Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] - [2009] WASCA 183

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD -v- COMPUTER ACCOUNTING AND TAX PTY LTD [No 2] [2009] WASCA 183

CORAM: MARTIN CJ
BUSS JA
NEWNES JA

HEARD: 22 JULY 2009

DELIVERED : 23 OCTOBER 2009

FILE NO/S: CACV 76 of 2008

BETWEEN: PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD
First Appellant
MARTIN PAUL BANNING
Second Appellant
AND
COMPUTER ACCOUNTING AND TAX PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :SIMMONDS J
Citation  :COMPUTER ACCOUNTING AND TAX PTY LTD -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [2008] WASC 133
File No  :CIV 2265 of 2006

Catchwords:

Measure of damages for contravention of Trade Practices Act 1974 (Cth) and Fair Trading Act 1987 (WA) and deceit - Damages for acquisition loss - Damages for lost investment opportunity - Period over which lost investment opportunity damages can be claimed - The awarding of interest on lost investment opportunity damages - Subsequent declines in value of property - Avoidance of double recovery - Onus of proof - Multiple causes of loss

Evidence - Expert evidence - 'Non specific hearsay' - Admissibility of evidence where specific transactions are relied upon as the basis of an opinion - Deferral of rulings on admissibility

Legislation:

Fair Trading Act 1987 (WA)
Trade Practices Act 1974 (Cth)

Result:

Appeal allowed

Category: B

Representation:

Counsel:

First Appellant               :     Mr A Hershowitz
Second Appellant          :     Mr A Hershowitz
Respondent:     Mr M J McCusker QC & Mr C P Stokes

Solicitors:

First Appellant               :     Holborn Lenhoff Massey
Second Appellant          :     Holborn Lenhoff Massey
Respondent:     Chris Stokes & Associates

Case(s) referred to in judgment(s):

Automasters Australia Pty Ltd v Bruness Pty Ltd [2004] WASCA 229
Doyle v Alby (Ironmongers) Ltd [1969] 2 QB 158
Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR
Gould v Vaggelas [1985] HCA 85; (1985) 157 CLR 215
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640
Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638
Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494
Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302
Potts v Miller [1940] HCA 43; (1940) 64 CLR 282
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
Radferry Pty Ltd v Starborne Holdings Pty Ltd [1998] FCA 1689
Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
Whitaker v Paxad Pty Ltd [2009] WASC 47

MARTIN CJ: Professional Services of Australia Pty Ltd (the first appellant) and the executor of the estate of the late Mr Martin Banning (the second appellant) appeal from the assessment of damages awarded against them by the trial judge in proceedings brought by Computer Accounting and Tax Pty Ltd (the respondent). Their main complaint concerns the damages awarded in respect of the respondent's claim that it lost the opportunity to make a more profitable investment than that which it made and retained. The findings made by the trial judge in respect of liability, which are not contested, provide the context for the enunciation of the specific challenges which the appellants make to his assessment of damages.

Findings on liability

The directors of the respondent are Mr Hartmut Frigger, an engineer, and his wife, Ms Angela Frigger, an accountant. The respondent is a corporate vehicle used by Mr and Ms Frigger for investment purposes. There was an issue at trial as to whether the respondent engaged in the transaction giving rise to the proceedings as legal and beneficial owner, or as trustee for a superannuation fund in which Mr and Ms Frigger have an interest. However, that issue has not been pursued on appeal.
The late Mr Banning was the sole director of the first appellant. In 2000, the first appellant acquired land on the corner of South-West Highway and Dickens Place, Armadale on which there was a service station, roadhouse and workshops (the service station).
For about nine months during the second half of 2002 and the first quarter of 2003, Mr and Ms Frigger investigated potential real estate investment on behalf of the respondent. Evidence was given of various potential acquisitions which they investigated, which included vacant residential land, residential properties, a service station and car wash in Osborne Park, strata title office units, a food factory and office, a furniture shop, and a hardware store. The latter three premises were in Malaga. Two of the residential properties were in Attadale, another in Applecross and another in Coolbellup. The asking price of the properties investigated varied between $120,000 and $1.2 million.
During February 2003, Mr and Ms Frigger saw an advertisement for the sale of the service station in a newspaper. They responded to the advertisement and made contact with Mr Banning. He sent them information relating to the service station.
Negotiations for the acquisition of the service station followed, during the course of which various representations were made by Mr Banning to Mr and Ms Frigger.
The service station is on an irregularly shaped parcel of land having an area of 4843 sqm. It has frontages to both South-West Highway and Dickens Place. About 2000 sqm of the western side of the site is undeveloped land. At the time of the negotiations between Mr Banning and Mr and Ms Frigger, the service station and workshop premises had been leased to separate tenants. The service station was leased to Northdown Enterprises Pty Ltd (Northdown) for a term of 10 years commencing on 1 July 2001 with an option to renew for 10 years and two further options to renew for the same period, at a rental of approximately $40,000 per annum. The workshop was leased to Mr Mark Penrose for a term of five years with an option to renew and two further options of renewal also of five years, at a rental of approximately $20,000 per annum, commencing on 1 July 2001.
On 10 March 2003, copies of the leases relating to the service station were provided to Mr and Ms Frigger. On 13 March 2003, two contracts were entered into for the purchase by the respondent of the service station for a total price of $665,000. One contract related to the land only, and another contract related to the improvements on the land.
On 21 March 2003, following execution of the contracts for the acquisition of the service station, but before settlement, Mr and Ms Frigger inspected a file of documents which they were given by Mr Banning relating to the tenancies. Settlement of the purchase of the service station took place on 1 May 2003.
On 2 May 2003, the first appellant commenced proceedings against Northdown, claiming payment of rates and taxes due under the lease. On 6 May 2003, the respondent wrote to Mr Banning calling for a reduction of $20,000 in the purchase price as a result of the dispute with Northdown relating to outstanding rates and taxes, and as a consequence of a conversation between Mr Penrose and Mr Banning said to have occurred during April 2003 in which Mr Penrose had complained at what he regarded to be the high level of rental he was paying under his lease.
On 25 June 2003, Mr and Ms Frigger received a letter from Mr Penrose in which he asked for a reduction in rent, and for time to pay the rent due in respect of the month of July. On 15 July 2003, Mr Frigger agreed to reduce the rental to be paid by Mr Penrose to $1,200 per month until further notice.
In the meantime, on 10 July 2003, Northdown had vacated the service station. On 16 July 2003, the respondent gave notice of default to Northdown by reason of it vacating the premises contrary to the terms of the lease. On 31 July 2003, the respondent terminated the Northdown lease by reason of Northdown's failure to remedy the default. On 6 August 2003, Mr Frigger informed Mr Penrose that the reduction of rent due under his lease would no longer apply.
The respondent sought other tenants for the service station, and on 15 September 2003, entered into a lease of the service station to Goad Resources Pty Ltd for a term of five years, with two options of renewal each for five years, at a rental of $44,000 per annum (the Goad lease).
On 15 September 2004, the respondent gave notice of default to Mr Penrose as a result of his failure to punctually pay rent and other outgoings under his lease. On 2 October 2004, the respondent commenced proceedings for recovery of possession from Mr Penrose, and recovered possession. The workshop thereafter remained vacant until June 2006, when it was leased to a Mr Palumbo for a term of seven months, with an option to renew for 36 months from 1 January 2007. The rental under that lease was $1,110 per month (including GST). Mr Palumbo did not exercise the option of renewal and subsequent attempts to lease the workshop had not been successful at the time of trial.

The misrepresentations

The trial judge found that Mr Banning, acting on behalf of the first appellant, represented to the respondent that:
(a)Northdown and Mr Penrose each conducted a business from the premises that was 'extremely successful';
(b)there were two 'secure leases in place', which conveyed the meaning that there was no reason to doubt that the tenants would see out the terms of each lease;
(c)each tenant was up to date in payments due under the leases;
(d)there was no reason to believe that either tenant would default in payment of rent and outgoings and there was no dispute with either tenant relating to the payment of rental or outgoings.
The trial judge found each of those representations to be false and misleading and deceptive. He further found that the respondent had relied upon the representations which he found to be false at the time of entering into the contracts for the acquisition of the service station. As a consequence, he held that the appellants were each liable to the respondent for a contravention of the Trade Practices Act 1974 (Cth) and/or the Fair Trading Act 1987 (WA), in negligence, and in respect of some of the representations only, in deceit. Neither at trial, nor on appeal, did any party seek to draw any distinction between the measure of damages arising under any of the causes of action established, or as between the appellants, or as between the different representations. Generally speaking, the trial and the appeal have been conducted on the basis that once liability was established, the respondent was entitled to damages assessed as the amount required to put the respondent in the position in which it would have been but for the appellants' breaches of duty, together with any interest appropriately awarded in respect of the amount or amounts assessed.

The pleaded claim for damages

The respondent's pleaded claim for damages contained the following components:
(a)the difference between the true market value of the service station and the contract price at the time of acquisition;
(b)rent not paid by Northdown;
(c)in the event that the option of renewal under the Goad lease was not exercised, the difference between rent due under the Northdown lease and rent actually received following the expiry of the Goad lease;
(d)the loss of an opportunity to purchase an alternative property which would have appreciated in value to a greater extent than the service station.
The claim for lost investment opportunity was enunciated in a number of paragraphs in the statement of claim. In those paragraphs it is alleged that Mr and Ms Frigger invested in real estate either in their own right or through the respondent between 1980 and 2003. It is further alleged that in about 2002 and early 2003, the respondent, through its directors, formed an intention to purchase an investment property and actively investigated the market for such properties. Particulars of the properties inspected are given. Those particulars refer to residential properties in different suburbs, and commercial properties of different kinds in different suburbs. It is further alleged that but for the appellants' breaches of duty, the respondent would have purchased an alternative property for the same price, namely $665,000, in or about March 2003. It is alleged that such a property would have appreciated at a greater rate than the service station. Particulars of that allegation are given by reference to an index published by the Australian Bureau of Statistics relating to the price of housing in Perth. The percentage annual increases provided by that index are applied to an amount of $665,000, compounding to produce an allegation that by March 2007 a property purchased in March 2003 would have appreciated to a value of $1,479,738.49. Further appreciation until trial, based on the same index, is also claimed. The statement of claim further alleges that if the respondent had acquired an alternative property in March 2003, it would have derived higher rental returns than those derived from the service station, and claims damages in respect of the difference, foreshadowing the provision of particulars prior to trial.
The appellants joined issue with each allegation made by the respondent in support of its claim for damages.

The findings of the trial judge on damages

The trial judge dealt firstly with the respondent's claim for lost rental. As I have mentioned, the respondent's pleaded claim contained two distinct components in this regard. The first claim was for the difference between the amounts which it would have received if the Northdown lease had been performed, and the amount it actually received. This is a claim for loss of the expectation created by the appellants' representations, not for the detriment suffered by reason of reliance upon them. Although the measure of damages properly awarded for breach of the Trade Practices Act and the Fair Trading Act are not to be confined by analogy to those awarded in contract, tort or equity (Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494, [15], [38], [151]), the statutory requirement that the compensable loss or damage be suffered 'by' the conduct in contravention of the Act usually results in damage being assessed by reference to the detriment suffered as a consequence of reliance upon the contravening conduct, not the amount required to make good the expectation created by that conduct (Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1, 6 ‑ 7; 11 ‑ 12; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459, [132]). Accordingly, damages claimed by the respondent on the basis that it should be put in the same position as if its expectation that the Northdown lease would be performed was fulfilled were not properly claimed, as a matter of principle.
The trial judge allowed in part the claim for the difference between the amounts which the respondent would have received if the Northdown lease had been performed and what was actually received. He awarded damages by reference to the difference between the amount that would have been paid under the Northdown lease between the date of acquisition of the service station by the respondent on 1 May 2003 and the date of commencement of the Goad lease on 15 September 2003, and the amount actually paid. That amount was $4,999.50. I have already explained why, in my view, this award was wrong in principle. Further, at a practical level, it fails to take into account the fact that the rental payable under the Goad lease was higher than the rental payable under the Northdown lease. However, the appellants do not challenge this component of the assessment of damages which should therefore be allowed to stand. The trial judge rejected the balance of this component of the claim, which concerned a possible shortfall from the amount due under the Northdown lease following the expiry of the Goad lease, on the basis that such a loss was uncertain because there seemed to be at least a prospect that the term of the Goad lease would be extended by exercise of the option.
The other claim advanced by the respondent in respect of lost rental is properly characterised as reliance loss. It was the difference between the amount that would have been received by way of rental if the respondent had acquired an alternative investment in property, and the amount which was actually received. In relation to that aspect of the respondent's claim, the trial judge observed that the evidence established that the range of rental returns that might have been received as a result of an investment of $665,000 on residential property between 2003 and 2007 was between $13,000 and $19,500 per annum. He found that the equivalent range for commercial property was between $49,875 and $63,658 [311]. Because of the possibility that the respondent might have invested in residential property, and given that the respondent was in receipt of $44,000 per annum under the Goad lease over that period, he concluded that no loss had been established.
In relation to the loss on acquisition, the trial judge found that the total amount paid by the respondent for the service station was $701,875, being the purchase price of $665,000, together with stamp duty of $36,875 (of which $6,500 comprised penalties imposed by the Commissioner of State Taxation). The trial judge found that the value of the service station at the date of its acquisition was $414,750 ‑ $410,000 comprising the land and improvements, together with $4,750 in the form of two hoists and a compressor. Accordingly, he concluded that the loss on acquisition, being the difference between the total amount paid by the respondent (including stamp duty and penalties) and the value of that which was acquired, was $287,125. He awarded damages in that amount together with interest on that amount from the date of settlement (1 May 2003), until the date of judgment.

The lost opportunity claim

The trial judge found that Mr and Ms Frigger were experienced property investors who had been looking for an investment opportunity for about nine months prior to their acquisition of the service station. He found they had been looking at 'mainly commercial real estate' at least in Applecross, Attadale, Coolbellup, South Perth, Carine, Osborne Park, Malaga, Scarborough, Welshpool, Willetton and Myaree. Some of the property they looked at was vacant land [377].
The trial judge accepted evidence to the effect that reliable and secure rental income was an important consideration in the proposed investment, and that although the focus had been upon tenanted commercial property, the acquisition of residential property was 'not out of the question' [378].
The trial judge concluded that the opportunity lost, on the evidence, was that of acquiring an investment property, either commercial or residential, which was securely tenanted or could become securely tenanted quite readily. He also found that property of this sort was not easily found [379], although such opportunities did exist [380]. He concluded that but for the misrepresentations of the appellants, the respondent would have acquired such a property [383].
The evidence used by the trial judge to value the lost opportunity came entirely from two expert valuers, Mr Liggins and Mr Spencer. Mr Liggins' evidence was concerned with the appreciation that might have been achieved by an investment of $665,000 in property between 2003 and 30 June 2007. Mr Spencer's evidence was concerned with the appreciation on the value of the service station over the same period.

The findings made from the evidence of Mr Liggins

The trial judge observed that Mr Liggins' evidence distinguished between rates of appreciation of residential property and rates of appreciation of commercial property over the period in question. As he noted, in relation to residential property, Mr Liggins relied on statistical data from three sources, the Real Estate Institute of Western Australia, Landgate (a department of the government of Western Australia) and the Australian Bureau of Statistics. The trial judge found that from those sources in Mr Liggins' first report, he derived an average annual percentage increase for the Perth residential property market of 18.3% between the commencement of 2003 and the end of 2006, which he applied to an investment of $665,000 to produce a value, after four years, of $1,302,449. The trial judge found that Mr Liggins' third report, using data from 1 April to 30 June 2007, extracted an annual rate of increase of 20.98%, which applied to an investment of $665,000, produced an estimate of value of $1,499,190 [386]. In fact, the latter figure is not the average of the data from all sources, but the figure derived from the REIWA data alone, as the trial judge later noted [402]. In the result, the trial judge adopted the figure in Mr Liggins' third report which he attributed to the Landgate data alone, giving a value after appreciation for a residential property of $1,438,960 [403].

In relation to commercial property, as the trial judge observed, Mr Liggins isolated four commercial properties to derive an estimate of a general increase in Perth commercial properties of 25% per annum over the same period. He applied that rate to an investment of $665,000 to produce an estimated capital value of $1,725,006 as at 30 June 2007.
The trial judge noted that the appellants had objected to the admissibility of the opinions expressed by Mr Liggins. It will be necessary to refer below to the course taken at trial in that regard in some detail as the respondent asserts that there was no objection taken. At all events, the trial judge referred to the decision in Automasters Australia Pty Ltd v Bruness Pty Ltd [2004] WASCA 229 in which Steytler J summarised the well‑established principles relating to the extent to which facts relied upon by an expert for the purposes of expressing his or her opinion must be established by admissible evidence (Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705 and Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370). It is therefore clear that the trial judge proceeded on the basis that there had been an objection to the effect that the facts relied upon by Mr Liggins had not been established by admissible evidence. The trial judge expressed the view that:
… the objection is misplaced: the matter is one of valuing an opportunity, for which aggregate data, rather than data as to comparable transactions, would be appropriate. [389]
However, he took a different view of the opinions expressed by Mr Liggins with respect to commercial properties, which, as I have mentioned, rely upon four particular properties selected by Mr Liggins. The trial judge noted that the reason Mr Liggins had taken that course was because of his opinion that, unlike residential properties, in the case of commercial properties there were many factors which could affect value, including capital expenditure on improvements, terms and conditions of any lease relating to the property (and the terms of leases varied significantly), the financial strength of the tenant, whether the rent was above or below market rental, and possible alternative uses for the land [390].
The trial judge noted that Mr Liggins had selected the four properties he used from 12 properties in respect of which he had obtained data from Landgate. Mr Liggins had eliminated eight before selecting the remaining four, which showed a range of annual increases in value of 17.6%, 22.3%, 28.85% and 33.8% respectively. Mr Liggins had averaged these increases to produce a figure of 25% [391]. It should be noted that Mr Liggins visited all of these properties and, except for the second, verified the sale price data. The trial judge stated that he would therefore exclude the second value as 'one in respect of which there is not sufficient evidence to cause me to weight it at a significant value', but went on to differentiate between 'weight' and 'admissibility' [391].
In relation to the transactions analysed by Mr Liggins, the trial judge made the following observations:
392.I consider that the commercial property data shows a wide variety of rates of appreciation indeed. There is no question here of applying the method of comparing transactions, but rather one of finding, if not the average of rates of increase, an indicative range. It is within that range that Mr Liggins locates his 25%, which he refers to as 'realistic'.
393.Indeed the range of rates of appreciation appears on the evidence I have to be in fact wider than that just described. Two of the transactions he excluded, as reflecting 'exceptional returns' which 'should not be viewed as being normal or frequent occurrences' (Exhibit 6, 7), showed annual rates of increase of 39.1% and 41.5%.

The findings made from the evidence of Mr Spencer

The trial judge reviewed the evidence of Mr Spencer, in which he expressed opinions as to the value of the service station in March 2003, March 2005 and March 2007. After reviewing that evidence and making certain adjustments which the trial judge considered appropriate, he concluded that the value of the service station as at 1 March 2007 was $615,030, which he concluded showed an annual appreciation of 14.5%, from a starting value of $410,000 (excluding the hoist and compressors).

The reasoning of the trial judge

The conclusion at which the trial judge arrived in relation to the appreciation of an investment in commercial property was expressed as follows:
400In my view it would be appropriate to recalculate Mr Liggins' annual appreciation for commercial property by excluding the property whose rate of increase was 22.3% I earlier considered and including the 14.5% for the Armadale property. I consider that the inclusion of the Armadale property is justified as a type of investment, a service station property with independent operators, which the Friggers themselves had chosen. At the same time, I must note Mr Spencer's evidence that other service station properties, those with blue chip tenants, larger volumes and the ability to access discounting arrangements with supermarkets, were over the subject period faring better than properties without those attributes (Exhibit 105 page 4). The Friggers might have invested in a service station of that sort, if one had been available at their price.
401However, so doing produces a recalculated average of 24%. This of course is not much different from the average he arrived at. I consider then that there is no sufficient reason to depart from his average, which produces a commercial value at 30 June 2007 of $1,725,006. There was no evidence of any appreciation since then, and I consider that I should take that figure for my purposes.
The trial judge then turned his attention to the possibility that the respondent might have invested in residential property. In that regard he rejected reliance upon the data supplied by the Real Estate Institute of Western Australia (and inferentially the Australian Bureau of Statistics) and instead adopted the data supplied to Mr Liggins by Landgate, and which Mr Liggins used to produce an estimate of an appreciated value of residential of $1,438,960.
The trial judge used these conclusions to assess the value of the lost opportunity as follows:
404I consider that it is necessary to take account of the possibility that the plaintiff might have invested in either the residential or the commercial property markets. I would do that by taking the mid-point between the commercial and the residential values, or $1,581,983, from which the original capital investment of $665,000 should be deducted, to produce a capital appreciation of $916,983.
405From this capital appreciation I must deduct that for the Armadale property over the same period. That appreciation was on the assessments I have made from $410,000 to $615,030 or $205,030.
406The difference in amounts for capital appreciation, representing the damages for opportunity cost loss, would thus be $711,953, before the final allowance referred to at the end of this section of my reasons.
407I have considered whether or not a further adjustment needs to be made to this amount, in relation to the investment of $665,000, to allow for contingencies. Such contingencies would be a particularly disadvantageous bargain, such as a purchase in a low performing suburb, or an error in assessing the value of the transaction. At the same time, however, allowance would need to be made for the contingency that the Friggers would have done better than the figure allows for here.
408I consider that balancing the matters out there is no reason to adjust the figures.
…
410Finally, I need to reduce the damages in respect of investment opportunity loss by the amount of the stamp duty that would have to have been paid to attain it. The best evidence I have of that duty is the amount actually paid on the acquisition of the Armadale property, of $36,875 (excluding any penalty), the deduction of which produces a final figure of $675,078.
The reference to the amount of stamp duty of $36,875 excluding penalty is erroneous. As I have mentioned (see above [23]), that amount includes the penalty of $6,500.

The approach taken by the trial judge

There are a number of general observations usefully made at this point about the approach taken by the trial judge in relation to the assessment of the damages for the claimed lost opportunity. First, the assessment depends critically upon the acceptance of at least part of the evidence of Mr Liggins. Second, the assessment takes the midpoint of appreciation that might have been expected if commercial property had been acquired and that which might have been expected if residential property had been acquired, without allowing for the very significant reduction in the rental income which would have been received by the respondent had it acquired residential property. It was that difference in rental income which led the trial judge to conclude that it was not possible to conclude that the respondent would have received greater rental income if it had acquired an alternative investment (see above [22]). However, the trial judge appears to have taken no account of the prospect that if the respondent had acquired residential property, the rental received may well have been significantly less than that actually received by the respondent.
Third, there are other significant differences between the approach taken by the trial judge in relation to residential property and the approach taken with respect to commercial property. In the case of residential property, the data relied upon to assess appreciation was that supplied by Landgate, which is of a statistical nature. In relation to commercial property, the trial judge seems to have considered that it would be appropriate to rely upon an average produced by taking three transactions identified by Mr Liggins and which he had 'verified', augmented by the rate identified by Mr Spencer as being the rate actually achieved by the service station, to produce an average of four. Implicit in that approach is the proposition that the appreciation achieved by the service station is within the range of values reasonably indicative of the market as a whole. In the result, however, the trial judge reverted to the average of the four specific transactions identified by Mr Liggins, including the one transaction which the trial judge considered to be suspect (see above [32]).
Fourth, although the trial judge was valuing a lost opportunity, he made no finding as to the period over which the opportunity was lost. The period chosen for the assessment of the value of that lost opportunity was the period between the investment in the service station, and the date of trial. From the date of commencement of the trial, interest was awarded on the value of the lost opportunity assessed. If there is any logic in that approach, it must derive from the implicit proposition that the damages awarded and assessed as at the date of commencement of the trial put the respondent in the position it would have been in had it made an alternative investment, and could thereafter liquidate its investment in the service station and reinvest in a property of its choice, with the consequence that interest was an appropriate surrogate for a return on the investment from that point onwards. However, on the evidence, there is no basis for selecting the date of the commencement of the trial as the date upon which the lost opportunity to make an alternative investment ceased, or as the date upon which the capacity to liquidate the investment in the service station arose.
The respondent was aware of the true position in relation to the service station within a few months of settlement, and no evidence was led to establish any reason why it could not have liquidated its investment in the service station and reinvested in another property at any point prior to trial. But damages have been assessed and awarded on the basis that it was precluded from doing so up to trial, but was able to do so thereafter.
Fifth, the award of damages for the loss at the time of acquisition puts the respondent in the position in which it would have been as at 1 May 2003, and interest was awarded on that amount since that date. That award of interest compensates the respondent for the lost opportunity to invest $287,125 from 1 May 2003 (see Neilsen v Hempston Holdings Pty Ltd (1986) 65 ALR 302). However, the trial judge awarded additional damages for the lost opportunity to invest a further $665,000, thus allowing the respondent double recovery in respect of about 43% of that amount.
Sixth, the approach taken by the trial judge effectively removed all elements of risk from the respondent's investment, and made the appellants the underwriter of the success of the respondent's investment, by assuming that the respondent would have acquired an investment property which achieved at least average appreciation.
Seventh, there is an air of unreality relating to the overall conclusion at which the trial judge arrived. He had found that by reason of the appellants' breach of duty, the respondent had been induced to pay, on 1 May 2003, $665,000 (plus stamp duty) for property which had a value of $414,750. With knowledge of the true position, the respondent retained and relet the property, and still held it as an investment at the time of trial. The trial judge awarded damages in the total amount of $967,202.50 plus interest of $138,824.83. So, as a result of being induced to pay about $250,000 more than the property was worth, the respondent, who retains the property, has been awarded about $1.1 million in damages and interest. Analysis at that level of abstraction strongly suggests error in the process of assessment.

The grounds of appeal

Following the abandonment of a number of grounds of appeal, the appellants advance only two challenges to the assessment made by the trial judge with respect to the loss on acquisition. They are an alleged failure to take into account the value of that portion of the site which was vacant, and the inclusion of the amount in respect of penalty paid on stamp duty as part of the assessment.
In relation to the assessment of the lost opportunity for alternative investment, the appellants assert that no award should have been made on that account over and above the damages awarded for the acquisition loss, that the respondent had failed to discharge the burden of proving that an alternative opportunity to invest was available and would have been taken up, and that the trial judge erred by making no allowance for contingencies, and further erred by relying upon the inadmissible evidence of Mr Liggins.

The vacant portion of the site

The evidence of Mr Spencer was to the effect that as at 2003, the cost of retaining and developing the vacant portion of the site would have exceeded the value of any development on it, with the result that a prospective purchaser of the property would not pay any extra amount by reason of the inclusion of the vacant land. The trial judge accepted that evidence, which was uncontradicted and untested by cross‑examination. Although Mr Spencer's evidence was also to the effect that, by 2007, market circumstances had changed to the point where he made an allowance for the value of the vacant portion of the site, that view, of itself, casts no doubt upon the opinion he expressed with respect to the value of the site in 2003. This ground of appeal must be dismissed.

The stamp duty penalty

The trial judge was wrong to include allowance for the stamp duty paid in his assessment of the loss on acquisition. The respondent would have had to pay stamp duty on any property it acquired, and the loss it suffered was the difference between the price it paid and the capital value of the property acquired, irrespective of the duty paid. The error in principle is illustrated by assuming that the property was in fact worth the agreed price of $665,000. Nevertheless, on the approach taken by the trial judge, the respondent would still receive damages in the amount of the stamp duty, even though it had suffered no loss. This is wrong in principle.
It could perhaps be argued that as stamp duty is ad valorem, a monetary award equal to the difference between the price paid and true value does not put the respondent in precisely the position in which it would have been had it acquired property to the value of $665,000, because the investment of the money awarded as damages in another property in due course would incur stamp duty over and above that already incurred. This approach would compensate the respondent for that part of the stamp duty paid which did not correspond to the value of the asset acquired and would provide a basis for allowing part, but not all, of the stamp duty paid by the respondent. However, these are not points taken by the appellants. The only point which the appellants take is the inclusion in the damages award of the amount assessed by way of penalty on stamp duty in the sum of $6,500.
Ms Frigger gave evidence with respect to the imposition of the penalty, and documents relating to the penalty were tendered in evidence. However, the trial judge did not find, nor does the evidence permit a finding as to the precise reason why the penalty was imposed. In the absence of evidence, it seems reasonable to infer that the penalty was imposed by reason of some act or omission of the party responsible for the payment of the duty - in this case, the respondent. It is difficult to see any causal connection between the misrepresentations made by the appellants, and any act or omission that could incur the imposition of a stamp duty penalty, but at all events, the respondent has failed to establish any such connection.
However, as the respondent has pointed out, although the trial judge asserted that he would only deduct from the amount he assessed as the value of the lost opportunity the amount of the stamp duty excluding penalty, in fact he deducted the total amount. Accordingly, if that component of the assessment stands, the error made by the trial judge in that respect cancels out the error made in respect of the assessment of the loss on acquisition. However, if that component of the assessment of the value of lost opportunity does not stand, this ground must be allowed, and the assessment of the trial judge of the loss on acquisition reduced by $6,500, with corresponding alterations to the amounts allowed by way of interest.

The grounds relating to lost opportunity for investment

The expert evidence

I have referred above to the general approach taken by the trial judge to the expert evidence that was adduced in support of the claim for lost investment opportunity. However, before turning to the specific grounds of appeal, it is desirable to augment those observations with a more detailed consideration of the evidence.

Mr Spencer

Mr Spencer was called to give evidence later in the trial than Mr Liggins. When counsel for the respondent tendered his report, counsel then appearing for the appellants stated:
O'TOOLE, MR: Well, I object on the grounds that I raised on a previous occasion in respect of Mr Liggins, that to the extent that the report relies on unproven hearsay, I would object, and I think your Honour's ruling on that occasion was that your Honour would take in the report subject to my objection. (ts 866)
SIMMONDS J: Yes, subject to the possibility of further evidence and submissions. Mr Mendelow, we could proceed on the basis then that the document is taken in subject to objections to be dealt with in final submissions. (ts 867)
There is an issue between the parties as to whether the appellants in fact objected to the tender of Mr Liggins' report. This passage is relevant to that issue which I will address below.

As I have mentioned, Mr Spencer's evidence was directed to the valuation of the service station at different points in time - namely, March 2003, March 2005 and March 2007. In his first report, Mr Spencer made the following observations in relation to the service station:
The subject property is an older style secondary grade service station constructed in 1998 to non-standard specifications compared to modern oil company premises. The building lacks the usual 'imagery' fitout attributes that compliment [sic] contemporary service stations.
…
The premises occupy a secondary location, albeit a highway position, due to the relatively low passing traffic flows and low population density in the immediate catchment area. The level of competition is average. Its proximity to the adjoining South Armadale Industrial Area is a positive factor, but the industrial area is quite small with many vacant or underdeveloped lots.
…
The … trading information reinforces our opinion that the annual fuel throughput potential was around 3,000,000 litres inclusive of a small proportion of gas in 2003 and 2005.
…
Service station property rental and site values have been in a worsening down cycle for about 10 years brought about by a combination of factors including reduced reseller margins, recent volatility affecting world oil prices, surges of retail fuel price discounting with areas of intense competition. These adverse trends have resulted in service station purchasers becoming more cautious and requiring higher rental or profit yields to offset market risk. Environmental issues are of a particular concern to buyers.
Numerous small service stations have closed owing to these market forces. The trend has been for the establishment of larger convenience store orientated outlets along major traffic arteries or near shopping centres. The major part of the business is from shop sales during long trading hours. This is a market driven process which is tending to weed out operations which have marginal fuel turnovers of less than 3,000,000 litres pa due to inappropriate siting, or in situations where there are too many service stations in proximity to one another.
The profile of fuel retailers changed significantly over the past few years. Woolworth Plus Petrol strongly entered the market and developed new outlets near their supermarkets, taking over various Liberty outlets and forming an alliance with Caltex. Woolworths Plus/Caltex Woolworths now have 35 metro outlets. Woolworths fuel is available along Albany Highway, Kelmscott.
The new Coles/Shell alliance is offering discounts related to Coles grocery purchases (Coles Shell were close nearby in Jull Street, Armadale). Coles Express (Shell) has 44 metro outlets. Foodland reported a similar venture with Mobil service stations (17 outlets). Market advice indicates that the impact of Coles/Shell on the market was to greatly reduce achievable fuel volumes at nearby outlets, however BP did not experience the same reduction in shop sales turnover. FAL group is now securing service stations.
The effect of Coles and Woolworths in the market caused a substantial shift of market share between chain operators. Shell reports a 30% increase in fuel demand and our market sources indicate a commensurate loss of business by chain operators which are not aligned with a major grocery group.
…
Capitalisation rates vary from 9.0% for long leased, high throughput quality service stations involving 'blue chip' lessees to around 13% for fair standard secondary outlets with vacant possession. Knowledgeable investors would require a high yield from the subject due to its low turnover, secondary grade premises and position and insecure, low investment status tenants.
During his oral evidence, Mr Spencer expanded on the proposition that rental returns on service station properties had fallen because of competition generated by alliances between major supermarket chains and petrol retail outlets (ts 921). Significantly, the trial judge relied on this evidence to sustain the findings he made with respect to the value of the service station in 2005 and 2007 [395]. In other words, the trial judge accepted that a significant factor in the reduced appreciation of the property the subject of the proceedings was the change in the retail petroleum market, unrelated to the subject of the misrepresentations which had induced the respondent to acquire, and which occurred after the respondent had knowledge of the true position in relation to the tenancies.
In his reports, Mr Spencer identified a number of service station properties which he considered to be comparable to the service station, and upon which he had relied for the formation of his views with respect to the rental return likely to be achieved from, and the capital value of, the service station. In the context of the objection to which I have referred (see above [54]), Mr Spencer was cross‑examined at length in relation to his personal knowledge of the particulars relating to the sites which he considered to be comparable.
The closing submissions made by each of the parties were mainly in writing, and were presented some months after the completion of the evidence in the trial. Consistently with the statements made at the time Mr Spencer's reports were tendered, the written submissions provided by the appellants disputed the admissibility of some of the evidence relied upon by Mr Spencer relating to transactions which he considered to be comparable, on the grounds that the evidence was hearsay. In both written and oral closing submissions, counsel for the respondent asserted that there was no issue with respect to the admissibility of Mr Spencer's reports, because objection had not been taken. However, the passage in the transcript to which I have referred (see above [54]) shows that assertion to be wrong.
That conclusion is reinforced by the approach taken by the trial judge. Plainly, he understood there to have been objections to the evidence of the comparable transactions relied upon by Mr Spencer, because he devoted four pages of his reasons to ruling upon them [331] ‑ [337]. In those rulings he dismissed the objections on the basis that he was satisfied that Mr Spencer had sufficient personal involvement with the sites which he considered to be comparable to having 'first hand knowledge' of such things as volume of fuel turnover, profit margin, rental and capital value. That approach is, with respect, misconceived, because the knowledge of the valuer, derived from information provided by third parties, does not deprive his evidence of that information of its character as hearsay, but reinforces it. However, the ground of appeal which contested the admissibility of Mr Spencer's opinion was abandoned by the appellants at the commencement of the hearing of the appeal, so it is unnecessary to give further consideration to this issue in the context of Mr Spencer's evidence, although it will be revisited in the context of Mr Liggins' evidence.
In the result, the evidence of Mr Spencer led the trial judge to the conclusion that the market value of the service station as at March 2003 was $414,750, as at March 2005 was $523,000, and as at March 2007 was $615,030. The trial judge concluded this showed an annual appreciation over that period of 14.5%. The calculations relied upon to sustain that conclusion are not exposed by the reasons. The figure would appear to be wrong, as the appreciation over four years of just over $200,000 was a little less than 50% of the value assessed in March 2003, whereas 14.5% compounded over four years would obviously be more than 50%. However, neither party to the appeal has challenged the conclusion of the trial judge in this respect.

Mr Liggins

When Mr Liggins' report was tendered, counsel for the appellants advanced two objections to its tender. The first was on the ground that it was irrelevant, because the evidence did not establish that the respondent had $665,000 to invest in real estate, which was one of the assumptions that Mr Liggins had been asked to make. The following exchange took place after the enunciation of that objection:
SIMMONDS J:   All right. I understand that objection. I won't rule on it at this point. I don't believe it prevents the taking of the evidence, but I understand that the evidence is being taken subject to that objection. All the evidence, of course, in the trial is not yet in. It may or may not be that the matter that you describe fails to emerge and therefore Mr Liggins' evidence simply has to be put off to one side.
O"TOOLE, MR:   I also object to hearsay in the document. I object to materials which appear to have been downloaded from the internet without any evidence corroborating the validity of that material.
SIMMONDS J:   All right. Mr O'Toole, I think that's probably best dealt with in respect of the particular items of evidence in respect of which you make those points and I would expect you to do so. (ts 525)
There are perhaps two possible constructions which could be put upon the last observation of the trial judge. One is that he was expecting counsel for the appellants to separately and specifically object to particular portions of the evidence of Mr Liggins when the report was tendered. However, that is plainly not how counsel for the appellants understood the observation, because no further objection was enunciated during Mr Liggins' evidence. Such a course would in any event have been impractical, given that the evidence‑in‑chief of Mr Liggins essentially took the form of written reports, the tender of which en bloc induced the exchange to which I have referred. Accordingly, the construction I would put upon the observation made by the trial judge is to the effect that he was inviting counsel to provide submissions in support of his objection at the completion of the trial after all the evidence was in.
The interchange which took place at the time of the tender of the report of Mr Spencer, and which I have set out above, confirms this view. Counsel for the respondent did not object to the characterisation of Mr Liggins' report as having been received subject to a subsequent ruling upon its admissibility. That view is further confirmed by the course taken by the appellants in their written submissions, a significant portion of which was devoted to the enunciation of the objection to the evidence of Mr Liggins on the grounds, inter alia, that his opinions were based upon hearsay and facts which had not been directly proven in evidence. Although counsel for the respondent asserted at trial, both in written submissions and orally, that no objection had been taken to the evidence of Mr Liggins, and again in the appeal, as with Mr Spencer, that assertion is wrong. That conclusion is further reinforced by the reasons of the trial judge. As I have observed, in those reasons he ruled upon the objection to the admissibility of the opinions expressed by Mr Liggins, both to the extent that they were derived from the data received from Landgate, and to the extent that they were derived from specific comparable properties upon which he relied [389] ‑ [391], [400]. For these reasons, the respondent's contention that there was no objection to Mr Liggins' evidence at trial must be rejected.
The first question which Mr Liggins addressed in his report concerned the value in 2007 of an investment of $665,000 made in the Perth residential real estate market on 13 March 2003. In addressing that question, Mr Liggins referred to, and annexed, data which he had obtained from three sources - the Real Estate Institute of Western Australia, the Australian Bureau of Statistics, and Landgate house sales statistics. As the trial judge rejected any reliance upon the data from the Real Estate Institute of Western Australia and the Australian Bureau of Statistics (and there is no cross‑appeal from that ruling), it is unnecessary to consider the data from those sources in any detail.
Two types of data from Landgate were attached to Mr Liggins' first report. Appendix 2 to Mr Liggins' report is a schedule apparently produced by Landgate listing a number of residential properties in the suburbs of Attadale, South Perth and Applecross, setting out certain particulars of what are said to be transactions with respect to those properties. The schedule contains the following note on the foot of each page:
WARNING
1.The user of the information must confirm the validity of the information by other means. Failure to do so in legal or professional matters may damage the party and in such event no liability will be extended by the Western Australian Land Information Authority to the approved user of the data or third parties acting on such whatsoever.
Appendix 4 to Mr Liggins' report contained another schedule apparently produced by Landgate listing accumulated data in respect of residential sales in the suburbs of Attadale and Applecross showing, over a series of years, the median sale price of properties in each quarter of the year, the maximum sale price and the total sales. Also shown is the percentage change in the median sale price from the last quarter, and from the equivalent quarter in the preceding year. These schedules all contain the following note of caution:
This information is based on actual sales records and is intended only as a guide to market performance and trends. Where sample sizes are small, the analysed results become less accurate and less reliable. Caution should be exercised when using results under these circumstances.
A supplementary report provided by Mr Liggins, and tendered in evidence, showed only the schedules of accumulated data, this time for the suburbs of Attadale, Applecross and South Perth, up to the end of the third quarter of 2007. In that report, Mr Liggins has apparently relied upon the accumulated data to provide a schedule showing the percentage increase in the three suburbs for the year commencing 1 April 2003 and ending 31 March 2004, the three years commencing 1 April 2004 and ending 31 March 2007, and the three months commencing 1 April 2007 and ending 30 June 2007. That schedule is the table relied upon by the trial judge for his conclusion that if the respondent had invested $665,000 in residential property in March 2007, it would have had a value of $1,438,960 in the latter part of 2007 [403].
However, it is not at all clear how Mr Liggins arrived at his schedule, based on the accumulated data attached to his supplementary report. For example, in his schedule, Mr Liggins asserts that the Landgate sales statistics show an increase of 22.37% between 1 April 2003 and 31 March 2004. 31 March 2004 is, of course, the end of the first quarter of that year. According to the Landgate data annexed to Mr Liggins' report, in the suburb of Attadale the median price for that quarter increased 25.6% above the median price in the same quarter of the preceding year, in Applecross 7.3% and in South Perth 36.5%. The average of those three increases is 23.13%, not 22.37%.
Turning to Mr Liggins' schedule which purportedly used the Landgate accumulated data to show the median increase across the three suburbs for the three years ending 31 March 2007, his table shows an increase of 22.37%, whereas the notional increment in the value of the initial investment of $665,000 in March 2003 is shown as going from $813,761 to $1,491,151 - an increase of 83.24%. Obviously this is a typographical error with the 22.37% being the same figure as shown for the 12 months ending 31 March 2004, but it is not at all clear how the assessed increase in value was derived, because the annual increases in each of the three suburbs shown in the tables is:

Attadale	Applecross	South Perth
2005	10.8%	-0.3%	8.9%
2006	22.9%	30.4%	30.3%
2007	41.2%	36.0%	28.1%
74.9%	66.1%	67.3%

The mean of these increases is 69.43%. It may be that Mr Liggins arrived at his estimate by compounding the increases, but if that is so, it is not revealed by his reports or his evidence.
For the three months ending 30 June 2007, Mr Liggins' table shows a decrease of 3.5% across the three suburbs the subject of the Landgate data. But the tables attached to his report show, for that quarter, in Attadale an increase of 1.4%, in Applecross a decrease of 11.7%, and in South Perth an increase of 5.5%, which produces a mean decrease of 1.6%, not 3.5%.
Unfortunately, none of these matters were the subject of cross‑examination or analysis by the trial judge.
There are similar problems in relation to Mr Liggins' initial report. The table in that report which is said to show the percentage increases from each of the four sources of data upon which he relied over four consecutive years shows, in the case of the data from REIWA and the Landgate individual sales, a single and consistent figure of 18.3% in respect of each year. It is impossible to see from the report, or from Mr Liggins' evidence, how that figure was derived, or how there could have been such consistency over each of the four years. As I have mentioned, the figure of 18.3% is the figure which the trial judge attributed to the average overall four sources of data, to produce a value of a residential investment, after four years, of $1,302,449 [386]. This is not correct. The figure of 18.3% is the figure attributed to the two data sources I have mentioned and its derivation is unexplained. Again, this issue was not explored in cross‑examination or analysed to any extent by the trial judge.
Much more significantly, however, a consideration of the accumulated data shows that increases in median prices measured in this way do not provide a reliable measure of the likely increase in any particular property. That is because the data simply reflects the median price calculated by reference to a basket of properties sold in that suburb during the quarter. The characteristics and number of the properties within the basket obviously will impact upon the median price. For example, in Attadale, the median price in the last quarter of 2002 was $592,500, in the next quarter $517,500, and in the next quarter $627,500. These variations of median price in the order of 20% tell one nothing about any general increase or decrease in the value of properties in that suburb, but reveal only the characteristics of the basket of properties sold that quarter. To take another example, as I have mentioned, the Landgate schedule shows a percentage increase in the median price of properties sold in Attadale in the first quarter of 2004 of 25.6%, compared to the equivalent quarter the preceding year. However, the same comparison in the second quarter of 2004 would show an increase of only 7.5%, and in respect of the third quarter, a decrease of 0.1%. This data obviously does not provide reliable arithmetic indices which can be applied to produce a reliable estimate of the increase in value of any particular property. At its highest, it may provide a very general indication of trends over the longer term.
The limitations of the data upon which he had relied were acknowledged by Mr Liggins in his evidence‑in‑chief. However, he appeared to justify its use on the grounds of expedience. He described it in these terms:
However, all systems, all these sources - I mean, it's not, you know, completely 100% sort of clear. For instance, in these surveys by all of them, there are sort of areas which are included, the two negatives being that in some months in quarter terms, in three monthly periods, there might be very few sales and they might be all lower value properties rather than higher ones because, as you will be aware, most suburbs have a range of values and some more than others, so that applies to all of those but I believe over the period of time from 2003 and 2007, it levels out and in absence of being any other way, probably apart from, you know, inspecting these properties to find out who built or who added on, where the added value was, there is no alternative, in my opinion. (ts 532)

With respect, there is another alternative that would have been apt to the circumstances of this case, which was to assess the changes in value of the particular properties which had been investigated by the respondent prior to its decision to acquire the service station. However, that course was not taken.
In cross‑examination, Mr Liggins was asked why he had chosen the suburbs of Attadale, Applecross and South Perth. The answer given was:
The client lives in Applecross and if one was to consider purchasing a residential property in that sort of area, whether it be Applecross, Attadale or South Perth, which is the southern suburbs of the metropolitan area, that to me was sort of centreing on an area rather than taking a broad sweep. I mean one could go from sort of the lower value areas or one could go to the western suburbs, but I found that as a reasonable median. (ts 543)
As it happens, Mr and Ms Frigger did look at residential properties in Applecross and Attadale (but not in South Perth), in addition to other suburbs. However, it is clear from Mr Liggins' evidence that his choice of three suburbs was not based upon the steps which Mr and Ms Frigger had in fact taken, but his uninformed view of the steps which they might have taken.
On the evidence of Mr and Ms Frigger, there is no reason to select the suburbs of Attadale, Applecross and South Perth as indicative of the type of investment they might have made. Nor does the evidence establish that those suburbs were representative of Perth residential suburbs as a whole. To the contrary, the data provided by the Real Estate Institute of Western Australia included within Mr Liggins' supplementary report suggests that prices in those three suburbs rose at rates significantly higher than Perth median prices generally, particularly in the latter part of the four-year period assessed by Mr Liggins.
The trial judge rejected the objection to the admissibility of the opinions derived from the Landgate data on the basis that it was 'aggregate data, rather than data as to comparable transactions' [389]. With respect, this is not a valid distinction. The aggregated data from five, ten or twenty transactions, none of which is proven, does not become admissible because it is aggregated.
It may be that the trial judge had in mind evidence which has been described as 'non specific hearsay' (Pattenden R, 'Expert Opinion Evidence Based on Hearsay' (1982) Crim LR 85, 95; cited by Ipp J in Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370, 374 ‑ 375). However, that term is used to apply to information obtained by a valuer which 'forms part of his general experience, knowledge and expertise upon which he can draw "to formulate his opinion and to express working truths" … for example, to give a general exposition of the subject, to assess market trends, or to determine whether a particular transaction is aberrant or consistent with overall market conditions' (per Ipp J in Pownall, 374).
So, the accumulated Landgate data could properly be relied upon by Mr Liggins to inform a general view as to trends in the Perth residential market over the relevant period, which could then provide the context for his analysis of particular transactions. However, that was not the use to which Mr Liggins, or the trial judge, put the data. Rather, the data was used to provide a mathematical index which was applied to a hypothetical investment of $665,000 to produce the conclusion that such an investment would have had a value of $1,438,960 in 2007. The data was not admissible for that purpose, and the finding based upon it cannot be sustained.
I turn to the evidence of Mr Liggins with respect to a hypothetical investment in commercial property. As I have mentioned, Mr Liggins took a quite different approach to that which he had taken to a hypothetical investment in residential property. During his evidence‑in‑chief, he explained the reason for that difference in approach in the following terms:
With a commercial value, the indices or the REIWA, Landgate and ABS aren't really capable of preparing indices because the commercial market is so subject to so many changes. It's very hard to record unless you actually look into properties that have sold twice or three times in a certain period of time, so with the commercial value I inquired or I investigated through Landgate, which is the former Valuer General's office that assesses property for rating and taxing purposes, properties that had sold once - sorry, twice or three times during March or between March 2003 and the date of the report. I recall there were quite a number of properties which I gradually eliminated for reasons such as it was vacant land or was vacant land when it sold a second time, it had a building on it which was either leased or owner occupied, so I endeavoured to narrow it down to the 12 properties I think I've listed in my report which I inspected mostly or practically all of them externally on the basis that my request to the owners of the property during the time for inspection was not well received. They didn't want to be involved so that's the reason why I had to assess them on their merits externally … I accept this is very subjective but that to me was the only way that you could record or assess movement of commercial values. (ts 531)
From the 12 properties selected by Mr Liggins in this way, eight were eliminated for various reasons, leaving only four. No evidence was led to establish the relevant facts or circumstances of those four transactions.
The trial judge noted that Mr Liggins' evidence was to the effect that he had visited all of the properties, and with the exception of the second property, had verified with the parties the sale price data. In relation to that property, the trial judge observed:
I would exclude that second value, as one in respect of which there is not sufficient evidence to cause me to weight it at a significant value, even although the question is it seems to me one of weight and not admissibility. [391]
This approach reveals a misapprehension of the principles enunciated in the line of cases to which the trial judge referred. First, it is clear from those cases that where specific transactions are relied upon as the basis for the expression of an opinion, they must be established to the court by admissible evidence, if the opinion is to be admissible. The issue is, with respect, one of admissibility, not weight. Second, the fact that the valuer, in this case Mr Liggins, gave evidence to the effect that he had made inquiry and satisfied himself of the facts pertinent to the transactions said to be comparable is, with respect, irrelevant. Evidence from the valuer of what he was told by others, or in this case, of general conclusions he had drawn from what he was told by other unidentified persons is plainly hearsay and inadmissible. Where a specifically comparable transaction is relied upon, it must be proven to the court by admissible evidence, and no admissible evidence was adduced in respect of the particular transactions relied upon by Mr Liggins in relation to commercial property. With respect to the trial judge, there was no proper basis for distinguishing between the one transaction which Mr Liggins had not investigated, and the three which he had investigated in relation to the admissibility of the opinion derived from those transactions.
The trial judge held:
I consider that the commercial property data shows a wide variety of rates of appreciation indeed. There is no question here of applying the method of comparing transactions, but rather one of finding, if not the average of rates of increase, an indicative range. It is within that range that Mr Liggins locates his 25%, which he refers to as 'realistic'. [392]
With respect, the process undertaken by Mr Liggins was precisely that of using a very small number of transactions implicitly suggested to be comparable to a hypothetical transaction undertaken by the respondent in 2003, so as to produce the conclusion that such a transaction would have resulted in the respondent holding property to the value of $1,725,006 as at 30 June 2007 [401]. There are a number of vital steps in that process of reasoning which were not established by the evidence. The first vital step was proving the relevant facts and circumstances with respect to the four transactions relied upon the provide the 'indicative range'. The second was an analysis of the extent to which those properties are comparable to a property in which the respondent might have invested if it had not invested in the service station in 2003. That vital step was not addressed by the evidence or by the reasons of the trial judge.
The first property chosen by Mr Liggins was a unit in Beach Road, Malaga which sold for $258,500 in June 2004, and again in November 2006 for $514,250. The evidence does not supply any further information in relation to that property other than it was 'currently vacant and for lease'.
The next property selected by Mr Liggins was also in Malaga. No information is provided in the evidence other than that it was purchased for $308,000 in April 2003, and then sold for $627,000 in October 2006 'to an owner‑occupier'.
The third property chosen by Mr Liggins was also in Malaga, and was a showroom property on strata title of 237 sqm. It sold for $135,300 in January 2003, and resold in November 2006 for $355,000.
The fourth property chosen by Mr Liggins was in Wittenoom Street, East Perth, and was a two‑storey commercial building comprising 40 sqm of office and 284 sqm of warehouse on a 304 sqm lot. It was purchased in June 2002 for $380,638 and sold in October 2006 for $760,000. In relation to that property, the information provided by Mr Liggins establishes that the latter transaction was undertaken for the purpose of redevelopment, and reflected unimproved land value only.
It will immediately be seen that these four properties are a very poor surrogate for assessing the likely effect of an alternative investment of $665,000 by the respondent in March 2003. One of the four involved an investment of about 20% of the amount invested by the respondent, another two less than 50%, and the fourth property a little over 50%. The evidence does not enable the conclusion that the respondent would have acquired any of these properties if it had not acquired the service station, nor did the trial judge attempt any analysis of that kind, nor make any finding to that effect.
For these reasons, the evidence adduced was incapable of sustaining the conclusion that if the respondent had not invested in the service station, it might have invested in a commercial property which would have had a value of $1,725,006 as at 30 June 2007.

The deferral of the rulings on admissibility

As I have noted, when objections were taken to the evidence of each of Mr Spencer and Mr Liggins, the trial judge deferred a ruling on those objections until the conclusion of the trial. He took a similar approach in relation to many of the objections taken with respect to the tender of documentary evidence. Generally speaking, this is a practice which should be actively discouraged because of its capacity to distort the trial process. There is a real danger, illustrated by this case, that a failure to rule on admissibility at the time of tender will cause unfairness to one or other of the parties.
This is not to say that there are not circumstances in which the deferral of a ruling on admissibility is appropriate. The first objection taken to the evidence of Mr Liggins was to the effect that the assumption made by the expert did not accord with the facts established by the evidence. It will often be the case that a ruling on an objection of that kind will necessarily have to await determinations of fact that can only be made after all the evidence is in.
However, another objection to the evidence of Mr Liggins was taken on the ground that it relied upon inadmissible hearsay, and a similar objection was taken to the evidence of Mr Spencer. There is no reason why an objection of that kind should not be ruled upon at the time it is made, and every reason why it should. Evidence is either hearsay or it is not. Nothing that happens in any other point in the trial will affect its character. However, a ruling to the effect that the evidence is hearsay made in the course of the trial will provide the party tendering the evidence with the opportunity to attempt to prove that fact by direct evidence. Deferral of that ruling until the decision is delivered, deprives the party tendering the evidence of that opportunity and can be the source of unfairness.
It follows from the views I have expressed that the ground of appeal which challenges the award of damages for lost investment opportunity because it depends upon the inadmissible evidence of Mr Liggins must be allowed. However, the course adopted by the trial judge raises a real question as to whether the consequence of allowing the appeal on that ground should be to order a retrial of that issue, because the respondent was denied the opportunity of adducing admissible evidence in support of its claim. The answer to that question lies in a consideration of the appellants' other grounds, including in particular the ground which asserts that the trial judge should have made no award of damages in respect of lost investment opportunity at all.

The claim for lost investment opportunity - general principles

The cases establish that where a party claims to have suffered loss and damage 'by' reason of conduct in contravention of the Trade Practices Act the usual measure of damage will be the measure applicable in tort - namely, the sum required to place that party in the position in which they would have been but for the contravening conduct (Gates v City Mutual Life Assurance Society, 6 ‑ 7; 14). However, the measure is not confined to the measure in tort, or by analogy to other measures, such as that available in contract or equitable remedies (Marks v GIO Australia Holdings Ltd, [15], [38], [151]).
Where the conduct in contravention of the Trade Practices Act is found to have been a material cause in the acquisition of an asset by the innocent party, the ordinary measure of damage will be the difference between the price paid for the asset, and its true value at the time of acquisition (sometimes called the rule in 'Potts v Miller' referring to Potts v Miller [1940] HCA 43; (1940) 64 CLR 282, 297 - see also Gould v Vaggelas [1985] HCA 85; (1985) 157 CLR 215, 220 and HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd [2004] HCA 54; (2004) 217 CLR 640, [35]). When assessing the value of that which has been acquired, subsequent declines in value can be taken into account if inherent in the asset itself at the time of acquisition, but not if 'independent', 'extrinsic', 'supervening' or 'accidental' (HTW Valuers [40]). In addition, losses caused by and flowing from the acquisition of the asset, such as trading losses incurred in running a business may also be recovered (Doyle v Alby (Ironmongers) Ltd [1969] 2 QB 158, 167 ‑ 171; Gould, 227 ‑ 228 (Gibbs CJ), 232 (Murphy J), 244 ‑ 246 (Wilson J), 256 ‑ 260 (Brennan J)). Provided the causal connection between the contravening conduct and the acquisition of the asset is established, it is otherwise unnecessary to establish a causal connection between the subject matter of the contravention and the cause of the loss (Henville v Walker [106]).
However, in the case of the acquisition of an income producing asset, where additional damages are claimed, over and above the loss suffered at the time of acquisition, as a result of reduced profitability or unprofitability, care must be taken to avoid double recovery. That is because the capital value of an income producing asset will generally reflect the income likely to be produced by the asset in the future. As Dawson J observed in Gould:
The difference between the price paid and the actual value at the time of purchase should reflect the future profitability or unprofitability of the business because the actual value of the business at the time of purchase must depend upon its potential as well as its present returns. … If, as prima facie it is, the subsequent profitability or unprofitability of the business is to be taken into account in the calculation of its actual value at the time of purchase, then care must be exercised in the calculation of consequential losses to ensure that the same ground is not covered twice. (266 ‑ 267)
Turning to the specific principles applicable to claims for lost investment opportunity, there is nothing novel or unusual about such claims. In cases such as this, where damages are awarded to compensate a party for having acquired an asset at a price in excess of its true value, interest will very often be awarded on the amount assessed as from the date of acquisition (Neilsen and Radferry Pty Ltd v Starborne Holdings Pty Ltd [1998] FCA 1689 (Full Court)). The award of interest compensates the party awarded damages for the fact that they were deprived of an investment of the value of that for which they paid between the time of acquisition and the time of award of damages. Interest is regarded as a surrogate measure for the benefit likely to have been derived from an investment equivalent in value to the price paid, given that the innocent party has obtained the benefit of an investment, albeit in a reduced value.
This is not to say that interest is the only means by which a party can be compensated for loss suffered because the value of the investment acquired was less than the price paid. As the measure of damage is the sum required to put the innocent party in the position in which it would have been but for the contravening conduct, if it can be established that, but for that conduct, another asset would have been acquired which would have produced a greater return than the asset actually acquired, together with the loss on acquisition (but not interest on this amount), damages may be awarded on that alternative basis (Neilsen). However, as I have observed, the award of damages assessed on that basis, together with interest on the damages awarded for loss on acquisition provides double recovery, and is wrong in principle. That is what the trial judge did in this case.

Onus of proof

In this appeal, various submissions were made in relation to the onus of proof when a party claims damages for lost investment opportunity. It seems to me that the position is clear, and that the party claiming such damages carries the onus of proving all facts necessary to sustain the award sought.
In Gates v City Mutual Life Assurance Society, the claimant sought damages as a result of misleading and deceptive conduct which induced him to take out an insurance policy. The High Court unanimously held that he carried the onus of proving that 'if the representations had not been made the appellant would have taken out a different policy' (per Gibbs CJ, 7). As Mason, Wilson and Dawson JJ observed:
Because the object of damages in tort is to place the plaintiff in the position in which he would have been but for the commission of the tort, it is necessary to determine what the plaintiff would have done had he not relied on the representation. If that reliance has deprived him of the opportunity of entering into a different contract for the purchase of goods on which he would have made a profit then he may recover that profit on the footing that it is part of the loss which he has suffered in consequence of altering his position under the inducement of the representation. This may well be so if the plaintiff can establish that he could and would have entered into the different contract and that it would have yielded the benefit claimed … The lost benefit is referable to opportunities foregone by reason of reliance on the misrepresentation. [13]

In Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332, the High Court considered the general principles applicable to the award of damages for the loss of an opportunity. Brennan J observed that the plaintiff carried the burden of proving such a loss (359). He observed:
… the loss of a mere opportunity to acquire a benefit is not in itself a loss, but the loss of the benefit will be such a loss if the plaintiff proves that he could and would have taken the opportunity and that the benefit would then have been yielded. That is tantamount to saying that the benefit is a loss in respect of which an amount may be recovered if the links in the chain of causation up to the loss of the benefit are proved. (362)
However, because that which has to be proven is a hypothetical possibility, the principles enunciated in Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638 apply, with the result that the court can assess damages in such a case on the basis of the possibility of profit, rather than the probability of profit (Brennan J in Sellars, 365 ‑ 366). However, that does not detract from the primary burden which the plaintiff carries of establishing, on the balance of probabilities, that but for the contravening conduct of the defendant an alternative investment would have been acquired which carried a prospect of profit greater than that achieved from the investment which was acquired (Sellars, 368).
The respondent relied upon observations made by two members of the High Court in Henville v Walker. They relied in particular upon the observation of Gaudron J in the following terms:
It follows that, under s 82(1) of the Act, it is for the purpose whose contravening conduct materially contributed to the loss or damage to establish what component of that loss or damage is referable to some act or event other than his or her contravening conduct and not for the person who suffers loss and damage to establish the precise component or components referable to that conduct. [70]
and of McHugh J:
Arguably, once a plaintiff demonstrates that a breach of duty has occurred that is closely followed by damage, a prima facie causal connection will be established. It is then for the defendant to show that the plaintiff should not recover damages. In the words of Dixon CJ in Watts v Rake, it is the defendant who must disentangle, so far as possible, the various contributing factors. [148]
Assuming, without necessarily finding, that those observations reflect a majority view, they do not bear upon the allocation of the onus of proving that, but for the contravening conduct, a more profitable investment would have been acquired. Those observations are concerned with the circumstance in which there is an entanglement of various issues which are said to have caused or contributed to the loss suffered. A classic illustration of that type of case is the not uncommon case in which trading losses are incurred after the acquisition of a business induced by misleading and deceptive conduct, and the question is whether those losses were the inherent consequence of the acquisition of the business, or the consequence of the inefficient or incompetent conduct of the business by the plaintiff after acquisition.
However, this is not a case of that kind. Rather, this is a case in which the respondent asserts that if it had not acquired the service station, it would have acquired some other asset which would have provided it with a benefit over and above that provided by the asset which it has acquired and retained. Further, the respondent asserts that it should be awarded damages for this loss of opportunity and damages equal to the loss on acquisition. In my view, it is clear that the respondent carried the burden, at all times, of proving the facts necessary to sustain an award of damages on that basis.

The period over which the opportunity was lost

When damages are awarded for the loss of an opportunity to make a profitable investment, a determination must be made as to the period over which that opportunity was lost. In the present case, the respondent asserted, implicitly, that the relevant period was the period between the time of acquisition of the asset, and the time of trial. But as Pincus J observed in Neilsen:
In this case, there is very little in the evidence to assist in fixing a time during which additional losses should be taken to run. It is, however, clear, in my view, that there is no justification in logic or otherwise for arbitrarily taking them up to about the date of hearing. (313 ‑ 314)
In a case such as this, where a determination as to the period over which the opportunity of alternative investment was lost has to be made, the time at which the party claiming damages became aware of the true position will be relevant. It is also relevant when assessing the extent to which such a party can claim continuing trading losses or reduced profitability after becoming aware of the true position. In that context, it has been held that the capacity to claim such losses does not cease immediately the innocent party becomes aware of the true position - rather, the question is: at what point of time, after becoming aware of the true position, would it be reasonable for the innocent party to put an end to the suffering of loss by disposition of the business (Gould, 221 ‑ 222, 228, 244 ‑ 246 and Neilsen, 313)?

Multiple causes

As I have noted, Henville v Walker establishes that it is not necessary for a party claiming damages under the Trade Practices Act to establish that the misleading and deceptive conduct was in respect of the subject which caused the loss, provided it is established that the conduct was a material cause of the acquisition which led to the loss. So, in the present case, it is not incumbent upon the respondent to have established that the reason the service station was less in value at the time it was acquired than the price paid for it was because of the insecure position of the tenancies. It is sufficient for the respondent to establish, as it did, that if it had known the true position with respect to the tenancies, it would not have acquired the service station.
However, this is not to say that once a party has been induced to acquire an asset, all losses suffered thereafter can be taken to have been 'caused' in the legal sense, by the contravening conduct which induced the party to acquire the asset. In this context, losses incurred, or which come to light subsequent to the acquisition of the asset must be evaluated with care. If and to the extent that those losses flow from something inherent in the asset itself and its condition at the time of acquisition, they are properly taken into account in assessing its true value at the time of acquisition, which goes to the assessment of the loss on acquisition. However, if they are not of that character, or cannot be characterised as losses incurred during the period over which the asset was reasonably retained before and after knowledge of the true facts, then they are properly characterised as independent, extrinsic, supervening or accidental and fall outside the scope of the losses for which the contravener is responsible (HTW Valuers [40]).

The application of these principles

The respondent carried the burden of proving that the contravening conduct of the appellants caused the respondent to lose the opportunity to make an alternative investment over a period during which, had it been made, the respondent would have derived benefits greater than those derived from the investment it actually made (which will include both rents and capital appreciation) augmented by an award of damages to reflect the loss on acquisition and the award of interest as a surrogate for the lost opportunity in respect of that portion of the investment.
The proposition implicit in the respondent's case to the effect that it had lost the opportunity of making an alternative investment up to the time of trial was illogical and unsustained by any evidence. On the evidence that was adduced, the respondent was aware of the true position in relation to the property within a few months of settlement in 2003. There was no evidence led to establish any reason why, after taking the prudent step of reletting the property, the respondent could not have liquidated its investment in the service station and reinvested the funds thereby acquired in some alternative, while at the same time pursuing a claim for damages for the loss on acquisition.
The respondent's case, adduced through the evidence of Mr Spencer and Mr Liggins, was to the effect that while the service station appreciated in value, the rate of appreciation was lower than the rates for appreciation of other commercial and residential properties generally. The decision in HWT Valuers [40] establishes that, to the extent that this lower rate of appreciation was inherent in the characteristics of the service station at the time it was acquired, it is properly taken into account in assessing its true value at the time of acquisition, and therefore in computing the loss on acquisition. It is clear that Mr Spencer has assessed all those characteristics in the valuation which was accepted by the trial judge as producing the estimate of 'true' value in May 2003. However, Mr Spencer's evidence, accepted and relied upon by the trial judge, to the effect that subsequent appreciation of the capital value of the service station, in common with all service stations in the metropolitan area of Perth, was affected by significant changes in the structure of the market for the retail sale of petrol supports the conclusion that the reduced rate of capital growth in the service station was caused by changes in the market which occurred after the time at which the respondent had become aware of the true position, and had had a reasonable opportunity to determine whether to retain or dispose of its investment. Such a reduced rate of capital growth is therefore properly attributed to the decision of the respondent to elect to retain the investment, rather than to the contravening conduct of the appellants which caused the respondent to acquire the investment in the first place. In the language of the High Court in HTW Valuers, it is properly characterised as 'supervening' or extraneous.
This is not to say that the respondent could not have made out a case to the effect that if it had not acquired the service station it would have

acquired an alternative investment which, over the period between the acquisition of the service station and the reasonable time required for the respondent to elect whether or not to retain or dispose of its investment after becoming aware of the true position, would have produced a greater return in terms of income and capital appreciation than that achieved from the service station. That case could have been established by, for example, leading evidence of specific alternative investments that were available in March 2003, and analysing the combined benefits (of rental income and capital appreciation) that would have been derived from making such an investment, as compared to the combined benefits derived from the service station up to the point in time at which it was reasonable for the respondent to have elected whether or not to retain the service station - say, for example, 12 months after its acquisition. If that course had been followed by establishing, through admissible evidence, the benefits derived from alternative investments that were available (as was done in Whitaker v Paxad Pty Ltd [2009] WASC 47), it is conceivable that the respondent may have made out a case for at least some of the damages it claimed.

However, that was not the way the respondent presented its case. Its case was presented on a fundamentally different basis, which was inherently flawed, for the reasons I have given. It follows that it would not be appropriate, in this case, to direct a retrial for the purpose of providing the respondent with an opportunity to present its case on a fundamentally different basis.
It follows that, in my opinion, the appeal should be allowed on the further ground that the respondent failed to establish the facts necessary to sustain the award of damages in respect of a lost opportunity for alternative investment, over and above the interest awarded on the loss suffered at the time of acquisition.

Conclusion

For these reasons, in my opinion, the appeal should be allowed, and that part of the decision of the trial judge awarding the respondent damages in the sum of $675,078 together with interest thereon be set aside, and further by reducing damages awarded for the loss on acquisition by $6,500, together with a corresponding reduction in the interest awarded on that sum.
BUSS JA: I agree with Martin CJ.
NEWNES JA: I agree with the Chief Justice.

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

TITLE OF COURT : THE COURT OF APPEAL (WA)

CITATION: PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD -v- COMPUTER ACCOUNTING AND TAX PTY LTD [No 2] [2009] WASCA 183 (S)

CORAM: MARTIN CJ
BUSS JA
NEWNES JA

HEARD: 22 JULY, 23 OCTOBER, 13 NOVEMBER 2009 AND
ON THE PAPERS

DELIVERED : 23 OCTOBER 2009

SUPPLEMENTARY
DECISION :7 DECEMBER 2009

FILE NO/S: CACV 76 of 2008

BETWEEN: PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD
First Appellant
MARTIN PAUL BANNING
Second Appellant
AND
COMPUTER ACCOUNTING AND TAX PTY LTD
Respondent

ON APPEAL FROM:
Jurisdiction              :  SUPREME COURT OF WESTERN AUSTRALIA
Coram  :SIMMONDS J
Citation  :COMPUTER ACCOUNTING AND TAX PTY LTD -v- PROFESSIONAL SERVICES OF AUSTRALIA PTY LTD [2008] WASC 133
File No  :CIV 2265 of 2006

Catchwords:

Costs - Consent order - Whether order should be revoked - Whether various orders should be stayed pending application for special leave to High Court - Appellants' costs of appeal where they have abandoned grounds of appeal

Legislation:

Nil

Result:

Costs and other orders made

Category: B

Representation:

Counsel:

First Appellant               :     Mr A Hershowitz
Second Appellant          :     Mr A Hershowitz
Respondent:     Mr C P Stokes

Solicitors:

First Appellant               :     Holborn Lenhoff Massey
Second Appellant          :     Holborn Lenhoff Massey
Respondent:     Chris Stokes & Associates

Case(s) referred to in judgment(s):

Ansons Pty Ltd v Merlex Corporation Pty Ltd [2001] WASC 204
Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681
Kalavrouziotis v Howel (unreported, WASC, Library No 980428, 30 July 1998)
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183

JUDGMENT OF THE COURT: On 23 October 2009, this court published its reasons for concluding that the appeal should be allowed, and that part of the decision of the trial judge awarding the respondent damages in the sum of $675,078 together with interest thereon should be set aside, and further allowed by reducing the damages awarded by the trial judge for the loss on acquisition of the property the subject of the proceedings by $6,500, together with a corresponding reduction in the interest awarded on that sum (Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183). The parties have been unable to agree as to the orders properly made to give effect to that conclusion, nor as to the orders appropriately made in consequence. Directions were made for the exchange of written submissions on those issues and for their determination on the papers. These reasons deal with those issues.

The publication of reasons for decision on the appeal

The parties' legal representatives were provided with a copy of the reasons to be published on the appeal the day before those reasons were formally published in open court, in accordance with Practice Direction 8.1. At the time the reasons for decision were published in court on 23 October 2009, counsel for the appellants indicated that each of the parties had produced competing minutes in relation to the orders appropriately made, and proposed to tender them to the court. However, as only one member of the coram was present (the Chief Justice), that member indicated that in the absence of agreement between the parties it would be necessary to either reconstitute the coram to hear argument on issues that were in dispute, or set a timetable for the resolution of those disputes by a decision of the court to be determined on the papers. The parties agreed that the latter course should be followed. Before directions were made to that effect, counsel for the appellants proposed that certain orders on their minute were agreed, and could be made by consent. Counsel for the respondent agreed that the orders numbered 1, 2, 3 and 7 on the appellants' minute could be made by consent, and the Chief Justice pronounced orders in those terms. Those orders were:
1.The appeal against the judgment of his Honour Justice Simmonds given in favour of the respondent on 9 July 2008 be allowed.
2.Order 1 of the orders made by his Honour Justice Simmonds on 10 July 2008 is set aside.
3.In lieu of the order referred to in paragraph 2 hereof, it is ordered that:
1.The defendants do forthwith pay to the plaintiff:
1.1The sum of $280,625.00 together with the sum of $87,370.48 being interest at the rate of 6 per cent per annum from 1 May 2003 to 9 July 2008, and thereafter $46.13 per day from 9 July 2008 to the date of payment.
1.2The sum of $4,999.50 together with the sum of $1,444.24 being interest thereon at the rate of 6 per cent per annum from 15 September 2003 to 9 July 2008, and thereafter $0.82 per day from 9 July 2008 to the date of payment.
7.The amount of $38,000.00 paid into court by the appellants on 10 December 2008 as security for the respondent's costs of the appeal to be paid out of court to the appellant's solicitors forthwith.
Directions were made for the exchange of written submissions in relation to the matters that remained in contention.
An order in the terms pronounced by the Chief Justice was lodged for extraction. However, before the document had been extracted, a letter was received from a director of the respondent indicating that the respondent objected to orders being extracted in those terms, notwithstanding the fact that counsel on its behalf had consented to them being made. As the respondent remained represented by solicitors on the record, it was entirely inappropriate for the director of the respondent to communicate with the court in this way. In all events, in due course, the solicitors for the respondent advised the solicitors for the appellants that the respondent no longer consented to orders being made in terms of pars 3 and 7 of the appellants' minute. In relation to par 3, the reason advanced for the disputed minute is the assertion that interest had been wrongly calculated, and, in respect of the first amount for which judgment was to be entered, should be expressed as $60.49 per day from 9 July 2008 (not $46.13), and in respect of the second sum for which judgment is to be entered, should be expressed at the rate of $1.06 per day from 9 July 2008 to the date of payment (instead of $0.82 per day).
In relation to the order numbered 7 in the appellants' minute, which related to the payment out of court of funds lodged by the appellants by way of security for the respondent's costs of the appeal, the respondent purported to justify its withdrawal of consent to an order in those terms on the basis that an application for special leave to appeal was to be made to the High Court, with the result that the amount should remain as and by way of security until that application had been determined.
Thereafter the appellants advised the court and solicitors for the respondent that they agreed with the proposed variation in relation to the amounts for which judgment was to be entered in respect of interest. However, the respondent did not consent to orders being made in the modified form. Accordingly, a further hearing before the Chief Justice was convened on 13 November 2009, at which directions were made for the exchange of written submissions on the expanded issues. We will deal with each of those issues in turn.

The interest on the amounts for which judgment is to be entered

There is no dispute as to the amounts for which judgment should be entered as a consequence of the allowance of the appeal. Nor is there any dispute between the parties as to the interest which should be paid on those amounts as and from 9 July 2008 until payment, although the appellants' original minute miscalculated that amount. There is no reason why orders should not be made in terms of the correct amount.

The amount paid into court by the appellants as security for the respondent's costs of the appeal

As has been noted, the respondent by its counsel consented to an order that the amount paid by the appellants into court by way of security for the respondent's costs of appeal be paid out to the appellants. It seems a fair inference from the events which took place at the time that order was made by consent, including in particular the apparent provision of instructions to counsel by a representative of the respondent during the course of that hearing, that an officer or officers of the respondent were present in court during the course of that hearing. In those circumstances it would be exceptional indeed for the court to revoke an order made by consent (Ansons Pty Ltd v Merlex Corporation Pty Ltd [2001] WASC 204 at [49]). However, it is unnecessary to consider the principles relating to the revocation of orders made by consent in this case, because there is plainly no basis upon which such a course should be followed.
The position adopted by the respondent confuses the making of an order, and an application for a stay of orders made pending appeal. When a court from which an appeal lies pronounces orders, it will generally be appropriate for that court to pronounce all orders appropriately made to finally dispose of the case, even when an appeal is foreshadowed. The obvious advantage of this general practice is that it enables the appellate court to dispose of all matters when the matter comes before it, rather than leave the issues to be resolved in each of two courts.
The question of whether an order pronounced by a court in the disposition of a case before it should be stayed pending the determination of an appeal from that decision is an entirely different question. There are, of course, various principles governing the question of whether a stay should be granted. Amongst them is the principle that where the appeal lies from an intermediate appellate court to the High Court of Australia by special leave, an application for a stay should first be made to the court from which the appeal lies (Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd (No 1) (1986) 161 CLR 681, 684). In Jennings, Brennan J noted at 684:
A stay to preserve the subject-matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted. If an order for a stay is made, the respondent is kept out of the benefit of the order of the court in which the matter is pending until the hearing of the application for special leave to appeal.
Although the position of the respondent in relation to these matters is not pellucidly clear from the various positions it has adopted, it seems that in addition to opposing the making of orders for the payment out of the funds paid into court by the appellants by way of security for the costs of the appeal, the respondent also seeks a stay of that order. That stay is sought apparently by reference to certain provisions in a Deed of Company Arrangement and assertions in respect of outstanding costs orders. However, neither the Deed of Company Arrangement, nor the assertions in respect of outstanding costs orders have been put in evidence before this court. There is a further assertion that both appellants are insolvent. That assertion is said to be justified by an affidavit of Graeme Trevor Lean dated 10 October 2009 filed in CIV 2265 of 2006. There is no such affidavit. There is an affidavit of Mr Lean sworn 10 September 2009. Mr Lean is a court‑appointed receiver in respect of the one share of the second appellant in Banning Holdings Pty Ltd. The assertions made in that affidavit do not bear upon the solvency of either appellant.
In summary, no reason has been advanced which would justify revoking the order made by consent to the effect that the appellants be paid out the amount which they paid into court by way of security for the respondent's costs of the appeal, the appellants having been substantially successful in that appeal. In relation to the assertion that such an order should be stayed, there is currently no evidence before the court establishing the exceptional circumstances necessary to justify the grant of a stay. This is not to say that such evidence could not be adduced. In the circumstances of this case, the interests of justice justify allowing the respondent liberty to apply generally, which would enable an application for a stay to be brought on proper grounds and supported by evidence.

Repayment of part of the judgment sum

The appellants eventually satisfied the judgment entered at first instance, by payments made on 2 June and 5 June 2009. Because of the allowance of the appeal, and the reduction in the judgment entered, they are entitled to a refund of the moneys overpaid, together with interest. There is no dispute between the parties as to the amounts involved.
However, the respondent opposes orders being made to require repayment of those amounts essentially for the same reasons the order releasing the amount paid by the appellants as security for the costs of the appeal was opposed - namely, on the basis that an application for special leave to appeal to the High Court is to be made, and assertions in respect of the financial position of the appellants which are not sustained by any evidence. Again the respondent's position confuses the question of whether orders should be made with the distinct question of whether there should be a stay of those orders pending an application for special leave to appeal. There is no reason why orders should not be made quantifying the obligation of the respondent to repay the amounts overpaid by the appellants. The question of whether or not those orders should be stayed is a separate question. There is no evidence before the court that would justify any orders of that kind.

Costs of the appeal

The appellants seek an order that their costs of the appeal be paid by the respondent. The respondent opposes that order on the basis that the appellants were not wholly successful in the appeal. Although the oral argument on the hearing of the appeal was essentially directed to the issues upon which the appellants were successful, the grounds of appeal which were filed and supported by written submissions, identified a number of discrete issues which were abandoned at the commencement of the oral hearing. Prior to their abandonment, the respondent had been put to expense in preparing written submissions in opposition to those grounds.
There is no inflexible rule that an appellant will be deprived of the full costs of their appeal if substantially successful because he or she did not succeed on some grounds - see Kalavrouziotis v Howel (unreported, WASC, Library No 980428, 30 July 1998). Generally the court will assess the extent to which the discrete issues upon which the substantially successful party lost added to the costs of the litigation in order to assess whether some adjustment of the usual costs order is appropriate.
In this case, the appellants advanced a number of grounds of appeal which were quite separate and distinct to the grounds upon which they were ultimately successful. Although those grounds were abandoned at the commencement of the hearing, the respondent would no doubt have incurred costs in responding to those grounds. In our view, it is appropriate in this case to reduce the costs to be awarded to the appellants to reflect the costs incurred by the respondent responding to the grounds which were abandoned. Those costs are best reflected by ordering that the respondent pay 80% of the appellants' taxed costs of the appeal.

Costs of the proceedings at first instance

The appellants seek an order setting aside the orders for costs made by the trial judge, and remitting the matter to him for further consideration in light of the judgment of this court. The respondent seeks orders varying the orders made by the trial judge in certain particulars.
The trial judge made orders apportioning the costs between the parties to the trial based on a number of considerations. Certain special costs orders were made which could well be affected by the reasons of this court. The usual practice when issues of this kind arise is to remit the matter to the trial judge, who is in the best position to evaluate the appropriate order for the costs of the trial, having presided over it. There is no reason why that practice should not be followed in this case.

The costs of resolving the issues relating to the orders properly made on the appeal

The appellants seek an order for indemnity costs in respect of the costs incurred by them in resolving these various costs issues. They make that application on the basis of the unreasonable position adopted by the respondent, in purporting to resile from orders that were made by consent. In our view, the respondent has acted unreasonably in relation to these matters. Despite the amounts involved not being contentious, and the need for orders to reflect the reasons of this court being obvious, after initially consenting to some appropriate orders, the respondent purported to withdraw that consent, and then opposed the making of orders on grounds which were confused and unsupported by evidence. The appellants should not be out of pocket as a consequence of the respondent's unreasonable behaviour, and accordingly we will order that such part of the appellants' costs of the appeal as relate to the resolution of issues with respect to the orders to be made on the appeal be taxed on an indemnity basis, in that the appellants are to be awarded all costs reasonably incurred and which are reasonable in amount in respect of those issues.

Conclusion

In addition to orders 1, 2 and 7 pronounced on 23 October 2009, allowing the appeal, setting aside the judgment of the trial judge and ordering the payment out of court of the $38,000, the following orders are made:
3.In lieu of order 1 of the orders made by the trial judge it is ordered that:
1.The defendants do pay to the plaintiff:
1.1the sum of $280,625.00 together with the sum of $87,370.48 being interest at the rate of 6 per cent per annum from 1 May 2003 to 9 July 2008, and thereafter $60.49 per day from 9 July 2008 to the date of payment.
1.2the sum of $4,999.50 together with the sum of $1,444.24 being interest thereon at the rate of 6 per cent per annum from 15 September 2003 to 9 July 2008, and thereafter $1.06 per day from 9 July 2008 to the date of payment.
4.The respondent do pay to the appellants the sum of $716,188.45 plus interest at 6 per cent per annum from 2 June 2009 until 23 October 2009 in the sum of $16,835.33 plus further interest at 6 per cent per annum from 23 October 2009 being $117.73 per day to the date of payment.
5.The respondent do pay to the appellants the sum of $59,634.27 plus interest at 6 per cent per annum from 5 June 2009 until 23 October 2009 in the sum of $1,372.41 plus further interest at 6 per cent per annum from 23 October 2009, being $9.80 per day to the date of payment.
6.The respondent do pay to the appellants 80% of their taxed costs of the appeal, save that in respect of the appellants' costs of the issues relating to the orders to be made upon publication of the court's reasons, the respondent do pay the entirety of the appellants' costs to be taxed on an indemnity basis, in that the appellants are to be awarded all costs reasonably incurred which are reasonable in amount.
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8.The costs orders made on 6 May 2009 by the trial judge be set aside and the question of the costs of the trial be remitted to the trial judge for reconsideration in light of the reasons of this court.
9.Liberty to apply within 14 days in relation to whether there should be a stay of any of orders 4, 5 and 7.