2005 (Walster affidavit, 16 February 2007, paragraph 46):

“Mr Petts: I assure you there is no real risk of losing your house. I’ve got the money, but everyone’s closed for Christmas . This is just to keep us going til January or February or [sic] the latest.
Mr Walster: OK, we’ll do it.” (my emphasis)

43 Particulars of Mr and Mrs Walster’s title to the property at 7 High Street Willoughby were provided to Crown & Gleeson and arrangements were then put in place for the settlement of the loan on 22 December 2005.

44 Although I am satisfied that it was Ms Buchanan who raised with Mr Walster the question of him offering his property as security for the loan, thus giving rise to contact between Mr Walster and Mr Petts, I am satisfied on the balance of probabilities that Mr Walster would not have entered into the mortgage of his family home unless Mr Petts had represented to him the following matters:

(a) that long-term finance had already been arranged (that is, was in place), but that payment under that long-term finance could not be obtained, given the Christmas period, until January 2006;

(b) that the extent of any potential liability of Mr and Mrs Walster would not extend beyond $300,000.00;

(c) that there was really no risk of Mr and Mrs Walster losing their house and that Mr Petts had backup finance available.

45 In finding that Mr Petts represented to Mr Walster that long-term finance had been arranged by 22 December 2005, I have had regard as well to the evidence of Mr Lee and Ms Buchanan that Mr Petts was making representations to the same effect at that time (see [27]-[31] above). Although there was some debate at the hearing over what words had been used by Mr Petts, the real issue at the hearing appeared to be what reasonable construction could be given to the words and what foundation, if any, was there for Mr Petts to make such statements.

46 On the morning of 22 December 2005, Mr Walster made an appointment with a solicitor, but later cancelled it as he considered that there would have been insufficient time to see the solicitor before he had to go and sign the documents (Walster affidavit, 16 February 2007, paragraph 52).

47 I accept the evidence of Mr Walster that, on 22 December 2005, Mr Petts telephoned him and a conversation to the following effect took place (Walster affidavit, 16 February 2007, paragraph 54):

“Mr Petts: CMC [sic] can settle mid January. The loan with Crown & Gleeson will just tie [sic] us over until then. I have arranged for you to sign the loan documents at the Crows Nest office, Frank. Can your wife come into the office to sign the loan documents now?
Mr Walster: OK, I’ll get her to come in.”

48 It was common ground that Mr Petts was not present on 22 December 2005 when Ms Buchanan and Mr and Mrs Walster signed the loan and mortgage documents. On that day, Mr Petts was at the Homebush swimming complex with his children (Petts affidavit, 1 August 2008, paragraph 20). This fact tends to support the evidence of Mr Walster (at [40]) and Ms Buchanan (at [32]) that Mr Petts had expressed his desire to spend time with his children as a matter impacting upon his wish for an early resolution. Mr Zofrea was present when the documents were signed by Ms Buchanan, Mr Walster and Mrs Walster on 22 December 2005.

49 Crown & Gleeson was a Queensland-based company. On 22 December 2005, Ms Garnham, then a law student working as a legal officer for Crown & Gleeson, flew to Sydney so that the loan and mortgages could be settled. Ms Garnham gave her evidence in a straightforward manner at the hearing before me and I accept her evidence where there is any conflict with the evidence of Ms Buchanan or Mr Walster. Ms Garnham met with Ms Buchanan at the Land Titles Office in Sydney. Mr Zofrea was also present. I note that Mr Zofrea was not called to give evidence before me. No submission was made by any party that any inference should be drawn from the failure of any party to call him. I will determine the cross-claim by reference to the evidence adduced at the hearing.

50 I am satisfied that Ms Buchanan was well aware when she met Ms Garnham on 22 December 2005 that Mr Walster’s property was to be used as security for the Crown & Gleeson loan. I reject her evidence that she only learned of this fact when she saw reference to the Walsters’ property in the loan documentation. I accept Ms Garnham’s evidence that Ms Buchanan had an opportunity to examine the loan and mortgage documentation and that extensive discussion took place between Ms Garnham and Ms Buchanan concerning the documents. I accept Ms Garnham’s evidence that they then drove to the Plastech Group’s office at Crows Nest. Mr Walster was present at the Crows Nest office and commenced to examine the loan and mortgage documents for about 30 minutes before his wife arrived (Walster affidavit, 16 February 2007, paragraph 56). His examination of the documents indicated, correctly, that the interest rate was extremely high (15% per month reducing to 10% per month if interest was paid on time) and that the term of the loan was six months.

51 The loan documents identified the following securities:

(a) a fixed and floating charge granted by Ms Buchanan and Mr Walster as directors of Plastech Australia;

(b) a registered mortgage granted by Ms Buchanan and Emily Jane Stimson in favour of Crown & Gleeson over a property at 51 Ernest Street, Crows Nest;

(b) a registered mortgage granted by Ms Buchanan and Ms Stimson in favour of Crown & Gleeson over a property at 26/29 Holtermann Street, Crows Nest;

(c) a registered mortgage granted by Ms Buchanan in favour of Crown & Gleeson over a property at Lots 33 and 14, 6/18 Clarke Street, Crows Nest;

(d) a registered mortgage granted by Mr and Mrs Walster in favour of Crown & Gleeson over their property at 7 High Street, Willoughby.

52 The loan amount to be advanced by Crown & Gleeson was $884,000.00 comprising $686,300.00 to be paid to the borrower, $176,800.00 to be retained by Crown & Gleeson (as prepayment for two months’ interest) and $13,000.00 by way of a brokerage fee for Mr Petts, together with sums for searches, registration fees, contract preparation and stamp duty.

53 I accept Ms Garnham’s evidence that, following the arrival of Mrs Walster, there was a conversation during which Ms Garnham took Mr and Mrs Walster through the documentation (Garnham, T68-70). This discussion took place against the background of Mr Walster already having an opportunity to peruse the documents for some 30 minutes. I accept Mr Walster’s evidence that he felt under a degree of pressure at that time. The real cause of the pressure was the deadline of 4.00 pm on 22 December 2005 by which time payment had to be made to the United States of the deposit due on the Plasma Converter. To the extent that it may be relevant to the present cross-claim, I am not satisfied that any pressure was placed on Ms Buchanan or Mr and Mrs Walster by Ms Garnham. I accept Ms Garnham’s evidence that she was not under any time constraints and had no existing booking to return to Queensland that evening (Garnham, T67, 201).

54 I am satisfied that Mr and Mrs Walster were under pressure dictated by the deadline. By the time the loan and mortgage documents were executed by them, it was apparent that a large debt was secured by, inter alia, the mortgage over their property with very high interest rates payable on the loan. Although Mr Walster’s sense of loyalty to the Plastech Group and Ms Buchanan created the context in which he came to find himself that day, I am well satisfied that it was the representations made by Mr Petts which induced him to execute the loan and mortgage documents. In particular, I am well satisfied that Mr Walster believed at that time, as a result of Mr Petts’ statements to him, that long-term finance had already been arranged and was in place and would commence in late January 2006, thereby overtaking what to Mr Walster appeared to be the theoretical liability under the documents which he and his wife executed on the afternoon of 22 December 2005.

55 It is reasonable to conclude that a reading of the documents would have disclosed no reference to a $300,000.00 ceiling on the potential liability of Mr and Mrs Walster under the loan agreement. To the extent that Mr Walster may have relied upon that representation to that point, it might be said that any foundation for a belief based on that representation had been eroded by Mr Walster’s examination of the documents. Even if that be the case, however, the Crown & Gleeson loan and mortgage documents were not capable of throwing any light upon the primary representation which I am satisfied led Mr Walster to enter into the loan and mortgage arrangements. That was Mr Petts’ representation made to Mr Lee, Ms Buchanan and Mr Walster that long-term finance had been arranged.

56 Following execution of the documents by Ms Buchanan and Mr and Mrs Walster, the loan and mortgage transactions were settled and Crown & Gleeson advanced the sum of $686,300.00 which was utilised to pay the deposit due that day on the Plasma Converter.

57 A little less than $25,000.00 of the Crown & Gleeson loan was utilised to discharge the existing mortgage to Permanent Custodians Limited on Mr and Mrs Walster’s property (Walster, T156). As a result, Crown & Gleeson obtained a first mortgage over the Walsters’ property at 7 High Street, Willoughby.

58 Between 23 December 2005 and about 14 January 2006, Mr Petts was on holidays with his children (Petts affidavit, 1 August 2008, paragraph 21). Upon his return to work, Mr Petts continued his attempts to put in place long-term finance for the Plasma Converter project.

59 Mr Petts maintained in evidence that, as at 22 December 2005, he believed that the Plastech Group would get refinanace. The basis for this belief was said to be “verbal agreements from finance companies and also letters of offer” (Petts, T197-198). He pointed to three finance companies and he relied upon certain documents annexed to his affidavit of 1 August 2008 in support of the claim that long-term finance had been arranged for Plastech Australia in December 2005 (Petts, T198). However, none of the documents were capable of supporting this conclusion.

60 Annexure A to Mr Petts’ affidavit is an email from Mr Steve James of CMS to Mr Petts dated 11 January 2006 which refers to a meeting that day and declined to assist the Plastech Group, noting that “your client’s best opportunity would rest with a project finance company or alternatively an equity participant”. As mentioned earlier (at [26]), a pre-approval advice had been issued by CMS in December 2005, but the finance was not approved when CMS were informed that the Plasma Converter system would be constructed in the United States. The evidence does not support a conclusion that long-term finance had been arranged (that is, was in place) from CMS as at 20-22 December 2005. At its highest, the CMS document points to a type of provisional offer made in December 2005, but in circumstances where basic and fundamental information had not been provided to CMS, including the place of manufacture of the equipment. Although it might have been accurate to state in December 2005 that finance might be forthcoming from CMS in January 2006, subject to a variety of prerequisites being satisfied, this was not what Mr Petts said to Mr Walster, Mr Lee or Ms Buchanan.

61 Annexures B and C to Mr Petts’ affidavit are documents relating to Asia Capital Pty Limited, including an invoice dated 7 January 2006 seeking payment of advisory fees of $10,000.00 for February 2006 for Asia Capital Pty Limited as part of a commencement deposit. Ms Buchanan maintained that any meeting with Mr Colin Oxlade of Asia Capital Pty Limited did not occur until much later than 7 January 2006 (Buchanan, T124). A fair reading of these documents suggests an introductory arrangement commencing in early 2006, not the realisation of some concrete financing arrangement said to have been reached in December 2005.

62 Exhibits C and D relate to an application by Ms Buchanan made 14 February 2006 for bridging finance of $6 million for a three-month period with an indicative interest rate of 10% per month (Exhibit D). On 21 February 2006, Fortuna Capital Partners Pty Limited issued a letter of offer to Ms Buchanan for a fully-drawn advance of $6 million to Plastech Australia for a term of up to 90 days at a maximum of 10% per month interest. It was the evidence of Ms Buchanan and Mr Petts that this bridging finance was not taken up (Buchanan, T115). Mr Petts said in evidence that he had arranged long-term finance with Fortuna Capital Partners Pty Limited in December 2005 through Ms Brookes McTavish and that he had numerous conversations with Ms McTavish and Ms Buchanan after January 2006 to arrange the finance, but that ultimately it did not go through because Ms Buchanan would not accept some of the conditions proposed by Fortuna Capital Partners Pty Limited.

63 I accept that Mr Petts may have had discussions of some type with Fortuna Capital Partners Pty Limited and other entities prior to 22 December 2005 concerning the possibility of long-term finance being extended to Plastech Australia. However, none of the documents relied upon by Mr Petts assist him in support of the proposition that he had arranged long-term finance by 22 December 2005. Even the Fortuna Capital Partners Pty Limited documents (Exhibits C and D) indicate an application made in February 2006 for 90-day bridging finance, not a long-term loan.

64 It is not necessary to record in any detail what occurred after February 2006. It is sufficient to note that the Crown & Gleeson loan was not repaid. Efforts were made by Crown & Gleeson to resolve the dispute in 2006. Mr Walster resigned his directorships on about 24 March 2006 as he was concerned that he could be held liable for the debts of the Plastech Group even though he was not involved in its management.

65 The Crown & Gleeson loan became payable in full on 22 June 2006. Crown & Gleeson commenced proceedings against Mr and Mrs Walster culminating in the present hearing.

66 I should observe that Crown & Gleeson, from an early time in the proceedings, indicated an intention not to pursue the sum outstanding under the mortgage by reference to the very high interest rates contained therein. Rather, Crown & Gleeson confined its claim against Mr and Mrs Walster to the principal sum of $660,499.26 together with interest calculated at the rate of 5.5% per annum. As at 4 August 2008, the sum claimed by Crown & Gleeson was a total of $733,139.05 with an interest component of $72,639.79 (Exhibit A). As mentioned earlier, Crown & Gleeson’s claim settled on 7 August 2008 in the sum of $575,000.00. Although these aspects are by way of historical background only, they explain the course taken in the litigation by Crown & Gleeson prior to settlement of its claim.

Mr Walster’s Cross-Claim Against Mr Petts

67 By Statement of Cross-Claim filed 24 July 2007, Mr Walster sought the following relief against Mr Petts:

(a) damages pursuant to s.68 of the Fair Trading Act 1987 or at common law;

(b) indemnity or, alternatively, contribution in respect of any amount including costs which Mr Walster may be ordered to pay Crown & Gleeson;

(c) interest pursuant to s.100 of the Civil Procedure Act 2005 ;

(d) costs including all of Mr Walster’s costs of these proceedings and any he may be ordered to pay to Crown & Gleeson;

(e) such further or other orders as the Court thinks fit.

68 The causes of action relied upon by Mr Walster in his cross-claim against Mr Petts are the following:

(a) misleading or deceptive conduct under s.42 Fair Trading Act 1987 ;

(b) negligent misrepresentation;

(c) unconscionable conduct under s.43 Fair Trading Act 1987 .

The Misleading or Deceptive Conduct Claim

69 Paragraph 9 of the Statement of Cross-Claim alleges that, on or about 20 December 2005, Mr Petts entreated Mr Walster to enter into, and offer his house as part security for short-term finance from Crown & Gleeson, and during the course of doing so, that Mr Petts represented to Mr Walster that:

(a) the short-term finance was bridging finance only, spanning the Christmas period, and would only remain in place for one, or at most, two months;

(b) Mr Petts would have in place by January 2006 long-term finance for the purchase and acquisition of the Startech Plasma Converter which would discharge the short-term finance;

(c) the short-term finance posed very little risk to Mr Walster;

(d) the security sought from Mr Walster was only required to secure the sum of $300,000.00 of the short-term finance, being the shortfall that the Plastech Group and Ms Buchanan was unable to secure;

(e) there was no real risk that Mr Walster would lose his house;

(f) Mr Petts had backup finance available to Mr Walster in the event that the Plastech Group defaulted on the short-term finance;

(g) Mr Petts could easily arrange a $300,000.00 loan for Mr Walster in the event that the Plastech Group defaulted on the short-term finance;

(h) Mr Petts owned a property in the State of Victoria and was prepared to use it to pay out the short-term finance;

(i) the Plastech Group would not be able to purchase and acquire the Startech Plasma Converter unless Mr Walster offered his house as part security for the short-term finance.

70 Paragraph 10 of the Statement of Cross-Claim alleges that, on or about 21 December 2005, Mr Petts repeated the representations pleaded in paragraph 9(a) and (e) (at [69] above) to Mr Walster, and further represented to Mr Walster that:

(a) Mr Petts had secured long-term finance for the purchase and acquisition of the Startech Plasma Converter; but

(b) the lenders of the long-term finance had closed for the Christmas 2005 holiday period.

71 Paragraph 11 of the Statement of Cross-Claim alleges that the representations pleaded in paragraphs 9(a)-(h) (at [69] above) and 10(a)-(b) (at [70] above) were made by Mr Petts in trade and commerce and were misleading and deceptive, or were likely to mislead or deceive, contrary to s.42 of the Fair Trading Act 1987 in that:

(a) the short-term finance did not only span the Christmas 2005 period and was not discharged in January or February 2006;

(b) Mr Petts did not have secured as at the time of making the representations and would not in the future secure long-term finance to enable the Plastech Group to purchase and acquire the Startech Plasma Converter and discharge the short-term finance in January or February 2006; and

(c) the representations expressly or impliedly conveyed to Mr Walster, or misled him into believing that his liability under the short-term finance was limited to the sum of $300,000.00 when in truth Mr Walster’s liability was unlimited and his house as security could be called on to satisfy all of the moneys advanced under the short-term finance;

(d) the short-term finance was attended with considerable risk to Mr Walster and his property;

(e) Mr Petts did not have backup finance available to Mr Walster and did not use a property in the State of Victoria to pay out the short-term finance.

72 Mr Walster alleges in paragraph 12 of the Statement of Cross-Claim that insofar as the representations pleaded are representations as to future matters, they were misleading in that Mr Petts made the representations without reasonable grounds contrary to s.41 of the Fair Trading Act 1987.

73 In his Defence to the Cross-Claim filed 6 June 2008, Mr Petts denies the representations alleged in paragraphs 9 and 10 of the Statement of Cross-Claim and says that he said to Mr Walster “words to the effect that he was working on long term finance, but that it would be hard getting anything this side of Christmas as lenders were about to go on holidays” (paragraph 10, Defence to Second Cross-Claim).

The Claim in Negligent Misrepresentation

74 With respect to the claim in negligent misrepresentation, Mr Walster alleges at paragraphs 14-16 of the Statement of Cross-Claim that Mr Petts knew or ought to have known that Mr Walster would act on the faith of and rely on the representations pleaded in paragraphs 9 and 10 in deciding whether to enter into the short-term finance brokered by Mr Petts and offer the High Street property as security. It is alleged that Mr Petts owed Mr Walster a duty to exercise care in making representations to Mr Walster concerning finance brokered by Mr Petts. It is alleged that, in breach of that duty, the representations made by Mr Petts pleaded in paragraphs 9 and 10 were false and misleading and, in the circumstances, negligent.

75 The Defence to the Second Cross-Claim does not admit that Mr Petts owed Mr Walster a duty to exercise care and otherwise denied the allegations of negligent misrepresentation.

The Unconscionable Conduct Claim

76 With respect to the claim of unconscionable conduct contrary to s.43 Fair Trading Act 1987, Mr Walster alleges in paragraph 17 of the Statement of Cross-Claim that Mr Petts:

(a) made the representations to Mr Walster contained in paragraph 9(a)-(h) (at [69] above) and 10(a)-(b) (at [70] above); and

(b) exerted undue influence or pressure and used unfair tactics on Mr Walster to enter into the short-term finance brokered by Mr Petts and to offer the High Street property by:


(i) making the representation pleaded in paragraph 9(i) (at [69] above) and

(ii) representing to Mr Walster that Mr Petts had just lost his marriage and that he wanted to see his children over Christmas which, in all the circumstances, was intended to impliedly convey and did convey that securing the short-term finance would enable or facilitate Mr Petts to see his children over Christmas.

77 Mr Walster alleges in paragraph 18 of the Statement of Cross-Claim that Mr Petts engaged in the unconscionable conduct pleaded in paragraph 17 in circumstances where he did know or ought to have known that:

(a) the short-term finance was improvident from the perspective of Mr Walster and that he stood to obtain no advantage from offering the High Street property as security;

(b) Mr Walster did not know the risks associated with the short-term finance;

(c) Mr Walster did not know the identity of the prospective lenders of the short-term finance or the terms on which it was to be offered; and

(d) Mr Walster was by virtue of the matters pleaded in paragraphs (a)-(c) above in a position of special disadvantage and unable to adequately protect his own interests.

78 Mr Petts’ Defence to the Second Cross-Claim denied Mr Walster’s claim for unconscionable conduct.

Determination of Cross-Claim

79 It is now necessary to apply my findings of fact to the causes of action advanced by Mr Walster in his cross-claim against Mr Petts.

80 With respect to the claim of misleading or deceptive conduct under s.42 Fair Trading Act 1987, I am satisfied that Mr Petts made representations to Mr Walster “in trade or commerce”: Concrete Constructions (NSW) Pty Limited v Nelson [1990] 169 CLR 594 at 601-604; Plimer v Roberts (1997) 80 FCR 303 at 304-5, 308-311, 322-329. At the relevant times, Mr Petts was acting as a mortgage or finance broker and financial adviser seeking to procure finance for the Plastech Group. In the course of that business activity, he communicated with Ms Buchanan, Mr Walster and others. Mr Walster was a director and employee of the companies in the Plastech Group. Mr Petts engaged in this business activity for reward, albeit in this case that his brokerage fee was paid by Crown & Gleeson from the proceeds of the loan.

81 Mr Petts submitted that at no time did he intend to mislead Mr Walster. The test, of course, is an objective one and it is not necessary for Mr Walster to demonstrate a deceptive intention on the part of Mr Petts. The intent of the maker of the representation is not relevant under s.42 and all that is relevant is whether, tested objectively, the conduct was misleading or deceptive or likely to mislead or deceive: Hornsby Building Information Centre Pty Limited v Sydney Building Information Centre Limited (1978) 140 CLR 216 at 223. Conduct that objectively leads one into error is misleading: Butcher v Lachlan Elder Realty Pty Ltd [2004] 218 CLR 592 at 626 [111] (“Butcher”).

82 The words “or is likely to mislead or deceive” in s.42(1) make it clear that it is unnecessary to prove that the conduct in question actually deceived or misled anyone: Butcher at 626 [112].

83 Conduct will only be misleading or deceptive if it induces or is capable of inducing error: Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 149 CLR 191 at 198; Butcher at 625-626 [111]. Whether particular conduct is misleading or deceptive is a question of fact to be determined in the context of the evidence as to the alleged conduct and to the relevant surrounding facts and circumstances: Butcher at 625 [109].

84 The fact that a person who has been the subject of a misrepresentation has been careless or could have discovered the misrepresentation had he made proper enquiries does not absolve the maker of the misrepresentation from liability for a breach of s.42: Collins Marrickville Pty Limited v Henjo Investments Pty Limited (1987) 72 ALR 601; Henjo Investments Pty Limited v Collins Marrickville Pty Limited (No. 1) (1988) 39 FCR 546 (on appeal). A person does not avoid liability for breach of s.42 because the person who has been the subject of misleading or deceptive conduct could have discovered the misleading or deceptive conduct by proper inquiries: Butcher at 626 [111]. However, depending on the circumstances, other related conduct may have the effect of modifying or erasing whatever is misleading in the conduct complained of: Butcher at 638-9 [152]; Alami v Langov [2008] NSWSC 812 at [39].

85 Mr Walster must establish a causal link between the impugned conduct and the loss that is claimed: Butcher at 604 [37].

86 I have set out earlier in this judgment (at [44]), the representations which I am satisfied were made by Mr Petts to Mr Walster on 20 and 21 December 2005. The critical representation, in my view, was the representation that long-term finance had been arranged by 20 December 2005, but that the funds would not be available, for seasonal reasons, until January 2006. This representation of Mr Petts related to present and future matters. He represented to Mr Walster that long-term finance had been arranged (that is, was in place) and that the long-term finance would be available (that is, paid) in January 2006. To the extent that Mr Petts’ representation related to a future matter, the representation shall be taken to be misleading unless Mr Petts had reasonable grounds for making the representation: s.41(1) Fair Trading Act 1987. The onus of establishing that Mr Petts had reasonable grounds for making such a representation is on Mr Petts: s.41(2).

87 I have already made findings (at [59]-[63]) concerning the absence of reasonable grounds for the representation. I have already observed that Mr Walster’s examination of the loan and mortgage documents and the explanation of them provided by Ms Garnham on 22 December 2005 may have served to, in some way, dilute part of the misrepresentations made by Mr Petts. In particular, an examination of the documents would have served to demonstrate that there was not a $300,000.00 cap on the potential liability of Mr and Mrs Walster in the event of default. Mr Kasep submitted that, even if there was some knowledge on the part of Mr Walster of the falsity of one of the representations, this does not serve to defeat Mr Walster’s claim: Gipps v Gipps [1978] 1 NSWLR 454 at 460. I accept this submission, and note also, in this respect, the authorities referred to at [84] above. Moreover, as I have earlier observed, the examination of the loan and mortgage documents could not in any way neutralise or dilute Mr Petts’ misrepresentation concerning the existence of long-term financing.

88 I do not accept Mr Petts’ contention that a statement that he had “arranged long term finance” meant something less than that long-term finance was in place. At one point in cross-examination by Mr Kasep, Mr Petts said “I was in the process of organising” finance (T177). In his Defence to the Cross-Claim (referred to at [73] above), Mr Petts asserted that he said to Mr Walster “words to the effect that he was working on long term finance”. I do not accept that Mr Petts used words to this effect to Mr Walster. A fair and reasonable construction of what Mr Petts said to Mr Walster was that finance was in place, that it would happen, but not until January 2006. A fair and reasonable construction of what Mr Petts said to Mr Walster was that long-term finance was to definitely be available with the only difficulty being one of timing, so that the finance would not be available until January 2006. This statement was not objectively correct. It was both misleading and deceptive.

89 I am satisfied that Mr Walster has made out his claim against Mr Petts based on s.42 Fair Trading Act 1987. I am satisfied that Mr Walster relied upon the misrepresentation. I am satisfied that Mr Walster has suffered loss or damage resulting from Mr Petts’ breach of s.42 of the Act in the form of his liability to Crown & Gleeson now crystallised in the sum of $575,000.00. This loss has arisen as a direct consequence of Mr Walster relying upon the misleading statement made by Mr Petts on 20 and 21 December 2005. Mr Walster is entitled to an award of damages under s.68 in this sum as that which will most fairly compensate him for the wrong suffered: Alami v Langov at [70].

90 In view of these findings, it is not strictly necessary to determine Mr Walster’s claim for negligent misrepresentation. However, the findings of fact which I have made, in my view, support a judgment adverse to Mr Petts on the negligent misrepresentation claim. I am satisfied that Mr Petts owed a duty of care to Mr Walster in the circumstances. I am satisfied that the representation that long-term finance had been arranged with payment to be made in January 2006, breached that duty of care. I am satisfied that Mr Walster suffered loss or damage as a result of that breach. Accordingly, I would find in Mr Walster’s favour with respect to this claim as well. This finding would entitle Mr Walster to judgment in the sum of $575,000.00 against Mr Petts.

91 It is not strictly necessary to determine the claim for unconscionable conduct under s.43 Fair Trading Act 1987. Brief oral submissions only were advanced in support of this cause of action, which did not touch upon all relevant aspects of this claim. As stated earlier (at [40] and [48]), I am satisfied that Mr Petts mentioned, in the course of his conversations with Mr Walster, his desire to spend time with his children over the Christmas period. It is difficult to see the relevance of such an observation except to cause an element of emotional pressure in what was already a pressured set of circumstances for Mr Walster. Mr Kasep made brief reference in submissions to Australian Competition and Consumer Commission v Samton Holdings Pty Limited (2002) 117 FCR 301 at 322-323 with respect to the situational disadvantage in which Mr Walster was placed. However, in the absence of detailed submissions addressing this cause of action, I do not propose to consider the claim further. It is not necessary for the purpose of determining the cross-claim, which is otherwise successful with respect to two causes of action.

Conclusion

92 In summary, I am satisfied that Mr Walster has made out his claim against Mr Petts based upon misleading or deceptive conduct under s.42 Fair Trading Act 1987 and also by way of negligent misrepresentation. I am satisfied that judgment ought be given in favour of Mr Walster against Mr Petts in the sum of $575,000.00.

93 Insofar as Mr Walster sought indemnity or contribution in respect of any amount of costs which Mr Walster may be ordered to pay to Crown & Gleeson, I note that the terms of settlement as between Crown & Gleeson and Mr Walster provided that there be no order as to costs.

94 As Mr Walster has not yet paid the sum of $575,000.00 to Crown & Gleeson, I do not see a basis for allowing interest up to judgment under s.100 Civil Procedure Act 2005.

95 Mr Walster has succeeded on his cross-claim against Mr Petts. In the ordinary course, costs should follow the event (Rule 42.1 Uniform Civil Procedure Rules) and I see no reason why such an order should not be made in this case.

96 I make the following orders:

(a) verdict and judgment on the cross-claim for Mr Walster against Mr Petts in the sum of $575,000.00;

(b) Mr Petts is to pay Mr Walster’s costs of the cross-claim.

97 As requested at the conclusion of the hearing (T251), I will grant the parties leave to make application for any different costs order by notice to my Associate given within three days from today.

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