Ragata Developments P/L v Westpac Banking Corporation Ragata Developments P/L v Stanley Thompson Valuers P/L

[1992] FCA 969

JUDGMENT No. . .~d.~. . l -~.& .

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )

)

NEW SOUTH WALES DISTRICT REGISTRY ) NO G 255 of 1991

1

GENERAL DIVISION )

BETWEEN :	RAGATA	DEVELOPMENTS PTY
LIMITED

Applicant

AND:  WESTPAC BANKING CORPORATION

Respondent

WESTPAC BANKING CORPORATION

Cross Claimant

STANLEY THOMPSON VALUERS PTY

LIMITED

First Cross Respondent

RAGATA DEVELOPMENTS PTY

LIMITED

Second Cross Respondent

Place: Sydney

No G 654 of 1991

BETWEEN:  RAGATA DEVELOPMENTS PTY
LIMITED

Applicant

AND :  STANLEY THOMPSON VALUERS
PTY LIMITED

Respondent

Coram:	Davies J.
Date:	14 December 1992

MINUTES OF ORDER

THE COURT ORDERS THAT:

The parties to bring in within 3 days minutes of the orders which they propose.

Costs reserved.

NOTE:  Settlement and entry of orders is dealt with in Order
36 of the Federal Court Rules.

IN THE FEDERAL COURT O F AUSTRALIA	) )
NEW SOUTH WALES DISTRICT REGISTRY	1 No G 255 of 1991
)
GENERAL DIVISION	)

BETWEEN:  RAGATA DEVELOPMENTS PTY LIMITED

Applicant

AND:  WESTPAC BANKING CORPORATION

Respondent

WESTPAC BANKING CORPORATION

Cross Cla~mant

- AND. STANLEY THOMPSON VALUERS PTY L I M m D

First Cross Respondent

AND:  RAGATA DEVELOPMENTS PTY LIMITED

Second Cross Respondent

BETWEEN:  RAGATA DEVELOPMENTS PTY LIMITED

Applicant

AND:

- STANLEY THOMPSON VALUERS
PTY LIMITED

Respondent

m:	Davles J.
Date:	14 December 1992

Place: Sydney

REASONS FOR JUDGMENT

These two proceedings have been heard together. Ragata Developments Pty Limited ("Ragata") is a building and development company. Westpac Bankmg Corporation ("Westpac") provided finance for the purchase by Ragata of blocks of land at 74-8 Crown Road, Queenscliff and for the development on that land of thirteeen two- bedroom units and one one-bedroom unit. Stanley Thompson Valuers Pty Limited

("STV") provided a valuation to Westpac with respect to the Queenscliff land.

Westpac has filed three cross-clalms. The first is against STV and claims

contribution to the extent of complete indemnity from STV in respect of the claim made

by Ragata on Westpac. The second cross-clalm seeks judgment against Ragata for moneys owing. The third cross-clalm is brought against the two directors of Ragata, Colin Reginald Bright and Michael John Philllps and their respective wives, Patr~cia

Dorothy Bright and Paula Phillips. The cross-claim seeks moneys due under guarantees

given by Mr and Mrs Bright and Mr and Mrs Philllps with respect to the obligations of

Ragata to Westpac and it also seeks possession of properties which secured the

guarantees. That cross-claim was not brought until a late date, 12 November 1992. The

cross-claim was heard with the remainder of the proceedings but, by agreement between

guarantees will be set out in a defence to the cross-claim which has yet to be formulated	counsel, issues which Mrs Bright and Mrs Philllps may wish to raise with respect to the
and those issues will be set aside for separate determmation.
The issues dealt with at the trial and in these reasons for judgment thus embrace all issues m the proceedings save those separate Issues which relate to Mrs Br~ght and
Mrs Phillips and which concern their llablllty under the guarantees. Those separate lssues are reserved for subsequent determmation.

Westpac provlded finance to Ragata through its Chatswood branch, of which the

Manager was Mr J.R. Burton. The valuation whch 1s m issue was made by Mr K.M.

Rayner, a registered valuer employed by S W . The Managing Director of STV was Mr

R.J. McGarva.

Proceedings NG 654 of 1991, brought by Ragata against STV, were Instituted in the Supreme Court of New South Wales on 29 June 1990. In those proceedmgs, which were transferred to this Court in 1991, the clam was made that the valuation was negligent and in breach of s.52 of the Trade Practices Act 1974 (Cth).

In proceedings No. 255 of 1991, Ragata has sought damages and other relief
under the Trade Practices Act m respect of alleged statements made by Mr Burton on

behalf of Westpac to Mr Bright and Mr Phillips on behalf of Ragata. The statements are

alleged to be misleading or deceptive or llkely to mislead or deceive.

At the hearing, Ragata and Mr and Mrs Bright and Mr and Mrs Phillips were represented by Mr F.M. Douglas, Q.C., and Mr M.A. Pembroke of counsel. Westpac was represented by Mr R. Macfarlan Q.C. and Mr J.W. Stevenson of counsel. Mr G. Inatey of counsel appeared for STV.

When the proceedings commenced, the version of events set out in the affidav~ts

filed on behalf of Ragata was dramatically different from that set out in the affidavits

filed on behalf of Westpac. After cross-examination, however, much was explained and,

in his final address, Mr Douglas made only one narrowly confined attack against

Westpac. In so doing, he impliedly accepted the general version of events grven by Mr

Burton.

I am of the vlew that Mr Burton's evidence was reliable and should in general be accepted. I am also of the vlew that significant elements of the evidence of Mr Bright and of Mr Phillips were unreliable. It is unnecessary for me to elaborate on thls point, for the issue finally relied upon does not depend upon any difference as between Mr

Bright and Mr Phillips on the one hand and Mr Burton on the other.

A surprising turn of events was Mr Rayner's evidence in paragraphs 39 and 40 of

his affidavit. Mr Rayner chose to attack Westpac's lending practices, and he thereby cast

doubt upon his own valuation.. The crucial evidence upon which Mr Douglas relies to

found the claim now made against Westpac 1s the evidence deposed to by Mr Rayner in
paragraph 40 of his affidavit and the oral ev~dence	which he gave with respect thereto.

On 25 May 1988, before any approach had been made to Mr Burton, Ragata entered into a contract to purchase the property at 74-8 Crown Road, Queenscliff and a deposit of $50,000 was paid. However, a term of the contract was that development approval for the construcbon of thirteen two-bedroom units and one one-bedroom unit be obtained within 3 months. No formal step was taken to rescind the contract when the condition was not satisfied but, subsequently on 14 October 1988, new contracts between Ragata and the vendor in similar terms to the first contracts were entered into.

In June 1988, Mr Bright and Mr Ph~llips spoke with Mr Burton with a view to

obtaining finance. On 5 July 1988, Mr Burton sought additional funding for Mr Bright and Mr Phillips and their companies. The proposal contained the following information, whlch had been communicated by Mr Bright and Mr Phillips to Mr Burton.

"Ragata has exchanged contracts to purchase a parcel of land (conslstmg of 3 house block$) with D.A. approval for 14 Town Houses overloolung Queenscliffe Beach at

$1.05M. Deposit 550 pald. Settlement is scheduled lor late Augustlearly September.

Company has, under consideration, two optlons to develop thls slte

(a)	Sell land at S2.2 and enter Into a contract to construct the 14 Town Houses for $1.86M (Total value S4.06M based on 14 X S290).
(b)	Develop the slte and sell off the Town Houses separately at prices around $340 each."

Finance for the development was not sought by the proposal.

After consultation with Mr Burton, Mr Bright and Mr Phillips developed a

including interest" of $3,850,000. That sum was made up of the cost of the land and costs	proposal for finance. The proposal sought "The funds reqlured to complete the Project
of acqulsltlon, preliminary costs in relatlon to the development application and preliminary site works and estimated costs of construction of the fourteen units. In
support of the construction costs, Ragata supplled to Mr Burton a letter from Drew Dickson and Partners Pty Limited, architects, which set out the architects' estlmate of the
construction costs. The proposal contained the following information:-

"PROJECTED SALES FROM QUEENSCLIFF

(Based on Todays Values).

4 Units @ $420,000

4 Units @ S370,000

4 Units @ $315,000

Gross from Sales

Less Agent Comm~ssion

on Sale

TOTAL Proceeds from Sales

The enclosed Letter from Burns, Bennett and Heaton glveu the estimated total value of the Project on completion to be S5,380,000."

The letter attached from Bums Bennett Heaton, Real Estate Agents, was dated 28 July

1988.  This included the followng information:-

"PRICING: The block has an estimated completion date of December 1989 or January, 1990. To determine a sale price now for 198911990 is very difficull, however, going on recent sales in both Manly and Dee Why we bclievc the figures listed below to be approximately ihc asking prices.

On or about 31 August 1988, Mr Burton, who believed that a valuation of the land

made by a registered valuer would be requued and who had so informed Messrs Br~ght
and Phillips, instructed Mr McGawa, the Managing Director of SW, to prepare a
valuation of the land in Crown Road, Queenscliff.

On 5 September 1988, Mr Burton put to his superiors a proposal for finance of

$3,831,000 to fund the acquisition of the land and the proposed development.

Mr Burton's proposal included the information:-

"As with prevlous project, Bank 1s belng asked to v~rtually fund the development 100%

plus accept capitallsatlon of interest. Some comfort 1s afforded by directors puttlng the11 (to be unencumbcred) homes up as collateral security, as well as the pnme location for the development.

l l	/88 Reg~stered RPA Mortgage by Company over:
OUEENSCLIFF NSW	74-78 Crown Road

On which is erected 3 old houses to be demolished to make way for 14 home unlts all 2 bedroom of concrete and brlck construcuon.

I	Land inspected by Stanley Thompson Valuers on 7/7/88 and valued at
$1m
Bank Valuauon at 85% - $1190
I	Development costs estimates at S2691
@ 85%

-

$2287

The date of STV's valuation inspection on 7 July 1988 may have been an error.

which had been orally communicated to Mr Burton. However, the figure of $1,400,000 was Mr Rayner's estimate of the value of the land On 9 September, 1988, the State Manager, Commercial Lending of Westpac,

approved the grant of additional finance of $3,831,000 subject inter alia to:-

licensed valuer confirming real~sation	figures
D.A. & B.A. approval"

A crucial lssue is whether, when he recelved nohf~cat~on of this condit~on, Mr

Burton phoned Mr McGarva and requested a valuation confirming the values on

reahsation. Mr Rayner has given evidence that he received no such instruction and that his valuation was a valuation solely of the land. It seems to me that the form of Mr

Rayner's valuation is inconsistent with this evidence. I shall deal with the valuation in

more detail shortly. Mr McGarva said that he did not recall any such instruction from Mr Burton but he was not prepared to swear that Mr Burton did not phone Ium. Mr

Burton gave evidence that he phoned Mr McGarva and instructed Mr McGarva that the

Bank required the valuation to confirm the realisation figures.

I accept Mr Burton's evldence for a number of reasons. In the first place, it seems to me that Mr Burton was an honest and a generally reliable witness. Secondly, he had been Informed in writing of the condition upon which the approval was to be

granted. Accordingly, it is unllkely that he did not take steps to ensure that the condition

was met. Thirdly, he informed Mr Bright and Mr Phillips of the condition and of the fact that he would instruct STV that Westpac required confirmation of the reallsation figures. And lastly, Mr Phillips gave evidence that he recalled Mr Burton malung a phone call to

Mr Burton's actual conversation on the phone.

STV to give this instruction, though Mr Phllllps either did not hear or could not recall

At some stage Mr Burton received oral advice from Mr Rayner that the land was valued at $1,400,000. At some stage also, he was orally informed that Mr Rayner estimated the realisation proceeds to be $5,000,000 and Mr Burton informed Messrs Bright and Phillips of that. There is an lssue as to whether Mr Burton informed them that the realisation proceeds were estimated to be $5,000,000 or whether he said "more than $5,000,000" but the difference is not significant for present purposes.

On 16 September 1988, Mr Burton received Mr Rayner's wrltten valuation. The

valuation recorded the followng 1nformatlon:-

"ORDERED BY:	Westpac Dlstrlct Commercial Banklng Centre 1st Floor cnr. H111 St. & Roseville Ave., Roseville NSW 2069
ON ACCOUNT OF:	Queenscllff Regatta Developments Pty Limlted
PROPERTIES:	74-78 Crown Road QUEENSCLIFF"

The valuation then gave pictures of the property and described it and the then

Improvements on it. After several pages of inconsequential description, the report read

"GENERAL REMARKS:

Overall mndltion of the property, wlth the exception of No. 74, is satlsfactoty. However, we understand that the properly IS subject to a Development Application for a part two and three storeyed resident~al flat bulldlng mmprlslng thlrteen X 2-bedroom and one X	l-bcdroom home unlts.	We understand this appllcatlon 1s currently belng processed by
Warrlngah Shlre Council.

In our assessment of value we have had regards to general enquiries and recent market transactions, as well as feaslbil~ty analysis based on considered sales of the finished home unit building.

Feaslbilitv study

GROSS REALISATIONS	..,
LESS:
Legal & selling expenses	S 150,000
Profit & risk	Sl,000,000

Interest on development	S	300,000
Holdmg charges	S	17,000

Aqu~s i t~on	charges	S	235,000
M~scellaneous	expense	S	5,000

$ 3,293,000

LESS:

Development costs $ 1,870,000

RESIDENTIAL LAND VALUE:  $1,423,000

ADOPT AS - $1,400,000"

The follow~ng page conta~ncd the only comparable sales wh~ch were specifically set out in the report and

read as follows:-

"Comnarablc sales

i)            Unit 7. 48A Oueenscl~ff Road. Queenscliff

Three bedroom unit, nlneteen ycars old.
Sold recently. $360,000

We understand that another unlt in the same block IS presently for sale,

asking $410,000, accommodat~on also being three bedroom.

ii)          61 Crown Road. Oueenscl~ff

Three bedroom unlt wth some mews.

Sold recently: $250,000

iii)        3 Thornton Street Falrlieht

New block of units

2-bedroom unlts bung available for sale
for $260,000 to $280.000,
3-bedroom units approximately 5320,000 "

The report concluded on p.9:

"Our lnstructlons provide for assessment of Nos. 74-78 Crown Road, Queenscliff and assessment below reflects what we conslder to be the hlghest and best use, i.e., development site for home unlt building.

As such, we antmpate that m the event of f~nance be~ng approved, all three s~tes hould be held

as one. Should any one of these sltes be released, we would anticlpate re-castmg of thls valuatlon

accordmgly.

Our valuat~on is of the real estate only and excludes all Items of furn~ture and furn~shmgs.

This valuatlon 1s for the use only of the party to whom it 1s addressed and for no other purpose. No responsibhly 1s accepted to any th~rd party who may use or rely on the wholc or any part of the wntcnt of tlus valuation

Our valuat~on below is subject to approval of the Development Appl~cat~on as presented

to Wdrringah Shire Counc~l.

SUBJECT TO THE OVERRIDING STIPULATIONS CONTAINED WITHIN THE BODY O F THIS REPORT, WE ARE O F THE OPINION THE MARKET VALUE O F THE ABOVE DESCRIBED PROPERTY, FEE SIMPLE IN POSSESSION, AS AT 12th September 1988

IS:

$1.400.000

(ONE MILLION FOUR HUNDRED THOUSAND DOLLARSY

On receiving this valuatlon, Mr Burton read it br~efly and put it with Ragata's

papers. He informed Messrs Brlght and Philllps that he had received the valuation and

informed them again that the estimated proceeds on reallsation were $5,000,000. If there is any slgnlficance in the lssue as to whether Mr Burton sald $5,000,000 or over $5,000,000, I would accept Mr Burton's evidence that he ~nformed Messrs Bnght and

Phillips that the estimated proceeds on reallsation were $5,000,000. I do so, not only because I consider Mr Burton's evidence to be more reliable than that of Messrs Bright

and Philhps, but also because that was the sum set out in the valuation.

On 21 September 1988, Mr Burton wrote to Ragata giving formal approval to additional finance of $3,831,000, the purpose of which was expressed to be "to allow purchase of property 74-78 Crown Road, Queenscliff and to provide working capital for construction of Home Unit Development thereon!' It was noted that drawdowns in respect of construction costs were to be against architect's certificates.

On 14 October 1988, Ragata entered into further contracts for the purchase of the

Crown Road land, and thereafter, the purchase and the development of the property

proceeded.

It is not in dispute that Westpac relied upon Mr Rayner's valuation and would not

have approved the add~t~onal finance had Mr Rayner's valuation not confirmed the

figures put forward in Ragata's proposal for finance. There is an issue as to whether

Ragata would have suffered any loss were the valuation negligent. Messrs Bright and

Phllips did not rely upon the valuation in the sense of seeking it or even seeing it before

the second contracts were executed. However, I am satisfied that, had not the valuation accorded substantially with the figures which had been set out in Ragata's proposal, the development would not have proceeded. Accordingly, there was a suffic~ent causal

connection between the valuat~on and the losses which Ragata suffered by reason of

undertaking the development of the home units.

I should add that the evidence of Messrs Bright and Phillips supports the view that

their conduct was influenced by the valuation. The evidence put the matter on the	footing that they were looking to Mr Burton to assure them that the project was a viable	one. There are reasons which I need not go into for rejecting the contention that Mr
Burton was, in any sense, an adviser as to the financial viablllty of the project. Nevertheless, the evidence of Messrs Bright and Phillips supports the conclusion that they
were not uninfluenced by Mr Burton's views and accordingly that, had Mr Burton rece~ved a valuation showing an entirely different picture and had he Informed Messrs Bright and Phillips of that, it 1s llkely that Ragata would not have proceeded with the development.
Mr Phillips obtained a copy of the valuation from Westpac late m 1988 and Mr Bright read it probably in January 1989. This was either before construction had commenced or at a very early stage of construction.

I come now to Mr Rayner's affidavit and evidence. His affidavit annexed the

instruction sheet which he received on 31 August 1988 and which required a valuation

of the vacant land only. Mr Rayner took notes of comparable land sales and verified in evidence during re-examination he verified three pages of his handwritten notes concerning comparable land sales.

Mr Rayner also spoke to Mr Phillips on several occasions. He requested copies of the plans and specifications and, m fact, received the plans though not the specifications before he completed his report. He obtained detalls of the proposed development, of the units proposed and of the finish intended. Mr Rayner obtained

took note of Mr Phlllips' estimates of the likely sale prices of each of the units and then	details of preliminary expenses including excavation and professional fees. Mr Rayner
investigated comparable sales of units, some of which are referred to and set out in his
report.
In his evidence, Mr Rayner confirmed the matters set out in his report, namely that he estimated the realisable proceeds of the individual units to amount to $5,000,000 and that he valued the land at $1,400,000. There 1s not now any contention that Mr Rayner's assessments of the gross realisable values at $5,000,000 and of the land value
at $1,400,000 were negligent.

The problem has arisen from an attack which Mr Rayner volunteered in h ~ s

affidavit agalnst the loan made by Westpac. In his affidavit, Mr Rayner deposed, inter

"39. I was surprised to find out recently that Westpac had lent approx~mately $3.8

mill~on to Ragala against my initlal valuation report. As I stated earher the report I carrled out was for residual land value only. In my experience of being a valuer at Westpac I would not have expectcd the bank to have lent money agalnst the gross

rcallsation value m my valuatlon report .

40. More ~mportantly, if the bank was to lend money against the gross rcal~sat~on for

the development my understandmg 1s that it should have been against the in-one-line

value That is the value for which a developer would buy the development. Usually t h ~ s

1s about 20% off the gross reahsat~on. If I had been asked to do a gross reallsatlon valuat~on I would have approached the exercise differently. I would have carried out the

same preliminary enqulnes as outllned earher m my affidavit but I would ins~st on seelng

the hu~ldlng application or the plans when they had been drawn up. In that way, I could

confirm the details given to me by the developer. If asked to do a gross real~sat~on

valuat~on I would have included advlce on lending and would have indicated that the

gross for this development was bull~sh in a bulllsh market. The gross was towards the hrgh end of the market and I would have stressed that it was an untried market. I would have then rewmmended to the bank lendlng agalnst the in-one-lme value. 1 would have

then carrled out a hypothetical exerclsc for the in-one-line value.	Thls is broadly the
same as the feaslb~llty	study carrled out m the res~dual and value exerclse but does not
rncludc development costs.	In tlus instance it would have meant also a lower profit/nsk
allowance because there would be no extended selling period thereby reducing the rlsk
In hls particular development the m-one line value would have been $3.77 m~lllon	which
1s the value I would have recommended that the bank lend against."

Mr Rayner supported these paragraphs by the following oral evidence, inter alia:-

"So that if you had been asked to do, by the bank, a valuat~on on a gross reallsation process the steps whlch I have drawn to your attention are all the steps whlch you would have undertaken in such an cxerc~se?---Certainly. I would have taken out some of the costs.

And the gross reallsation figure which you would have come up with was S3.77 mill~on?---

No. The in-one-line valuat~on would have been 3.77.

Yes The gross reallsatlon on an m-one-11ne basls would have been $3.77 mllhon?---No,

the m-one-line valuatlon would have been 3.77.
Well, is that not the same thmng?---It's certainly not a gross realnatlon, no.

But what you would have done d you had been asked to carry out a valuatlon on a gross reallsatlon basls would have been to undertake an exercise wluch would have tested and venfied to your satlsfact~on what was a reasonable sum for the gross realisations---?---Oh, I'm sorry, no, no. The gross reallsations would have stayed the same. However I would havc drawn an in-one-lme vdluat~on at $3.77 mlll~on whlch would have been in the

cert~ficate	at the end. My process would have been the same."
Mr Rayner said that his valuat~on	had been of the land only and he produced hls

handwritten notes of comparable land sales. Mr Rayner said that hls primary method

of assessing the land was to look at comparable land sales and that he had gone through the process of estimating the realisations only as a backup method of valu~ng the land. Mr Rayner said that, had he been asked to do a valuation on the basis of realisations,

he would have included other information, such as the value of the units if sold in-one-

line, that is to say, as a whole on the completion of the development. He said that the

value of $5,000,000, allowed for the sale of indindual units over a period of time.

It was on th~s basis that Mr Douglas put the case. He submitted that if Mr Burton

had not requested that there be confirmation of the realisation value, then hls conduct

was misleading and deceptive, for he informed Messrs Bright and Phillips that he had done so and that Mr Rayner had confirmed the realisations as $5,000,000, whereas he

had not asked for such a valuatlon and Mr Rayner's view of the valuatlon was only

$3,770,000. Mr Douglas further submitted that, if Mr Burton had requested that there

be confirmation of the realisable values then, as that value would have been $3,770,000,

Mr Rayner was negligent and 1x1 breach of 5.52 of the Trade Practices Act in stat~ng	the
figure at $5,000,000.

Mr McGarva gave ev~dence that he did not recall being informed that Westpac

wanted the valuation to extend to the gross realisation proceeds and that he doubted that Mr Burton had so advised him. As to the valuation report, Mr McGarva gave this

evidence:-

"I would have rewgnlsed that the preparation of the valuation was bascd on land and whllst there was reference to gross reallsation, I would not have wns~dered that as an

adequate statement wncernlng gross real~sat~on a d the vanous impl~cat~ons.

However, I do not accept key elements of Mr Rayner's and Mr McGarva's

evidence.

In the first instance, I am satisfied that Mr Rayner was asked to and did confirm the realisation figures. I have dealt with the other evidence on this aspect. The valuation report itself confirms the pomt. The figure which looms large in the structure of the report 1s the figure of $5,000,000 specified for "realisations". It is to be noted that the

term used is "realisations", not "realisation". Therefore, the report specified the total of	the individual amount which would be hkely to be received on the sale of the units, not
m-one-line but mdividually. The report confirmed the realisation figures which Ragata had put to Westpac.
Not only does the figure of $5,000,000 loom large in the report, but a significant feature of the report is that no comparable land value is specified. It seems to me to be probable that, if Mr Rayner had Intended the report to deal only with the value of the
vacant land and if he had used comparable land sales as the primary source of his valuation, at least some of those land sales would have been set out. The comparable sales which are set out are the sales which support the value of the proposed sales of the units, they are not sales of vacant land.

The only probable explanation of the structure of the report 1s that Mr Burton

did, as he said in his evidence that he d~d, convey to STV Westpac's requirement that the

realisation figures be confirmed. In my view, it is likely that this change in instructions led Mr Rayner to alter his valuation report, not by including other information, but by

omitting the comparable land sales which he would otherwise have described.

Thus, the report was finally structured so that it achieved the two purposes required by Mr Burton, first, that a value be stated for the land, and secondly, that the realisation figures be confirmed. That is what Mr Burton requested and that is what the report dehvered. It contained a formal valuation of the land and a confirmation by a registered valuer of the realisation value if the units were sold individually.

The report achieved what Mr Burton, Mr Bright and Mr Phillips expected of it.

None of them saw any inconsistency between the report and what they required.

It is to be kept in mind that Mr Burton had never intended to lend on the bas~s

of 85% of the $5,000,000. Mr Burton's figures were based on 85% of the land value,

$1,400,000 and 85% of the development costs estimated at $2,691,000, totalling in all

$3,477,000. Other security was available to support the remainder of the loan totalling

$3,831,000.

Mr Burton did not seek either a formal valuation of realisation worth or an m one

line valuation. Ragata had put in a proposal showing total proceeds from sales of

$4,988,000, preliminary costs of $1,758,000 and construction costs of $2,099,836. In the

first instance, Ragata supported the proposal with letters from Bums Bennett Heaton

and from Drew Dickson & Partners Pty Ltd. Mr Burton had been content to proceed upon that footing subject to obtalnlng a formal valuation of the land. The condition imposed by the State Manager, Commercial Lendmg, was that a licensed valuer confirm

realisation figures. That is what Mr Burton asked STV to do and what Messrs Bright and Phillips understood that Mr Burton would request STV to do. Mr Rayner's report did what Mr Burton requested.

I can see no element of negligence or of misleading or deceptive conduct m the

valuation report or m Mr Burton's description of it to Messrs Bright and Phillips.

It follows that, despite Mr Rayner's sprrited attempt to establish deficiencies in

Westpac's lending practices and thereby in hls own report, the claim must fail.

It is unnecessary for me to dlscuss the relief sought by Mr Douglas should Ragata

be successful save to say that, had I been satisfied that the valuation report was deficient,

I would have found against STV on the ground of a breach of s.52 of the Trade Practices

and on the basis of negligence. It seems to me that STV was well aware of the
purpose for which the valuation was required and that Ragata, as well as Westpac, would

be likely to be harmed should the valuation be carried out neghgently. See San Sebastian

Ptv Ltd v. The Minister Administering the Environmental Plannine and Assessment Act

1979 (1986) 162 C.L.R. 341 at 355; &y v. & d

(1990) 26 F.C.R. 112 at 151-2. I have already discussed the issue of causation.

Mr Douglas handed up proposed minutes of order should Ragata be successful.

These minutes were not, however, glven any careful attention at the hearing as they were

handed up at a late stage. Had liability been established against Westpac, I would have

reserved to the parties leave to address me on the orders proposed.

As matters have eventuated, the application must be dismissed as agalnst both respondents. That necessarily carries with it dismissal of the first cross-claim which merely seeks contribution should there be liability in the principal application. On the second cross-claim, the sum due has been proved as $4,519,162.74 plus interest accruing at $1,453.35 per day from 2 December 1992. There will be judgment for the appropriate sum. On the third cross-claim, it has been accepted that liability has been established

There will thus be orders in respect of the monetary sum as against Mr Bright and Mr	save in respect of the matters which might affect Mrs Bright and Mrs Phillips separately.
Phillips and perhaps m respect of their interests in the real estate which secured the
guarantees. This judgment should bind Mrs Bright and Mrs Phillips save and except in respect of the matters relatlng to them separately which they wish to raise.

Lest there be any problems wth the orders, I think the appropriate course is to

direct the parties to bring in within 3 days mlnutes of the orders which they propose.

Counsel are agreed that costs should be reserved as counsel for the respondents wished to seek orders on an ~ndemnity basis with respect to at least some of the costs lnvolved m these proceedings. The lssue of costs could be dealt with when the minutes

of order are discussed or at some convenient time subsequent.

I certify that this and the preceding 19 pages are a true copy of the Reasons for Judgment of the Honourable Mr Justice Dav~es.

Date:	14 December 1992
Counsel for the applicant:	Mr F.M. Douglas QC with Mr M.A. Pembroke
Solicitors for the applicant:	Sly and Weigall

Counsel for the respondent:	Mr R.B.S. Macfarlan QC with Mr J.W. Stevenson
Solicitor for the respondent:	Henry Davis York
Counsel for the cross respondent:	Mr G. Inatey
Solicitor for the cross respondent:	Colin Bigges Paisley
Dates of hearing:	30 November 1991, 1 December 1992, 2 December 1992
Date of judgment:	14 December 1992