FEDERAL COURT OF AUSTRALIA National Australia Bank Ltd v Hann Nominees Pty Ltd [1999] FCA 1262 NATIONAL AUSTRALIA BANK v HANN NOMINEES PTY LTD VG 144 OF 1994 RYAN J MELBOURNE 13 SEPTEMBER 1999 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 144 OF 1994 BETWEEN: NATIONAL AUSTRALIA BANK Applicant AND: HANN NOMINEES PTY LTD Respondent JUDGE: RYAN J DATE OF ORDER: 13 SEPTEMBER 1999 WHERE MADE: MELBOURNE MINUTES OF ORDER THE COURT ORDERS: 1. That there be judgment for the applicant in an amount of damages calculated in accordance with paragraph 145 of the reasons for judgment published this day reduced by 20% for contributory negligence. 2. That the application herein be adjourned to a date to be fixed for submissions, if necessary, on interest and costs. 3. That liberty be reserved to either party to apply on not less than 48 hours notice in writing to the other party. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VG 144 OF 1994 BETWEEN: NATIONAL AUSTRALIA BANK Applicant AND: HANN NOMINEES PTY LTD Respondent JUDGE: RYAN J DATE: 13 SEPTEMBER 1999 PLACE: MELBOURNE REASONS FOR JUDGMENT THE FACTUAL BACKGROUND 1 In 1990 Sandhurst Trustees Limited ("Sandhurst") referred a number of borrowers then on its books, including Denis Dean Nominees Pty Ltd ("Denis Dean") to the applicant ("the Bank"). Before August 1990, Denis Dean made an application to the Bank for a loan ("the loan application") and this was supported by a valuation from the respondent, addressed to Sandhurst, of property which had secured an existing loan from Sandhurst to Denis Dean. The property comprising the security was situated within the Shire of Shepparton, immediately to the south of the City of Shepparton, at the intersection of the Melbourne Road and Kialla Lakes Drive and was known as "Dean's land" ("the subject property"). 2 The application to the Bank by Denis Dean was made in the first instance to Mr Fidler, the manager of the Bendigo branch of the Bank. The Bank, however, later informed Denis Dean that a valuation addressed to it would be required. A valuation by the respondent, addressed to the Bank and dated 27 July 1990 was subsequently received by the Bank ("the subject valuation"). 3 The subject valuation was in the following terms: REPORT AND VALUATION PROPERTY: Lot A, L/P 139345, Part Crown Allotment 72, Melbourne Road, KIALLA OWNER: DENIS DEAN NOMINEES PTY LTD PURPOSE OF VALUATION: To assess the market value of the property for mortgage security purposes for National Australia Bank Ltd. A mortgage insurer may rely on this valuation. TITLE DETAILS: All of that piece of land being Lot A on Plan of Subdivision No. 139345, being part of Crown Allotment 72, Parish of Kialla, County of Moira, and being the land more particularly described in Certificate of Title Volume 9467 Folio 270. AREA & DIMENSIONS: The property has a frontage of 33.45 metres to Melbourne Road, by a total depth of 325.77 metres, by a width at the rear of 119.49 metres. The area of the property is 3.323 hectares. SITUATION: The property is situated on the eastern side of Melbourne Road, approximately 830 metres south of the Broken River. The property has been positively identified from title searches and the Parish plan. SERVICES: Electricity, telephone, town water and sewerage are available and connected to the property. Access to the property is over a bitumen road. ACCESS: The property has a frontage to Goulburn Valley Highway. It also has a frontage to Midstar Court on the northern boundary and the rear portion has both physical and legal access to the northern side of Kialla Lakes Drive. ZONING: The land is subject to Planning Control by the Shire of Shepparton. The front portion of the land is zoned Highway Commercial and the rear portion Industrial 'A' (Light Industrial). BUILDINGS: Office and Workshop Erected on the front portion of the land is a brick office and workshop complex. The office consists of approximately 151 square metres and is constructed of brick walls, concrete floor and steel deck roof. Attached to the rear of the office is an R.S.J. portal framed workshop containing approximately 219 square metres. This building is of recent construction and is in very good condition and has been well maintained. It is currently occupied by Statewide Powder Coaters. Workshop Also erected on the land is a brick and R.S.J. portal frame workshop containing a total area of 229.4 square metres. This building is also in very good condition and has been well maintained. It is currently occupied by Ryans. BUILDINGS: (cont.) Factoryettes Also erected on the land is a set of five factoryettes containing a total area of approximately 350 square metres. The building is generally sound and is constructed of steel frame and galvanised iron cladding. Office and Show Room Recently erected on the land is a tilt concrete frame and galvanised iron roof workshop and showroom, containing approximately 464 square metres. The building has a reinforced concrete floor, tilt concrete walls, galvanised iron roof, aluminium framed glass windows at the front and has been set up as a garage service centre and spare parts. It is in very good condition. RENTAL: The building on Lot 1 is currently let to Statewide Powder Coaters at $36,000 per annum. The building on Lot 2 is currently let at $11,500 per annum. The factoryettes have a total rental of $10,400 per annum. The building on Lot 4 is currently owner occupied and has a market rental of $37,200 per annum. The property has a total rental value of $95,100. All the rentals are on the basis of the tenant paying rates and other outgoings. PLANNING PERMIT: There are two planning permits which have been recently issued. Firstly for a four lot plan of subdivision including Lots No 1, 2, 3 and balance of the land and the second planning permit for the subdivision of Lot 4, 5, 6 plus the balance of the land. PLANNING PERMIT (Cont.) Therefore permits exist for the development of the property into Lots 1 – 6 on the attached land plus the remaining land. Lot 1 contains 1,893 square metres fronting the Goulburn Valley Highway. Lot 2 contains 2148 square metres fronting Midstar Court. Lot 3 containing 2,023 square metres facing Midstar Court, Lot 4 containing 2560 square metres facing Kialla Lakes Drive, Lot 5 containing 2240 square metres facing Kialla Lakes Drive, Lot 6 at 2030 square metres facing Kialla Lakes Drive. The balance of the land is also accessed to Kialla Lakes Drive. The approximate cost of the subdivision including holding costs, interest on development expenses $124,000. GENERAL REMARKS: The property is well situated on the main southern entrance to Shepparton and is ideally suited for development. VALUATION DATE: The valuation has been assessed as at the date of inspection the 27th July, 1990. VALUATION: The valuation has had regard for market trends and demands and comparable sales and the market value of the property, is ONE MILLION ONE HUNDRED AND SIXTY FOUR THOUSAND AND SIX HUNDRED DOLLARS ($1,164,600) 4 The subject valuation was then signed "Peter F. Hann F.A.I.V." and dated 6 August 1990. 5 The subject valuation continued in these terms: "P F HANN & COMPANY VALUERS & REAL ESTATE CONSULTANTS SUBDIVISIONAL ANALYSIS DATE: JULY 1990 OWNER: DENNIS DEAN NOMINEES PTY LTD PROPERTY: MELBOURNE RD KIALLA CROWN DESCRIPTION: Lot A L/P 139345 PARISH: KIALLA AREA: 2.684 HA ===================================================== TIMINGS: -LEAD IN: 1.0 MONTHS SELLING: 3.0 MONTHS DEVELOPMENT: 2.0 MONTHS TOTAL: 4.0 MONTHS LOT 1 $388,900 LOT 2 $107,000 LOT 3 $80,000 LOT 4 $401,100 LOT 5 $85,000 LOT 6 $80,000 BALANCE $400,000 GROSS REALISATION7 LOTS @ AVERAGE $220,286 $1,542,000 Less SELLING EXPENSES COMMISSION 7 LOTS @ $ 4,406 $30,840 LEGAL EXPENSES 7 LOTS @ $ 2,203 $15,420 ------------- TOTAL SELLING COSTS $46,260 -------------- NET REALISATION $1,495,740 PROFIT AND RISK 10.0% $135,976 -------------- FUNDS AVAILABLE FOR DEVELOPMENT $1,359,764 Less DEVELOPMENT COSTS WATER $9,000 SEWERAGE RETICULATION $33,000 ROADWORKS (Midstar Crt) $22,000 ROADWORKS (Kialla Lakes Drive) $20,000 ELECTRICITY $10,000 PUBLIC OPEN SPACE $7,000 ENGINEERING & SURVEY FEES $15,000 CONTINGENCIES 3.00% $3,480 ------------- TOTAL DEVELOPMENT COSTS $119,480 INT ON DEVELOPMENT20.00% $3,485 ANNUAL COSTS 7 LOTS @ $ 145 $1,015 INT ON ANNUAL COSTS20.00% $34 TOTAL COSTS $124,014 AVERAGE COST PER LOT $17,716 -------------- FUNDS AVAILABLE FOR LAND PURCHASE $1,235,750 Less INTEREST ON LAND 17.00% ADJUSTED FOR TIME 3.54% $42,269 Less rental income $17,042 $25,227 LEGAL & S/D PURCH 4.00% $45,903 $71,131 -------------- $1,164,619 ======= SAY $1,164,600" "CAPITALIZATION OF RENTAL LOT 1 RENTAL 370.0 M2 @ $97.50 $36,100 % of G.R. INSURANCE $600 1.66% MAINTENANCE $500 1.39% LAND TAX NIL 0.00% ---------- TOTAL $1,100 3.05% $1,100 ------------ 35,000 CAPITALISE @ 9% $388,889 ------------- MARKET VALUE SAY $388,900 ----------------------------------------------------------------------------------------------------- LOT 2 RENTAL 230.0 M2 @ $50 $11.500 % of G.R. INSURANCE $300 2.61% MAINTENANCE $500 4.35% LAND TAX NIL 0.00% ---------- TOTAL$800 6.96% $800 ------------ $10,700 CAPITALISE @ 10% $107,000 ------------ MARKET VALUE SAY $107,000 ----------------------------------------------------------------------------------------------------- LOT 4 RENTAL 464.5 M2 @ $80 $37,200 % of G.R. INSURANCE $600 1.61% MAINTENANCE $500 1.34% LAND TAX NIL 0.00% ---------- TOTAL$1,100 2.96% $1,100 ------------ $36,100 CAPITALISE @ 9% $401,111 ------------ MARKET VALUE SAY $401,100" 6 Attached to the subject valuation was a map which set out a proposed seven-lot plan of subdivision of the subject property ("the plan of subdivision") A copy of that map is appended to these reasons for judgment. 7 The loan application contained the following appended notes which were completed by Mr Fidler and were dated 4 September 1990: Referred to NAB by Sandhurst Trustees Ltd (STL) Dean has conducted borrowing accounts with STL for some 10 years and during that time has had an excellent history with them. Dean is part of a long established Shepparton family whose car parts/garage who have historically banked ANZ/Commonwealth. Current loan at STL ($675,000) was for land purchase/development of factoryettes. This has been completed and now Dean will subdivide into 7 lots. He will sell either lots 1 or 4 for $400,000 and clear C/Bill $375,000 within 12 months. Rental received from other property will be self funding until further lots progressively sold over longer term. Additional $100,000 is required for sub-divisional costs. Draw down of $100,000 – to be placed in cash management account and progressively paid out on production of invoices from Board of Works etc (Bank cheques payable to those bodies sent direct). All subdivisional approvals have been passed by appropriate government bodies. Cash flow indicates sale of block at $300,000 – (allows for worst). Strongly recommended due to past excellent history with STL. 8 The loan application was subsequently graded by the Bank as category A which meant that the amount of money to be lent by the Bank was not to exceed 75% of the valuation of the security provided by the borrower. In his witness statement, dated 31 July 1996, Mr Wakefield, the Assistant Regional Manager of the Bank, stated that he "tentatively approved the loan" on 11 September 1990 and, indeed, the loan application bore the stamp "APPROVED Assistant Regional Manager" and the date "11 SEP 1990". The loan application was subsequently approved as noted in an internal memorandum dated 13 September 1990 from Mr Wakefield to Mr Fidler. That memorandum was in the following terms: "Denis Dean Family Trust Denis Dean Nominees P/L – Trustee Your ALOC 8/90 is approved subject to the following. Approved copy of Plan of Subdivision to be held. Receipt of 1990 financials by 31/10/90. Trust Deed – Satisfactory perusal by Securities Services. Memorandum and Articles of Association Borrowing powers confined etc. Is there any chance of further developing collaterals even through Shepparton branch?? The garage appears to be trading quite profitably. We note that no guarantees are to issue. Close monitoring of payments for completed works will be required to ensure there is no overrun. We are pleased to see this referral from good customer Sandhurst Trustees Ltd Complete bottom Page 4 ALOC." 9 Mr Fidler wrote to "Brendan Kelly, c/o Stubbs Wallace & Partners" a letter dated 14 September 1990, which, I infer, was sent to Denis Dean's accountants, in the following terms: Re: APPLICATION FINANCES PROPERTY DEVELOPEMNT DENNIS K DEAN We are pleased to offer finance for Mr Dean's property development on the following basis: - 1.$400,000 – Fixed Term Interest Rate. Expires 30/9/93. 2.$375,000 – Commercial Bank Bill. Expires 30/9/91. Prior to proceeding the following will be required: - A) Approved copy of Plan of Subdivision. B) Receipt of 1990 financials (to be held by 31/10/90) C) Trust Deed to be perused by our State Securities Department. D) Memorandum and Articles of Association to be perused to confirm borrowing powers etc. A formal letter of offer will issue on receipt of the above, which will detail interest rates and terms. 10 Mr Fidler then wrote as follows to Denis Dean on 11 October 1990: "Re: APPLICATION FOR FINANCE PROPERTY DEVELOPMENT We advise details of the arranged finance below:- 1) $400,000 - Fixed Term/Fixed Interest – Expiry 30/9/93. As an indication only the current interest rate for this facility is 15.65%. 2) $375,000 - Commercial Bill - Expiry 30/9/91. As an indication only the current interest rate for this facility is 13.70% with a 2.00% activation fee. We attach Letter of Offer for Fixed Rate/Fixed Term Facility in duplicate for sealing where indicated on the last page of the offer. Please note the Interest rate has been left blank as Interest rate quoted require acceptance and draw down within 24 hours. Letter of Offer Bill Facility is also attached for your records. Interest on Bill Facility will be advised on draw down and each roll-over in letter form detailing Yield rate and discounted amount. Company search has been requested together with Title Search, upon receipt of the securities we will complete documentation and contact you to sign. After signing of documents we will be in a position to settle. As detailed in our letter dated 14th September, 1990 to your solicitors, we still require copy of approved Plan of Subdivision for our records." 11 The "Letter of Offer Bill Facility" ("the Bill Facility Offer"), referred to in the above letter, contained, relevantly, the following clause: 15 If an event of default occurs the Bank shall have the right to serve a notice of termination of the Facility on the Drawer. Upon service of such notice the Drawer's right to have bills accepted by the Bank shall terminate and all amounts payable hereunder including an amount equal to the aggregate face value of the bills accepted by the Bank hereunder which remain outstanding (notwithstanding that the maturity date of such outstanding bills have yet to occur) shall become immediately due and payable by the Drawer to the Bank. 12 "An event of default" was defined in clause 1 of the Bill Facility Offer as "an event under clause 14". 13 Clause 14 provided, so far as is relevant; During the term of the facility each of the following events and occurrences shall constitute an event of default: - (a) If the Drawer fails to pay the face value of any bill to the bank on the maturity date of such bill; (b) If the Drawer fails to pay on the due date any other amount payable hereunder; (c) If the Drawer defaults in the performance or observance of any term or condition of the Facility or of this Letter; (d) If any order for payment is made or judgement is entered or signed against the Drawer and the same is not satisfied within 7 days thereafter; (e) If, in the opinion of the Bank, the Drawer becomes unable to pay his debts, or the assets or position of the Drawer are not sufficiently maintained; (f) If the Drawer fails to make any payment when due, or within any applicable period of grace, in respect of any obligation for borrowed moneys or any such obligation shall, by reason of default on the part of the drawer, become due or capable of being declared due prior to its stated maturity; … (h) If at any time the Drawer should fail to pay to the Bank any moneys from time to time due and payable to the Bank pursuant to any other arrangement or facility, or fail to comply with any other provision of such arrangement or facility or the provisions of any security given to the Bank; 14 While the letter dated 11 October 1990, quoted above, from Mr Fidler to Denis Dean referred to a "Letter of Offer for Fixed Rate/Fixed Term Facility", that document was not tendered in evidence. However, I did not understand it to be disputed that a total loan facility of $775,000 was made available to Denis Dean and that the facility comprised a $400,000 "Fixed Term/Fixed Interest" loan to expire on 30 September 1993 and a $375,000 Commercial Bill facility to expire on 30 September 1991. It was also not in dispute that both the "Fixed Term/Fixed Interest Loan" and the Commercial Bill facility, to which I shall hereafter refer collectively as "the loan agreements", did not contain an overdraft facility. 15 It was also not disputed that the purpose of the loan from the Bank was to enable Dennis Dean to repay $675,000 owing under its existing loan from Sandhurst and to apply the balance of the loan, $100,000, to the subdivisional costs that would be incurred by Denis Dean in implementing the plan of subdivision of the subject property. It was also common ground that Denis Dean entered into a mortgage agreement with the Bank dated 26 October 1990 whereby the subject property became the security for performance of the loan agreements. 16 Settlement under the loan agreements was effected on 30 November 1990 and confirmed by letter dated 5 December 1990 and a cheque book and deposit book were issued to Dennis Dean in respect of the amount of $100,000 placed in an account with the Bank. It was also not disputed that, at that stage, the Bank had not requested a personal guarantee from the directors of Denis Dean or that no debenture charge had been agreed upon between the Bank and Denis Dean. 17 It was common ground that Denis Dean had not paid all the interest as it became due at intervals under the Commercial Bill facility and that the account was irregular on occasions through the rest of 1991. A further application for a line of commercial credit seeking a renewal of the Commercial Bill facility was submitted by Mr Fidler on behalf of Dennis Dean on 30 September 1991 together with a covering memorandum by Mr Fidler. That memorandum was in the following terms: We forward file info Denis Dean Nominees Pty Ltd seeking renewal of existing bank bill facility. Manager went to Shepparton to interview M Dean and the following was revealed: 1 .The property is not yet in sub-divisional stage. Additional $100,000 has been utilised as follows – i. $50,000 used to complete Deans Garage building on our security. ii. $13,000 paid to Water Board as deposits on works to be completed (purchase of material/pipes etc). iii. $12,000 set aside for new sandblasting building erection on our security. Planning permit approved and building permit to be applied for this month. Building to be erected on powder coating land. iv. $25,000 held in separate account. Utilised for cash-flow short falls. Account is not with NAB, but with ANZ. Originally Mr Dean was to sell a block to reduce/clear our commercial bill. Due to the property down-turn this has not been proceeded with and Dean now requests that $375,000 be allowed to extend for another two years. This request is mainly due to Dean wanting to concentrate on bis businesses. The powder-coating has now completed its first full year and has produced a good result. The Garage has obtained a "fluid-drive" franchise and this has increased business, together with a general increase in business at the Garage. Dean has indicated that other directors are loath to sign either guarantees or R.M.D. In view of the foregoing the writer would understand if we insisted on these being a requirement now, despite original approval not requiring same. 18 That application was rejected by the Bank and in September 1991 the account was referred to the Bank's regional office. 19 In September 1991 Mr Dean, as one of the directors of Dennis Dean, signed a guarantee in favour of the Bank but the other director, Mr Dean's wife, declined to do so. 20 By June 1992 the file related to Dennis Dean was referred to Mr Tibballs, the Bank's manager of legal services. On 5 June 1992 Mr Tibballs telephoned Mr Gough, a real estate agent based in Shepparton, to seek his assistance with respect to a potential sale of the subject property. On 24 August 1992, Mr Tibballs was instructed to start proceedings to recover possession of the subject property and to apply to have Denis Dean wound up. Denis Dean was ordered to be wound up early in 1993 and in March of 1993 the Bank obtained a Court Order for possession of the subject property. 21 Mr Tibballs wrote to Mr Gough a letter dated 9 March 1993 which contained this passage: We refer to our telephone conversation of 5 June 1992 and confirm that the Bank proposes to appoint your company as our selling agent to advertise and submit the property at Melbourne Road, Kialla to public auction in due course. 22 Mr Gough then advised Mr Tibballs as follows in a letter dated 18 March 1993: Further to your letter dated 9 March 1993, and our subsequent telephone conversations, set out hereunder is our report for your consideration. RE LEASE – STATEWIDE POWDER COATERS TO DENIS DEAN NOMINEES PTY LTD. When approached, Mr Dean advised he was seeking legal advice before responding. After some seven days, when contacted, he advised whilst he had made several verbal offers to the Bank and said as [sic] and the matter was complicated, he would not produce any written agreement. RE LEASE – DON SMALLGOODS Mr Tom Bartlett, Sales Manger, indicated the company were quite happy to continue "as is" RE LEASE – BILL RYAN AUTOMOTIVE PTY LTD. Mr Bill Ryan has advised he does not wish to enter into a lease as he feels his business would be better placed in a more central area such as Benalla Road. He would continue on a monthly basis until asked to leave or other premises are located. RE LEASE – SIMON E HEARD Mr Heard is in America but I have spoken to his father, who indicated he believed Simon was happy to continue the present leasing arrangements. We understand he holds a lease over Factory 5 until September '93 with an option period of a further 2 years and 6 months. He also leases Factory 4 on a monthly basis and appears to need that space to operate his business. RE CURRENT OCCUPATION – DENIS DEAN COMPANIES STATEWIDE POWDER COATERS, MELBOURNE ROAD Still holds some minor equipment and also some materials remain in the yard. The adjoining boundary fence has been opened to allow access to their new premises. In discussing this matter with Mr Dean, he advised he would clear all buildings and yard area prior to Easter '93. DEAN'S GARAGE, KIALLA LAKES DRIVE Still holds some minor equipment. PROPERTY REPORT 1. The property is currently held in one title. 2. We would recommend you attempt to arrange with both the Shire of Shepparton and Shepparton Water Board, an agreement for the purchaser to be held responsible for the completion of the following works within a certain time of their taking possession. A. The completion of the construction of Mid Star Court. B. The provision of a sewerage main to Mid Star Court and subsequent connection to the garage building on Kialla Lakes Drive. C. The connection of the sewerage service to those buildings from that main. We also recommend you contact Messrs. Carr McNamara & Muir, Consulting Engineers and Surveyors, 108 Wyndham Street, Shepparton, for a current assessment of the likely costs of subdivision. We would be better placed to have this information available to prospective purchasers than to have them guessing the likely costs or going to other advisers who did not have the information at hand. 23 The letter continued: RE: MARKET VALUE We have previously indicated to the District manager, Mr Michael Darcy, and Mr Sean Williams, KPMG Peat Marwick, a figure in the vicinity of $190,000 may have been obtainable. At that time we were lead to believe Dean would lease the Melbourne Road property at $13,000 and Ryan would lease at $11,000. Purchasers will now be offered either vacant premises, monthly tenancy and one minor lease, as well as the costs to complete required works estimated at $130,000. Accordingly, you may have to consider a market value of $100,000 being the figure at which the property would be sold. 24 In a letter to Mr Gough, dated 2 April 1993, the Bank confirmed that it did not propose to complete a subdivision of the subject property, and again confirmed that it wished to appoint Mr Gough as its selling agent for the mortgagee's auction of the subject property to be held on 4 June 1993. 25 In a letter dated 8 April 1993 to the Bank, Mr Gough observed: RE MARKET VALUE The $100,000 estimated in my letter of 18 March was based on a sale whereby a purchaser is to take the property subject to agreements 2 and 4 of that letter. In relation to outstanding requirements of the Water Board and Shire, it is most difficult to make a recommendation of value with those works completed but we surely could assume those costs could be added to the $100,000 estimated market value. 26 The Shire of Shepparton wrote to Mr Gough a letter dated 21 April 1993 which included the following passages: Council considered the matters contained in the letter and resolved to receive the letter and advise you that: - (a) Council agrees to the requested 6 months moratorium on the requirement for the construction of the balance of Midstar Court, subject to the lodging of a Bank Guarantee to the value of $50,000 by the purchaser. (b) Council confirms that if the street is not constructed within 6 months, it would intend to arrange the construction and debit the cost to the Bank Guarantee. 27 The contract of sale of the subject property contained, amongst others, the following "special condition": 17. 17.1 The Purchaser agrees to assume all responsibility for the completion of the outstanding sewerage construction works and road works required by the Shepparton Water Board and the Shire of Shepparton respectively. In particular and without limiting the generality of the foregoing, the Purchaser agrees to provide Bank Guarantees for $85,000 and $50,000 to the Shepparton Water Board and Shire of Shepparton respectively as per their attached letters of 8 April 1993 and 21 April 1993, copies of which are annexed to this Contract. 17.2 The Purchaser further agrees to indemnify and keep indemnified the Vendor from and against all or any loss or damage the Vendor may suffer as a result of the Purchaser failing to observe and comply with the requirements of the Shepparton Water Board and the Shire of Shepparton in respect of the completion of the sewerage works and road works. 28 The "Vendor's Statement To A Purchaser Pursuant to Section 32 Of The Sale Of Land Act 1962" stipulated, so far as is relevant, in sub-cl 1.2: The Vendor sells the property as registered mortgagee in exercise of the power of sale conferred by the Transfer of Land Act 1958. Attached to this Statement is evidence of the Vendor's right or power to sell the property, namely copies of: - Mortgage No. R167772X Demands dated 12 August 1992 upon the mortgagor named in the Mortgage which were posted on 17 August 1992 and have not been met. 29 The "demands" referred to in sub-cl 1.2 were in the following terms: "DENIS DEAN NOMINEES PTY LTD of 158a Welsford Street SHEPPARTON 3630 In the State of Victoria AND to all others whom it may concern NATIONAL AUSTRALIA BANK LIMITED ACN 004 044 937 whose registered office is situate at 24th Floor 500 Bourke Street Melbourne in the State of Victoria (hereinafter called 'the Bank') HEREBY DEMANDS of you the said Denis Dean Nominees Pty Ltd the immediate payment of all the moneys now owing to the Bank at its Bendigo Branch by you the said Denis Dean Nominees Pty Ltd on the security of Instrument of Mortgage bearing date the Twenty sixth day of October one thousand nine hundred and ninety made between you the said Denis Dean Nominees Pty Ltd of the one part and the Bank of the other part and registered in the Office of Titles Number R167772X. The amount of the said indebtedness on Account No 04-996-9947 on the Twelfth day of August one thousand nine hundred and ninety two was FOUR HUNDRED AND THIRTY FIVE THOUSAND SEVEN HUNDRED AND TWENTY FOUR DOLLARS AND NINETY TWO CENTS together with interest and bank charges details of which are available on application from the Bendigo Branch of the said Bank. The amount of the said indebtedness on Account No 95-926-9018 on the Twelfth day of August one thousand nine hundred and ninety two was FOUR HUNDRED AND TWENTY ONE THOUSAND FOUR HUNDRED AND NINETY DOLLARS AND SIXTY ONE CENTS together with interest and bank charges details of which are available on application from the Bendigo Branch of the said Bank. If you fail to comply with this Demand the Bank may sell the mortgaged land. DATED this Twelfth day of August one thousand one hundred and ninety two In the name and for and on behalf of NATIONAL AUSTRALIA BANK LIMITED ACN 004 044 937" 30 The auction eventually took place on 18 June 1993. In his witness statement dated 31 July 1996, Mr Gough gave this description of what happened at the auction: 12. On the day of the Auction about 12 people attended as spectators or purchasers. I believe that 3 people were interested in purchasing: Chris Reardon, Russel Shellie, Maurice from Tatura and Elaine Cowley. I had been instructed by the Applicant that the "Reserve" was the sum of $100,000. In the lead up to the auction Shellie asked me a question about the Road and Sewerage guarantee. I telephoned the authorities. I was advised that the guarantees would only be required in the event the purchaser was proceeding with the subdivision which had been proposed for Dean's land. All in attendance were informed by me of the conversation prior to the auction commencing. 13. I have no written record of the bidding at the auction. I remember the bidding started at $70,000 with a bid from Russel Shellie. The bidding closed at $90,000. I then called Russel Shellie over as the highest bidder. I told him the property was for sale at $110,000. He agreed to pay that price and the property was accordingly sold to him. 31 By its application to this Court the Bank seeks damages pursuant to s 52 and s 82 of the Trade Practices Act 1974 (Cth), and damages within this Court's accrued jurisdiction pursuant to s 11,17 and 37 of the Fair Trading Act 1985 (Vic) and for breach of duty and negligence at common law. 32 In its submissions, the Bank pointed first to the statement in the subject valuation that "the valuation has had regard for market trends and demands and comparable sales." It was contended that this statement was misleading and deceptive as, if the Bank's evidence were to be accepted, the respondent could not, in making the subject valuation, have had regard to market trends and demands and comparable sales. Rather, the Bank submitted, if the respondent had paid regard to market trends and demands and comparable sales, the valuation of the subject property would have been "a fraction" of what it was. The Bank further contended that the valuation by the respondent was a "gross inaccuracy" and that this of itself was misleading and deceptive. 33 It was further submitted, on behalf of the Bank, that the respondent owed a duty of care to the Bank in relation to the subject valuation and that the respondent had been in breach of that duty of care as a result of which the Bank suffered loss and damage. 34 I did not understand it to be disputed that the respondent in making the subject valuation had applied what was variously termed a "Hypothetical or Notional Subdivision" or "Turner" method of valuation. (I shall hereafter refer to this method as "the Turner method"). Again it appeared to be common ground that, in applying the Turner method, land is notionally subdivided into proposed lots of subdivision, which are then valued separately. The valuation ascribed to the proposed subdivision thus becomes the aggregate of the values attributed to each of the individual proposed lots of subdivision. It also did not appear to be in dispute that valuation of a proposed lot of subdivision upon which an existing building is located, can be achieved by "capitalising" the rental value or net rental return of that building. 35 It will be recalled that the plan of subdivision of the subject property consisted of a notional seven-lot plan of subdivision. Only lots 1, 2 and 4 on the plan of subdivision had existing buildings erected on them. 36 The building on lot 1 on the plan of subdivision was, at the relevant date, leased to what was referred to in evidence as a business known as "Statewide Powder Coaters" (I shall hereafter refer to this building as the "Powder Coaters building"). The Powder Coaters building was, at the relevant date, occupied by Mr Dean, who carried on the business of Statewide Power Coaters and was leased from Denis Dean at a rental of $36,000 per annum or the equivalent of $97.50 per m2. The Powder Coaters building was located at the corner of Midstar Court and a service road with access to the Melbourne Road. It had an overall area of 355 m2 comprising a 145m2 brick office section in front of a 210 m2 workshop. It also had a frontage to a service road to the Melbourne Road of approximately 40 metres and was described in the subject valuation in the following terms: Office and Workshop Erected on the front portion of the land is a brick office and workshop complex. The office consists of approximately 151 square metres and is constructed of brick walls, concrete floor and steel deck roof. Attached to the rear of the office is an R.S.J. portal framed workshop containing approximately 219 square metres. This building is of recent construction and is in very good condition and has been well maintained. It is currently occupied by Statewide Powder Coaters. 37 Lot 2 on the plan of subdivision occupied an area to the east of lot 1 with access to Midstar Court. The subject valuation stated that "the building on Lot 2 is currently let at $11,5000 per annum." That rental equated to $50 per m2. However, the subject valuation continued " the factoryettes have a total rental of $10,400 per annum." It was not disputed that at the relevant date the building on Lot 2 referred to in the subject valuation as "let at $11,500" was a building leased, to "Ryans" and was referred to in evidence as "Ryan's shed". (I shall hereafter refer to the building as "Ryan's shed"). That building was described in the subject valuation in the following terms: Workshop Also erected on the land is a brick and R.S.J. portal frame workshop containing a total area of 229.4 square metres. This building is also in very good condition and has been well maintained. It is currently occupied by Ryans. 38 It will be recalled that the subject valuation indicated that, in relation to lot 2, "...the factoryettes have a total rental of $10,4000 per annum.". The subject valuation described that building in the following terms: Factoryettes Also erected on the land is a set of five factoryettes containing a total area of approximately 350 square metres. The building is generally sound and is constructed of steel frame and galvanised iron cladding. 39 It was not clear, however, particularly in the light of the value ascribed to it in the subject valuation, whether lot 2 on the plan of subdivision comprehended both "Ryan's shed" and "the factoryettes". Nevertheless, it emerged in evidence that lot 2 on the plan of subdivision included both "Ryan's shed" and "the factoryettes". 40 The third lot on the plan of subdivision on which an existing building was erected was lot 4 which was located at the southern end of the subject property adjacent to a road known at the relevant date as "Kialla Lakes Drive". The building on lot 4 was described in evidence as "Dean's Garage". (I shall hereafter refer to this building as "Dean's Garage"). The subject valuation stated that the building "is currently owner occupied and has a market rental of $37,200 per annum." That rental was the equivalent of $80 per m2. Dean's Garage was described in the subject valuation in the following terms: Office and Show Room Recently erected on the land is a tilt concrete frame and galvanised iron roof workshop and showroom, containing approximately 464 square metres. The building has a reinforced concrete floor, tilt concrete walls, galvanised iron roof, aluminium framed glass windows at the front and has been set up as a garage service centre and spare parts. It is in very good condition. 41 In accordance with the principles governing the application of the Turner method, Mr Hann, the maker of the subject valuation and a director of the respondent, calculated what he termed the "net market rentals" for each of lots 1, 2 and 4 on the plan of subdivision. Those rents were then "capitalised" in order to produce a valuation. The capitalisation rates applied by Mr Hann with respect to lots 1, 2 and 4 were 9%, 10% and 9% respectively. The subject valuation set out the calculation as follows: "CAPITALIZATION OF RENTAL LOT 1 RENTAL 370.0 M2 @ $97.50 $36,100 % of G.R. INSURANCE $600 1.66% MAINTENANCE $500 1.39% LAND TAX NIL 0.00% ---------- TOTAL $1,100 3.05% $1,100 ------------ 35,000 CAPITALISE @ 9% $388,889 ------------- MARKET VALUE SAY $388,900 ----------------------------------------------------------------------------------------------------- LOT 2 RENTAL 230.0 M2 @ $50 $11.500 % of G.R. INSURANCE $300 2.61% MAINTENANCE $500 4.35% LAND TAX NIL 0.00% ---------- TOTAL$800 6.96% $800 ------------ $10,700 CAPITALISE @ 10% $107,000 ------------ MARKET VALUE SAY $107,000 ----------------------------------------------------------------------------------------------------- LOT 4 RENTAL 464.5 M2 @ $80 $37,200 % of G.R. INSURANCE $600 1.61% MAINTENANCE $500 1.34% LAND TAX NIL 0.00% ---------- TOTAL$1,100 2.96% $1,100 ------------ $36,100 CAPITALISE @ 9% $401,111 ------------ MARKET VALUE SAY $401,100" 42 In the subject valuation the market values and time frame for development of all seven lots on the plan of subdivision were: TIMINGS: -LEAD IN: 1.0 MONTHS SELLING: 3.0 MONTHS DEVELOPMENT: 2.0 MONTHS TOTAL: 4.0 MONTHS LOT 1 $388,900 LOT 2 $107,000 LOT 3 $80,000 LOT 4 $401,100 LOT 5 $85,000 LOT 6 $80,000 BALANCE $400,000 GROSS REALISATION 7 LOTS @ AVERAGE$220,286 $1,542,000 43 It will be recalled that Lots 3,5,6 and 7 on the plan of subdivision had no existing buildings erected on them. As appears from the figures just quoted, they were valued by Mr Hann at $80,000, $85,000, $80,000 and $400,000 respectively. 44 It seems also to be undisputed that, in accordance with the principles ordained by the Turner method, Mr Hann had made deductions from the gross projected realization for the notional selling costs that would be incurred in developing the subject property in accordance with the plan of subdivision. He then deducted 10% for what was described as "PROFIT AND RISK" leaving a balance of $1,359,764 which he described as "FUNDS AVAILABLE FOR DEVELOPMENT" 45 It appears as well to be common ground that it accorded with the principles applicable to the Turner method for the costs incurred in the development of the plan of subdivision to be deducted from the net funds available for development The subject valuation set out the balance of the calculation as follows: FUNDS AVAILABLE FOR DEVELOPMENT $1,359,764 Less DEVELOPMENT COSTS WATER $9,000 SEWERAGE RETICULATION $33,000 ROADWORKS (Midstar Crt) $22,000 ROADWORKS (Kialla Lakes Drive) $20,000 ELECTRICITY $10,000 PUBLIC OPEN SPACE $7,000 ENGINEERING & SURVEY FEES $15,000 CONTINGENCIES 3.00% $3,480 ------------- TOTAL DEVELOPMENT COSTS $119,480 INT ON DEVELOPMENT20.00% $3,485 ANNUAL COSTS 7 LOTS @ $ 145 $1,015 INT ON ANNUAL COSTS20.00% $34 TOTAL COSTS $124,014 AVERAGE COST PER LOT $17,716 -------------- FUNDS AVAILABLE FOR LAND PURCHASE $1,235,750 Less INTEREST ON LAND 17.00% ADJUSTED FOR TIME 3.54% $42,269 Less rental income $17,042 $25,227 LEGAL & S/D PURCH 4.00% $45,903 $71,131 -------------- $1,164,619 ======= SAY $1,164,600" 46 Accordingly, the subject valuation ascribed to the subject property at the relevant date a value of $1,164,600. THE EVIDENCE 47 In support of its contention that the respondent had been in breach of s 52 of the Trade Practices Act and liable for breach of duty and in negligence, the Bank relied upon the evidence of two witnesses, Mr Baylis and, Mr Wheeler. 48 (i) Mr Baylis's evidence Mr Baylis ("Baylis") was a registered valuer for NSW and Victoria who carried on business in Shepparton. He had been a valuer for approximately 20 years, including four years as the City Valuer for Shepparton. He had been engaged by the Bank to prepare a valuation of the subject property as at the relevant date ("the Baylis valuation") and much of his oral evidence mirrored the evidence contained in the Baylis valuation. The Baylis valuation ascribed to the subject property at the relevant date, a value of $365,000. 49 Baylis described the subject property as land that was "typical of that portion of Melbourne Road". He stated that the land was immediately to the south of the Broken River and that, consequently, the area occupied by the subject property, which he described as "relatively low", was prone to flooding. He noted that the area had been "slow to develop in relation to other areas of Shepparton because substantial areas of that land [were] subject to flooding". 50 Baylis confirmed the evidence in the subject valuation that the subject property was in two zones for planning purposes. The section with frontage to the service road of Melbourne Road was zoned "Highway Commercial/Industrial". The balance of the land was zoned "Industrial A" and Baylis observed that over the top of a portion of that Industrial A land was a flight path control zone preserving access to the nearby Shepparton Aerodrome. 51 Baylis stated that the existence of a flight path control zone over the subject property would limit the height and type of building that could be constructed within the control zone. By way of example of the effects of that restriction, he indicated that it would preclude the erection of a grain handling facility which might attract birds to the area of the control zone. 52 Baylis described the land zone "Highway/Commercial" as permitting a mixture of commercial and industrial uses such as showrooms, warehouses and factories but he stated that land zoned in that way was not suitable for retail outlets "such as you would find in a CBD district". 53 The Baylis valuation had not adopted the Turner method but had instead been made "on the basis of capitalisation of estimated net rental value plus an amount for the unused land, then checked by a summation approach." 54 The Baylis valuation contained this comment: Given the nature of the property and the obvious poor state of the industrial market it is considered inappropriate to use a Hypothetical Subdivision or Discounted Cash Flow Approach to this property. The basic premise of such an approach is that there is demand for subdivided lots at such a price to cover development and holding costs as well as return a reasonable profit. We are unable to support such a premise as all available evidence is to the contrary. 55 In the course of his evidence, Baylis was asked by Mr Watkins of Counsel for the Bank whether the Turner method was an appropriate one to adopt in valuing the subject property at the relevant date. 56 Baylis replied: "Well, it comes down to a valuer's interpretation. It is not the approach which I took but that's not to say it was not the right approach but in saying that I only just point out that the Turner approach or the hypothetical subdivision approach – so just by its very name brings in many assumptions and of course the more assumptions you bring in the more likely error can occur." 57 In relation to the Powder Coaters Building on lot 1 on the plan of subdivision, the Baylis valuation observed: At July 1990 we believe the rental value of the property would have been $17,050 per annum plus rates although we note the property was apparently leased through related parties at an excessively high rental of $36,000 per annum. There is a lot of evidence confirming that the $36,000 pa was not a market rental 58 In relation to the building known as Ryan's shed, the Baylis valuation observed: Building 3 was occupied at July 1990 by a transport operator (Ryan's). The tenant has now vacated but was apparently paying $11,500 per annum but market rental is considered to have been $10,400 per annum. 59 It was Baylis's evidence that, despite the presence of the Melbourne Road, the area of Shepparton south of the City, in which the subject property was located, had been much slower to develop than what he described as the "area around Benalla Road". The Benalla Road area was, in Baylis's opinion, a much more desirable part of Shepparton and he referred, in this context, to what he termed "NZ Hydraulics" which had relocated from the "Melbourne Road area" to an area "just off Benalla Road." 60 Baylis stated that, although the area of Shepparton around Benalla Road was, in his opinion, much more desirable than the area in which the subject property was located, the average rental return for industrial property in the area around Benalla Road was between $43 and $44 per m2. In this context, he referred to what he described as " "the McNeil development" in Benalla Road, Shepparton." That property, according to Baylis, consisted of two buildings one of which, at the relevant date, had been leased to "Insulco" for $26,000 per annum, or the equivalent of $43 per m2. The other had been leased to "Shepparton LP Gas" for the equivalent of $43-$44 per m2. 61 It was his opinion therefore, that the rents attributed in the subject valuation to the existing buildings on the subject property were excessive. In this context, he assessed the market rent for Dean's Garage to be no more than $45 per m2. 62 Likewise, he noted that the value ascribed by the subject valuation to Ryan's shed had been $50 per m2. However, he discounted the rental for Ryan's shed to $10,400 p.a. or $45.22 per m2, on the basis that the building had poor toilet facilities, was unsewered and not separately fenced and was located on the side road, Midstar Court, which at the relevant date had not been completely formed. He did, however, accept that his valuation was within 10% of the rental being paid by the tenant and was "at the higher end of that range", while doubting whether rental of $11,500 would have been achievable had the property been put on the rental market at the relevant date. 63 Baylis also stated that, notwithstanding that it had a 40 metre frontage to the Melbourne Road, a correct market rental for the Power Coaters building would have been $17,050 which, as I understand the calculations, computes at $46.08 per m2. Although it was apparently common ground that the tenant of that building was, at the relevant date paying a rent of $36,000, Mr Baylis regarded that rent as excessive and as explicable because of the substantial identity of the landlord and tenant or other reasons attributable to that relationship. 64 In addition to the properties located in the area around Benalla Road, Baylis also had regard to what he described as "the Harris building" located north of the subject property adjacent to Melbourne Road which returned a rent of $41 per m2, the "Jetco property" in Midway Place (returning $47.50 per m2) and "Grant Court" (returning $42.09 per m2). It was his evidence, however, that the "Jetco" property, although returning a slightly higher rental than the others he referred to, was a substantial property with good facilities. 65 Baylis also referred to what he called "the Laminex property" in North Shepparton. That consisted of a brick office and a high clearance factory and, according to Baylis, had been let at rent of $48,000 per annum. Reference was made in the same way to "Cartwright's", a property on the Melbourne Road, located to the north of the subject property. That property, was described by Baylis as comprising "a number of smaller showroom type buildings, a display yard and a house." According to Baylis, the showroom portion had been let at the equivalent of "just over $40 per m2." Baylis continued "we also had in the same complex a 204 square metre building occupied by 'Novus Windscreen Repairs' which was leased at…$42 per square metre" It was Baylis's evidence that Dean's Garage was located on a side road whereas some of the properties to which he had reference such as the "McNeil property" had main road frontage. 66 Baylis stated that he also taken into account the properties located on "the Drive-in site". This was a substantial property with a frontage of approximately 400 metres to the Melbourne Road, located nearer to the City and on the opposite side of the Melbourne Road from the subject property. One building on "the Drive-in site" described as the "Comalco building" had been let on a long lease to a large company and was returning a rental equivalent of $44.5 per m2. 67 Baylis then gave evidence about the factoryettes, stating: "…there's four smaller units or occupancies, plus one larger one. Now the exact sizes I haven't got because I couldn't get into the smaller ones because they were locked up. But based on evidence of rentals – rentals of storage sheds…which is what they are – central industrial area ranging generally I say $60 to $75 per week at that stage for the concrete slab type units. Now this building being a lesser standard, I think the basis which I used was that $35 per week and $60." 68 Baylis had initially assessed the balance of the undeveloped land on the subject property, which constituted lot 7 of the plan of subdivision, as having a market value of $35,000. When asked by Counsel for the Bank how he had arrived at that figure, Baylis stated, so far as is relevant: "Well it was taken on the basis that given the amount of filling required on that land, the land is quite low. There's already some filling dumped on that land, but it required additional filling before any development could occur on it. It required services to be provided and given the state of the industrial market at that stage, in my view it was not economic… or feasible to do any development on that land at that point of time. And so a notional value was assigned to that land…taking into account…what a prospective purchaser would be prepared to pay for…the property…because that land was attached. And the view that I took was that a lot of people…would not want to be involved with it, given the cost of development. They would have been…just as happy just having the industrial buildings as they were…without having the…additional land. And so a notional value was…attached to…that land of $35,000…" 69 However, it emerged in the course of Baylis's evidence that he had been unaware of the existence of lots 5 and 6 on the plan of subdivision. Accordingly, in Baylis's view, the consequent reduction in the area of the balance of the land required him to attribute to it a value of $25,000 instead of his initial valuation of $35,000. 70 Although it was clear from his evidence that Baylis had not adopted the Turner method in valuing the subject property, he was invited by Counsel for the Bank to indicate how his assumptions would affect the application of the Turner method in order to provide a basis for comparing his valuation with the subject valuation. 71 It was Baylis's view that the four month period referred to in the subject valuation as the appropriate period for the development and sale of the seven proposed lots was too short. He asserted that, having regard to the demand for industrial property in Shepparton at the relevant date, twenty-four months would have been a more realistic period to allow for developing and selling all seven proposed lots. He also considered it appropriate to deduct between 20% and 25% for profit and risk rather than the 10% allowed in the subject valuation. 72 Baylis also gave evidence with respect to the capitalisation rates applied to the net rents imputed in the subject valuation to lots 1,2 and 4 on the plan of subdivision. I did not understand it to be disputed that the capitalisation rate applied to the rent of a property is in inverse proportion to the demand for that property. Baylis, however, considered that the capitalisation rates adopted in the subject valuation for Lots 1,2 and 4 did not accurately reflect the market for industrial property in Shepparton at the relevant date. In his opinion, at the relevant date, "in Shepparton, 10% would be regarded as an average on a good property" 73 Baylis referred specifically to two properties which he thought could have been regarded as "blue chip" properties in that they had "good tenants, national tenants, on long-term leases". The first, which he described as "the Boral property", had attributed to it a capitalisation rate of 10.49% and the second, "the Laminex property" had a capitalisation rate of 11% "on a new six year lease". 74 In Baylis's assessment a capitalisation rate of 10% rather than 9% would have more accurately reflected the demand for lot 1. Baylis valued lot 1 at $160,000 which he said in evidence had been confirmed by the fact that "Lot 18, Mercury Drive in the Solar City Estate was sold for $158,000 in June 1990 for a larger building." 75 In relation to lot 2, Baylis considered that the capitalisation rate should have been 11%, and not the 10% ascribed by the subject valuation. Baylis valued lot 2 at $167,000, which was $60,000 more than the valuation attributed to it in the subject valuation. In arriving at his figure, Baylis had assumed, correctly it seems, that lot 2 had included both "Ryan's shed" and the "the factoryettes". 76 For lot 4, Baylis adopted a rental value of $20,000 per annum and applied a capitalisation rate of 10% to produce a valuation of $189,000. 77 Baylis acknowledged that in relation to the development costs included in the subject valuation, he did not have exact figures because "I didn't believe that was the appropriate approach to follow. I've only done that as a quick calculation in response to your question." However, he accepted that, adopting the Turner method in valuing the subject property and applying his figures rather than those of Mr Hann, an accurate valuation of the subject property would have been $380,000. 78 Baylis also gave evidence about the demand, at the relevant time, for subdivided lots of industrial property in Shepparton, indicating that the market at the relevant time was not strong and that the market "had turned in late 1989". He accepted that some industrial development had been taking place at the relevant date and referred specifically to "the Telford development" where the developer had what Baylis described as "a sizeable backing behind him". Baylis further considered that Mr Telford "was in a position of being able to carry a subdivision and be able to compete on price to any opposition which did start up". 79 Baylis, however, also referred to a development known as "Solar City Industrial Estate" in Mercury Drive, Shepparton which had consisted of ten lots which had been put up for auction in October 1989 because of a lack of demand by prospective purchasers. Baylis stated that there had been no bids for nine of the lots. Moreover, he indicated that, as between "Solar City" and the proposed lots of subdivision on the subject property "…I think it would be reasonable to say that they were quite comparable". 80 Baylis also referred to the "McNeil development", to which reference has already been made in connection with industrial rental properties. From personal experience gained in valuing the McNeil development for a bank, Baylis claimed that, while the developer had constructed two buildings which had been finished in 1990, "he did not proceed with the remaining buildings because of the economic climate" 81 Baylis then gave evidence about other industrial sales to which he had referred in assessing the market for industrial property at the relevant time. These included "a substantial industrial complex" of 2.7 hectares "in Wheeler Street owned by Arnott's" which sold in May 1988 for $1.58 million. He also referred to "a property known as "Kreskas" of 1.81 hectares which sold in April 1990 for $920,000. It was Baylis's evidence that the purchaser of this latter property had "lined up, prior to the auction the SPC Ltd, the local cannery, to lease two thirds of the building" which the purchaser hadnot required for his own trucking business. 82 Baylis also referred in this context to the 'Drive-in Site", to which reference has already been made in relation to industrial rental property. This property, it will be recalled, was located adjacent to the Melbourne Road nearer to the City than, and on the opposite side of the Melbourne Road from, the subject property. This property had been sold in March 1990 for $1.25 million. Baylis gave evidence that, in preliminary discussions about the valuation of the Drive-In Site before it was auctioned, he had valued it at substantially less than its eventual selling price but that the owner of the adjoining land, identified as "Mr Taig" had been anxious to acquire the site because of, amongst other things, its 215.97m frontage to the Melbourne Road. It was Baylis's evidence that at the auction, there had been a couple of serious potential buyers who expressed interest and that this had pushed the price up. 83 In this context, Baylis again referred to "Cartwrights" north of the subject property and with a frontage to the Melbourne Road of 113.3 metres which had been put up for auction in October 1989 but failed to sell and was later sold by private treaty in July 1990 for $525,000. 84 Baylis also referred to a property which he called "the Lemnos Cool Store". That property had an area of approximately eight hectares and contained cool stores and a number of warehouses and was sold in July 1990 for $1.7 million. In his evidence Baylis invoked two other sales which had occurred in 1987, the first being of "the Keatings property" for $120,000. That property he described "an old property, timber framed property with an asbestos roof which did not have highway frontage and was "further out" of Shepparton. Secondly, he referred to the property known as "the Laminex building", sold in December 1987 for $435,000 and to which reference has earlier been made in the context of industrial rental property. 85 Baylis gave evidence about lots 3, 5 and 6 of the subject property which, it will be recalled, had, at the relevant time, no existing buildings erected on them. In the subject valuation those lots had been assessed as having a value of $80,000, $85,000 and $80,000 respectively. However, Baylis discerned from the plan that lots 5 and 6 had frontages, not directly to Kialla Lakes Drive, but to a service road instead. Baylis valued all three lots at $50,000 each. 86 Baylis also referred to other matters to which he had had regard in assessing the market for industrial property in Shepparton at the relevant date. He instanced a property which he had valued which had later, in December 1990, been revalued downwards by the Valuer-General's Office as "market conditions had changed". He referred, as well, to a newspaper article in the local Shepparton newspaper which contained a report dated 13 December 1989 related to the "Drive-in site", to which reference has already been made. Baylis stated that the "Drive-in site" had been offered to the Shepparton City Council because the proprietor had been experiencing difficulty in "marketing this property". However, the newspaper report continued: The Council has, however, decided not to take up this offer, nor for another parcel of land, after the city valuer reported that the prices were too high. And the city valuer, G. Wetherley, said in his report there had been a low demand for industrial land in the past 18 months to two years. 87 Baylis next intimated that there had been "other proposals which had…got to the planning stage and then faltered." He continued: "There were two such properties, one was known as Wong's Land, which was…on the south east corner of Doyles Road and Benalla Road. There was a parcel of land where a planning permit had been issued in…April 1989 for a 19 lot subdivision in three stages, industrial lots of varying sizes but on average around about the 2000 square metre size blocks. That planning permit was taken out and then nothing proceeded with it. Work was not done and…nothing else has happened to that land since. There was another development in north Shepparton in Wanganui Road which…was known to me as Tomaise's land. Once again I was involved in doing a valuation for a bank on this property. It's a property of 6.05 hectares, industrial zone land. It's a property where a planning permit had been issued for a subdivision into 13 industrial lots and the developer, a Tomaise…was the owner of the block, and had decided that industrial development was the way to go and started carrying out development work on his land. He put in a retardation basin and the start of some of the services before the mortgagee took possession. The property created all sorts of difficulties in trying to market. It was first put up for sale in 1988 as a mortgagee sale, passed in with no bid. It was taken off the market, put back on again in June 1989 and passed in at $277,500 and at that stage the estimated cost to complete the sub-division…worked out by the local engineers and surveying company…was $500,000…The property… sold later that month for $180,000. The purchaser has not done anything to the property apart from completing the building on the land. There is a part-completed industrial shed. He has not attempted to do any industrial subdivision on that land as of this date." (ii) Mr Wheeler's evidence 88 Mr Wheeler ("Wheeler"), who was called to give evidence by the Bank, described himself as a "valuer, property consultant" and had prepared a valuation report of the subject property at the relevant date. In Wheeler's opinion the correct valuation of the subject property at the relevant date was $400,000. It was his opinion that the market rents adopted in the subject valuation for the existing buildings erected on lots 1, 2 and 4 on the plan of subdivision were not appropriate. It followed, therefore, in Wheeler's opinion, that to capitalise those rents would not produce an accurate valuation of the subject property. Instead Wheeler ascribed a "per square metre value" to each of the buildings erected on the developed lots and allowed $30,000 per square hectare for the balance of the land, yielding a value of approximately $60,000. 89 Wheeler did, however, provide to the Court a document which he had produced which was headed "Valuation Based On Mr Hann's Methodology But With Amended Rental Values, Site Values And Other Factors." That document, which applied the Turner method, valued the subject property at $375,000. It also accepted Baylis's assumption that it would have taken up to two years to develop and sell all seven lots on the plan of subdivision. 90 That document disclosed as well that Wheeler had valued lot 7 at $100,000 which was $40,000 more than the assessment of $60,000 which he had proposed earlier in his evidence. Moreover, Wheeler regarded the allowance for "profit and risk" in the subject valuation of 10% as conservative. In his opinion, a more appropriate figure would have been 20%. He also considered that a more appropriate capitalisation rate for each of lots 1,2 and 4 of the plan of subdivision would have been 10%, 11% and 11% respectively. 91 Much of Wheeler's evidence mirrored that given by Baylis. For example, he shared the latter's opinion that the rent for the Powder Coaters building and Dean's Garage did not reflect what could have been obtained in the rental market at the relevant time for those properties. However, it is to be noted in this context that the market rent which Wheeler attributed to lots 1, 2 and 4 computed at $35, $30 and $30 per m2 respectively, which were lower than the values assessed by Baylis. Wheeler and Baylis also drew on many of the same properties for evidence of comparable sales. As well, Wheeler reiterated the opinion that the Benalla Road area of Shepparton "had more industrial activity". 92 Wheeler stated that, although the airport runway approach passed over some of the subject property, he did not regard that as "likely to be particularly onerous in terms of development of that land". He considered that there had been a "remarkable fall" in the values of property in rural Victoria and in Melbourne "in the early 1990's" a decline which, by the relevant date, had commenced in Shepparton. In the course of his evidence, Wheeler produced a document headed "Shepparton – Industrial Sales" which itemised various sales of industrial property in the Shepparton area. That document examined four industrial developments in the Shepparton area which were designated respectively "the Grant Court Estate", "the Solar City Industrial Estate", "McNeill's Estate", and the "Telford Estate-Drummond Road." The same document, amongst other things, recited: "The evidence indicates that demand for industrial land was slackening by 1990. Only Drummond Road properties were selling at prices from $32 per m2 to $41 per m2" 93 In oral evidence, Wheeler stated that he had no doubt that the decline had started "probably in August, September, October 1989." (iii) Mr Hann's evidence 94 Mr Hann ("Hann") is a qualified valuer and was, at the relevant date, the contract Shire Valuer for the Shire of Shepparton. He was also a director of the respondent and had prepared the subject valuation on 6 August 1990 as well as having prepared previous valuations on instructions from Mr Dean. 95 Hann accepted that the reference in the subject valuation to "AREA:2.684 HA." incorrectly indicated the area of the subject property but denied that the error affected his calculations or the resultant subject valuation. Hann acknowledged that the rental of $97.50 per m2 for the Powder Coaters building was "slightly higher than some of the others but it was a…better presented property, certainly than the McKay Refrigeration one." He concluded that it was "a reasonable rent." However, he later conceded under cross-examination that the rental of $97.50 per m2 for "the Powder Coaters building" was "certainly very high" and that he had not made any allowance for the fact that Denis Dean was, in effect, both landlord and tenant of that property. 96 In relation to Dean's Garage on lot 4, Hann testified that the building was newer and better than the Powder Coaters building, and it was situated on Kialla Lakes Drive. He believed the rental for that property and for both Ryan's shed and the factoryettes was "totally appropriate for that property." 97 In this context, Counsel for the respondent referred Hann to a document, prepared by Hann himself, in the following terms: "SHIRE OF SHEPPARTON RENTALS 1990 RE-VAL PROPERTY LAND M2 BUILD M2 RENT PER M2 FINCO SHOP 1740 149 $47,786 $320.71 FINCO OFFICE 400 218 $23,248 $106.64 HARRIS RAD 1000 371 $15,375 $41.44 WILMAC 1320 180 (255) $13,645 (14,400) $75.81 (56.47) BYFORD 1150 352 $17,234 $48.96 EMBEE 475 210 $13,828 (13,560) $65.85 (54.57) JETCO 700 211 $10,037 $47.57 MERCARROLL 2200 460 $24,288 $52.80 MACKAY REF 1000 (260) $15,084 ENZED 1000 300 $12,838 $42.79 (72.53) TOTAL TRUCK 1000 110 $4,200 $38.18 SHEPP MAR 4886 750 $25,800 $34.40 TARGET 4050 786 $28,600 $36.39 NU STEEL 4050 804 $28,600 $35.57" (The figures indicated in parenthesis were introduced in the evidence of another valuer, Mr Kemsley, which is discussed below and represent his suggested corrections or qualifications of Hann's table.) 98 That table of rents was said by Hann to comprise, together with the rent for the "Drive-in site", the only rents to which he had had reference in assessing market rents for the buildings on the subject property. However he acknowledged that he was unaware of the provisions of the leases of the properties in his table as they affected rent reviews or adjustments by reference to market, the Consumer Price Index or some other factor. 99 Hann claimed that, with the exception of the last two entries on his table of rental properties, all of the properties there listed "related to the immediate area of Melbourne Road." He also stated that he had regard to the rent being paid by Comalco for part of the "Drive-In site" although he did not believe that the Comalco property was "quite as good". He continued "There is no other development around it like there is {at] the subject property." Accordingly, "it gave me an indication that a rental of at least $40,000 was available" for either "the Powder Coaters building" or "Dean's Garage". 100 Hann claimed to have paid regard to the "Drive-In site" sale, but asserted it as his opinion that Kialla Lakes Drive "had a better potential" than Riverview Drive, which was a road that bordered the "Drive-In site". He stated that "they both had rental incomes of just under $100,000 and that they both had frontage to Melbourne Road." He also observed that the "120A sewerage levy" for Dean's Garage had been paid whereas "there was still $105,000 worth of levies to be paid on the Drive-In site." 101 In valuing lots 3, 5 and 6 which, it will be recalled, did not have existing buildings erected on them, Hann said he had taken into account the sales of lots on "the Telford Estate" slightly to the east of Shepparton, as to which he said: "That's an area that's primarily of an industrial nature. It has got very little passing traffic; it has certainly got very little retail flavour, which the subject area has got. So I took the view that these lots, whilst they were similar in size, that they were marginally better then the Telford Estate." 102 He sought to justify his allowance of 10% for "profit and risk" in the subject valuation, by explaining that 20% to 25% was a commonly allowed for "profit and risk" on properties of a "larger nature and with a much larger number of lots to be subdivided over a considerably longer time…" He continued that he thought that 10% was appropriate for the subject property because: "the fact that there were only 7 lots led me to believe that the risk was far less. The other factor that influenced me was the fact that this property had some improvements on it and therefore was able to attract some rental income during the development period and selling period." 103 Another factor said to contribute to a reduced risk was that the Shire of Shepparton had approved the subdivision so that the risk of not obtaining that approval had been eliminated. 104 Whilst Hann accepted that the balance of the land on the subject property "certainly did need some filling", he regarded his valuation of $400,000 for that portion of the subject property as " a reasonable figure for that block". He stated that the proximity of the development on Kialla Lakes Drive, owned by "Kavant Nominees" had influenced that assessment because, at the relevant time, that development had "between 200 and 250 of the blocks developed" and there had been a proposal for the development of "other things" ,including a retirement village, on that site. He also said that it was his understanding that, at the relevant time, there was complete access to the subject property from Kialla Lakes Drive. 105 According to Hann, at the relevant time "there was still a keen demand for commercial and industrial land in Shepparton". He claimed that a number of sales had still been occurring "including sales in excess of $1 million" and that the "Telford estate was selling very well." He stated: "The crash for Shepparton came with the collapse of the Interwest Company together with the Farrow Corporation and Tricontinental; they all went about June/July, and that was when the crash started." 106 Hann expressed it as his opinion that "development to the south of Shepparton was much stronger" than in the Benalla Road area to the east of Shepparton. He asserted that all industrial property to the south of Shepparton which had been offered for sale had been sold, but later qualified that evidence by accepting that only two industrial properties had been offered for sale in that area at the relevant time, one of which was the "Drive-In site". Nevertheless, he contended that the absence of sales did not necessarily mean that the market for industrial property was not "buoyant." 107 He also observed, in relation to the area of south Shepparton that, "there were a large number of residential developments even further south than this property. There was a greater traffic flow in that area…That particular road, the Melbourne Road, is not only the direct route to Shepparton, but it is the major route from Melbourne to Brisbane, or it was at that time." By way of comparison, he went on to say that "Benalla Road in my opinion has always struggled a bit. There was a large development by Woolworths out there and…in 10 years it hasn't even got to its target turnover; it has always been a disaster." Hann also accepted that the "Solar City Industrial development" "has never been popular" and continued "…Even to date there has been very few sales and very few buildings constructed in there. It's just for some reason not a popular area." He said that he had disregarded the "Grant Court development", because "that particular development wasn't all that attractive. It was in an area that was difficult to get to. It's down a court, off a service road, in an area that was basically on its own for that sort of development. It was an area that never really took off." 108 In relation to the "Telford estate", Hann accepted that "Telford had promoted that estate well and they have sold reasonably strongly and they continue to do so." 109 As to the "McNeill development", Hann commented: "I didn't believe that it was quite as good as the subject land…once again there is a couple of factoryettes there or warehouses type constructions but they haven't proved to be popular either." (iv) Mr Kensley's evidence 110 Mr Kensley ("Kensley"), who was resident in Mount Waverley, Victoria, was called by the respondent to give evidence. He was a qualified valuer for the State of Victoria. 111 In his witness statement Kensley deposed at paragraph 7: Without having available details of any valuation which places a value on the land of $400,000 as at 27 July 1990 and without knowing the methodology adopted by such valuer or the evidence to which such valuer has regard it is not possible for me to comment upon such value other than to say-: (a) in my opinion such value is well below the range of market value for the subject property at the relevant date. (b) such a value cannot be reconciled with evidence of comparable sales available at that time. (c) such a value would appear to be based upon a failure to appropriately interpret evidence of demand in the local market at 27 July 1990 112 To similar effect, Kensley stated in par 8(xi) of his witness statement: Market Rentals. It appears to me the valuer took into consideration rentals paid at the relevant date for the lease of premises forming part of Dean's land. In my opinion the land at the relevant date was ripe for subdivision. It enjoyed a "gateway" location at the entrance to Shepparton. The immediate surrounding is either wholly commercial or industrial in nature being a strip or ribbon design and extending either side of Melbourne Road from the Broken River bridge south to opposite the Balmoral Street intersection. At the time of my view occupancies included in this "gateway" comprised a number of service stations including Shell, BP and Caltex, a motor vehicle dealership, caravan display site, plant nursery and a number of showrooms/warehouses. I understand the position to have been similar at the relevant date. All such premises derive substantial benefit by having exposure to a large volume of passing traffic and accessibility with safety of ingress/egress to the highway. The same style of "gateway" development is present also along the Midland Highway east of the central business district of Shepparton and to the north along either side of Numurkah Road. Having regard to the favourable location of the land the history of occupancy and the proposed development along and off Kialla Lakes Drive at the relevant date the property was not only ripe for subdivision but presented an opportunity for the sale of individual lots to owner/occupiers or for sale and lease back, noting that two of the occupancies were apparently associated with the registered proprietor. In these circumstances I consider the rentals which were adopted in the hypothetical analysis were not only consistent with the history of those experienced at the site (including from arm's length tenants) but also within a reasonable range. 113 Kensley accepted in cross-examination that the rental attributed to "the Powder Coaters building" in the subject valuation of $97.50 per m2 was "above what I would consider to be market rental". However, he did not agree when it was put to him by Mr Watkins of Counsel for the Bank, that the correct figure was in the range of $30 to $35 per square metre. He did, on the other hand, accept Mr Watkins' proposition in relation to the rents for "the Powder Coaters building" and "Dean's Garage" that they "ought not to have satisfied a prudent valuer that they were market rentals." He also thought that the rent of $11,500 for "Ryan's shed" "might be a little bit conservative." and that the rent for "Dean's Garage" was "slightly above a market rental." Despite these qualifications, it remained Kensley's opinion that the overall figure in the subject valuation of $1.164million was within 10% of the correct value of the subject property. 114 Kensley was asked by Mr Watkins whether he agreed with the $400,000 value attributed in the subject valuation to the balance of the land on the subject property. It was pointed out that a value of $400,000 computed to $20 per square metre for the balance of the land. Kensley stated that $400,000 was a "full expression of that property's value". However he also indicated that he regarded $20 per square metre as being at the "upper end of the range" and that "25% less is probably a fair market value". I infer from that evidence that, on his own approach, Kensley would have ascribed $15 per square metre, or $300,000, as the fair market value of the balance of the land. (v) Mr O'Connell's evidence 115 Mr O'Connell ("O'Connell") was a licensed real estate agent who lived and worked in the City of Shepparton. O'Connell was called to give evidence on behalf of the respondent. His witness statement included these passages: "The market in Shepparton in 1989, 1990 and up to and including 27 July 1990 was very much a local market. Right up until the end of August 1990 that local market, for commercial and industrial land including developed and development sites was in my opinion buoyant." The strength of the market and matters to which I have referred were reflected in sales in which I was involved in early 1990 to August 1990. These sales included the sale of the Drive-In site in Melbourne Road, Kialla which was sold by me at auction on 30 March 1990, the sale of coolstores and associated land was sold by me on 20 July 1990 and the sale of a site zoned "future industrial", for a favourable price shortly before auction scheduled for 29 June 1990. The fist time I was aware of any faltering in this very strong property market was when I auctioned an industrial block in late August 1990… I consider that in the period up to 28 August 1990 the Shepparton market including for land such as the subject property in Melbourne Road owned by Denis Dean was going strong and demand, if the property had been auctioned then would, I believe, have [created] keen interest. 116 O'Connell stated that the "Drive in site" auction and the "Lemnos Coolstore" auction, at both of which he was the auctioneer, were the significant sales that confirmed his view of the market at the relevant time. However, O'Connell made the concession that "I would never class myself as having enormous knowledge in the commercial field." PROPRIETY OF THE TURNER METHOD 117 It will be recalled that it was common ground that, in preparing the subject valuation, the respondent had adopted the Turner method. It was also not disputed between the parties that a valuer should seek to arrive at a valuation based on the highest and best use of a property to be valued. However, Counsel for the Bank submitted that the Turner method was not an appropriate method for use in valuing the subject property. In this respect, Counsel contended that lots 3,5 and 6 on the plan of subdivision should not have been valued separately as, at the relevant date, the subject property had not been subdivided and a more appropriate method of valuation would have involved aggregating those lots with the other undeveloped land. 118 It will also be recalled that Baylis's evidence on the appropriateness of the Turner method, was as follows: "Well, it comes down to a valuer's interpretation. It is not the approach which I took but that's not to say it was not the right approach but in saying that I only just point out that the Turner approach or the hypothetical subdivision approach – so just by its very name brings in many assumptions and of course the more assumptions you bring in the more likely error can occur." 119 Baylis advanced as another reason for not applying the Turner method, his perception of a lack of demand for subdivided industrial properties in the Shepparton area at the relevant time. 120 Rost & Collins Land Valuation and Compensation in Australia (2nd Edn) makethe following observations at p 141 about "hypothetical subdivision": "In valuing potential subdivisional land, the valuer must satisfy himself that the land is currently suited to subdivision and that, in competition with other lands, it possesses advantages that will enable all the allotments into which it may be subdivided to be sold within a reasonable time. Having satisfied himself that the land is suitable and ready for subdivision, the valuer should then prepare a plan of proposed subdivision which he considers would be best suited to the land and would conform with the requirements of local and regional Authorities." 121 As I understood the evidence, Dennis Dean had applied for planning permits and obtained the approval of the relevant local authorities. Although Baylis and Wheeler expressed their view that a reasonable time in which to develop and sell the proposed lots on the plan of subdivision was of the order of two years, it was clear that there was some demand for industrial property in Shepparton at the relevant date. I, therefore, do not regard the respondent's adoption of the Turner method as, of itself, a breach of a duty of care owed to the Bank. Nor do I regard it as conduct by the respondent that has been misleading or deceptive within the meaning of s 52 of the Trade Practices Act. I am confirmed in this conclusion by the recollection of Baylis's acknowledgment in his oral evidence, that, had he applied the Turner method, making what he regarded as appropriate assumptions and allowances, he would have valued the subject property at $380,000, a figure greater than, but within 10% of, the result at which he had arrived using the method which he preferred. OTHER ISSUES AS TO THE VALIDITY OF THE SUBJECT VALUATION 122 The evidence clearly puts in contest the following issues as to the propriety of the subject valuation. First, did the figures adopted in the subject valuation in respect of lots 1,2 and 4 on the plan of subdivision accurately reflect the correct market rents for those lots? Secondly, did the figures adopted for lots 3, 5 and 6 correctly reflect their market value? Thirdly, did the figure of $400,000 attributed in the subject valuation to the balance of the land accurately reflect its value? Fourthly, did the capitalisation rate applied to each of the developed lots accurately reflect the potential demand from prospective tenants for those lots? Fifthly, did the development period of four months allowed in the subject valuation accurately reflect the time necessary to develop and sell the proposed subdivided lots and did the allowance made by the respondent of 10%, for profit and risk, take proper account of the vicissitudes of the market at the relevant time? (i) Were the actual rents for lots 1, 2 and 4 market rents? 123 It will be recalled that it was not seriously disputed that the rent which equated to $97.50 per m2 did not reflect the actual market rent for the Powder Coaters building at the relevant time. I accept the evidence of Baylis and Wheeler that the net market rents attributed in the subject valuation to Lots 1, 2and 4 were excessive. In this context, I accept the alternative rents postulated by Baylis. Although he regarded properties in the Benalla Road area as commanding approximately equivalent rents of between $43 and $44 per m2, he also had regard to properties nearer the subject property adjacent to the Melbourne Road. As I understood the evidence, even the Comalco tenancy on the "Drive-in" site, which was located on the Melbourne Road opposite the subject property and was generally regarded as a superior property, was returning a rent which computed at $44 per m2 per annum. 124 On Hann's evidence the respondent had regard to a table prepared by Hann of rents derived from certain properties within the Shire of Shepparton. That table is set out at par 97 of these reasons where I have indicated parenthetically some additions and corrections suggested by Kemsley. 125 That table was not proffered as an exhaustive list of all industrial rental properties within the Shire of Shepparton at the relevant time. However, according to Hann, it constituted, with the addition of the rents then being derived from the "Drive-in site", evidence of current rents which he had taken into account in preparing the subject valuation. It was also his evidence, which was not challenged, that, with the exception of the last two entries on the table, all of the properties there listed "related to the immediate area of Melbourne Road." I also understood it to be accepted that the first two entries on the table were not comparable properties and were therefore not to be relied on in valuing the subject property. 126 I can find nothing in the table of purportedly comparable rents which casts doubt on what Baylis regarded as appropriate market rents for the subject property. In this context, Hann referred to the property known as "McKay Refrigeration" which was located opposite the "Powder Coaters building" being lot 1 on the Midstar Court plan of subdivision which was let at the equivalent of approximately $58 per m2. Given that Hann was unaware of the provisions of the lease to McKay Refrigeration, and, specifically, whether the rent was reviewable by reference to the Consumer Price Index or on some other basis, I am not persuaded by the evidence of the rent for that property alone that the figure of approximately $46 per m2 ascribed by Baylis to the "Powder Coaters building" was incorrect. 127 Mr Delany of Counsel for the respondent, however, submitted that Baylis's evidence should not be accepted because the schedules to the Baylis valuation omitted any reference to the properties which he had mentioned in oral evidence before the Court. Counsel also contended that Baylis had not referred to the most recent printouts from the Valuer-General's "PRISM" data base of sales and rentals in the Shepparton area. 128 Baylis had explained that, while he had paid regard to the information to which Counsel for the respondent had adverted, there had not been time to include those references in his written valuation. Furthermore, I did not understand Counsel for the respondent to dispute that Baylis maintained his own database of relevant information, which included information from the Valuer-General's database, and that he also maintained a "hard copy" file of relevant leaflets and auction notices. I have, therefore, not been persuaded to reject Baylis's evidence for this reason. Apposite in this context, are the observations of Heerey J in Henderson v Amadio (No 1) (1995) 62 FCR 1 at where at 122 his Honour pointed out: It was said that in considering issues of value, the Court was restricted to "hard" evidence, by which they meant comparable sales or lettings. Certainly the use of such evidence is the "conventional valuation technique": River Bank Pty Ltd v Commonwealth (1974) 48 ALJR 483 at 484 per Stephen J, although a reading of the judgment makes it clear that his Honour found the comparable sales method appropriate because of the particular circumstances of the case and the difficulties attendant upon a suggested alternative method. There was no suggestion that as a matter of law sales of comparable properties was the only available valuation method. Indeed the very fact that the merits of that and another method of valuation were discussed and compared implicitly argues against such a proposition. (ii) Were other sales truly comparable? 129 I also accept the evidence of Baylis and Wheeler that, at the relevant date, the demand for industrial property in Shepparton had already started to decline. In this context I note that Hann did not dispute that there was very little demand for developed lots in the 'Solar City development", "the McNeill development", and the "Grant Court" development. Rather, Hann sought to rely upon the demand for lots in the "Telford development". However, I accept the evidence of Baylis that the developer of the "Telford development" had been able to offer attractive land and building packages and had the flexibility to offer lots for lease as an alternative to sale. As Hann himself accepted, the developer "had promoted that estate well". 130 In the same context it is to be noted that Hann referred, in his evidence, to what he claimed had been sales of industrial properties in Shepparton for amounts in the vicinity of $1 million each. Specifically, he referred to two such properties, the first being "the Drive-in site" on Melbourne Road, and the second being what was known as "the Kreskas property" of 1.81 hectares which had been sold in April 1990 for $920,000. I did not understand it to be disputed that the purchaser of the latter property had arranged, before the purchase, to let part of the property on favourable terms to a large fruit canning company and that the purchaser proposed to use the balance of the property in the conduct of a trucking business. It should also be remembered that the sale of the "Kreskas" property occurred in April 1990 when, according to the evidence of Baylis and Wheeler, the market for industrial property in the Shepparton area had not yet begun to decline. 131 The "Drive-in site" which had an area of approximately 4.85 hectares, was also sold for $1.25 million in March 1990 before the Shepparton industrial property market had commenced its decline. Not was it disputed, that the eventual purchaser of that property, Mr Taig, was the owner of an adjacent property and had been anxious to acquire the "Drive-In site" with its substantial frontage of approximately 400 metres to Melbourne Road. As well, it appears that at the auction for the "Drive-in site", bidding was contested by a few genuine prospective purchasers. I accept the evidence of Baylis that these factors contributed to inflating the price paid for the "Drive-in site" above that which might otherwise have been achieved. It is also relevant that, although Hann regarded the subject property as possessing the same advantages of location as "the Drive-in site", he accepted that the latter had a substantially greater frontage to the Melbourne Road. 132 For these reasons, I am not persuaded that the sales of the "Kreskas property" and the "Drive in site" support the respondent's contention that there was, at the relevant date, strong general demand for industrial property in Shepparton. It follows that the prices paid for those properties did not necessarily reflect the market prevailing in that sector at the time. 133 I therefore accept Baylis's evidence as to the appropriate capitalisation rates to be applied in assessing the valuation of lots 1, 2 and 4 which substantially accords with the evidence adduced through Wheeler. (iii) Was Hann's allowance for "profit and risk" sufficient? 134 I also consider that the period of four months allowed by Hann in the subject valuation was unrealistically short for the development and sale of the proposed lots on the plan of subdivision. I accept the opinion of Baylis that it would more likely have taken up to two years to complete the development and sale. It follows that the 10% deducted for profit and risk provided in the subject valuation was conservative. Baylis favoured an allowance of 20 to 25%, under that head whereas Wheeler's evidence was that a figure of 20% was appropriate. I accept the allowance of 20% suggested by the latter witness. (iv) Value of remaining lots 135 Baylis ascribed to lots 3, 5 and 6 a market value at the relevant date of $50,000 each. Wheeler's written valuation tendered in evidence, valued the same lots at $70,800, $83,000 and $75,100 respectively. The evidence of Wheeler and Hann in respect of the valuation of these lots did not differ markedly and, accordingly, I have been persuaded that the figures assessed by Hann were reasonable. 136 There was a significant discrepancy between the evidence of Hann and Kensley on the one hand, and Baylis and Wheeler on the other, as to the market value of lot 7 which Hann valued at $400,000. Kensley accepted that a correct valuation would be within 25% of Hann's assessment, from which I infer that he regarded a prudent, but not unduly conservative, assessment as being approximately $300,000. However, Baylis valued lot 7 at only $25,000 and Wheeler assessed it at $100,000. In my view, upon a correct application of the Turner method lot 7 should have been valued as a separate lot on the proposed plan of subdivision while taking into account its relevant characteristics. It was common ground that lot 7 would require filling and had no direct access to Melbourne Road. On the other hand, it had an area of approximately two hectares. The impression which I retain from all the evidence is that Wheeler's assessment is to be preferred and the market value which should have been ascribed to lot 7 at the relevant time was $100,000. (v) True value of the subject property as a whole as a guide to respondent's exercise of care. 137 It follows from my acceptance of those parts of the evidence which I have indicated that a proper valuation of the subject property at the relevant time was $510,000. A valuer is required to exercise a degree of skill and judgment of the kind identified by the High Court in Voli v Inglewood (1963) 110 CLR 74 at 79 (as applied in Henderson v Amadio (1995) 62 FCR 1) in that, like any other professional person, he or she: "is bound to exercise due skill and diligence. He is not required to have an extraordinary degree of skill or highest personal attainment but he must bring to the task he undertakes the competence and skill that is usual among [valuers]" 138 Since what I have concluded was the correct market value of the subject property is approximately half the amount ascribed to it in the subject valuation, it follows that the amount of $1.164 million arrived at by the respondent cannot be defended as a figure which a reasonably skilled and prudent valuer could properly have arrived at. The subject valuation was like that described by Lindgren J in MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 AT 336: "a gross overvaluation" which "affords some evidence of negligence" on the respondent's part. MEASURE OF DAMAGES 139 It does not seem to be disputed that Denis Dean entered into the loan agreements with the Bank in order to discharge its liability to Sandhurst of $675,000 and to obtain moneys in excess of that amount to be applied in developing the subject property. As a matter of ordinary commercial practice, a bank can be assumed to lend be prepared, on the security of a first mortgage over a property, an accepted proportion of the market value of that property. However, in the present case, unless the Bank had been prepared to lend at least a sufficient amount to discharge the existing first mortgage in favour of Sandhurst, there would have been no loan transaction between Denis Dean and the Bank. It follows, therefore, that, if the Bank had been apprised that the true market value of the subject property was, as I have found, $510,000, it would not have advanced the amount of $775,000 which it, in fact, lent to Denis Dean. 140 Accordingly, the present loan agreements give rise to what in the authorities is called "a no transaction case." The question arises what was the extent of the liability of the respondent with respect to the provision of a negligent valuation which resulted in a transaction that would not have occurred if the correct market valuation had been provided. In Amadio v Henderson (1998) 81 FCR 149 at 222, a Full Court of this Court discussed the observations of the House of Lords in Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 and observed: There were appeals to the House of Lords in three of the actions but not in that against the solicitors. In the speech of Lord Hoffmann, with whom the rest of their Lordships agreed, it was first observed: Banque Bruxelles Lambert SA v Eagle Star Insurance Co Ltd [1997] AC 191 (at 211): "I think that this was the wrong place to begin. Before one can consider the principle on which one should calculate the damages to which a plaintiff is entitled as compensation for loss, it is necessary to decide for what kind of loss he is entitled to compensation. A correct description of the loss for which the valuer is liable must precede any consideration of the measure of damages. For this purpose it is better to begin at the beginning and consider the lender's cause of action." His Lordship then drew the following analogy to illustrate the point at which he disagreed with the reasoning of the Court of Appeal (at 213): "I can illustrate the difference between the ordinary principle and that adopted by the Court of Appeal by an example. A mountaineer about to undertake a difficult climb is concerned about the fitness of his knee. He goes to a doctor who negligently makes a superficial examination and pronounces the knee fit. The climber goes on the expedition, which he would not have undertaken if the doctor had told him the true state of his knee. He suffers an injury which is an entirely foreseeable consequence of mountaineering but has nothing to do with his knee." It was then suggested that "on the Court of Appeal's principle" the doctor would be responsible for the mountaineer's injury "because it is damage which would not have occurred if he had been given correct information about his knee". Lord Hoffmann then drew a distinction, said to be derived from Banque Keyser Ullmann SA v Skandia (UK) Insurance Co Ltd [1991] 2 AC 249 between a duty to provide information to enable the recipient to decide upon a course of action and a duty to advise someone as to what course of action he should take. His Lordship admitted certain exceptions to the principle which he had erected, including one predicated on liability for fraud. None of those exceptions is relevant here." 141 In the present case damages should be assessed so as to place the Bank as far as possible in the position in which it would have been but for the commission of the wrong: Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12-13. 142 It has been held by the High Court in Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 73 ALJR 901 that in a case such as the present where, as I hold, the valuation constituted both negligent conduct and a contravention of the Trade Practices Act, the measure of damages is the same under either basis of relief. Damages are confined to the difference between the amount actually lent and what would have been lent on a true valuation of the property "together with such expenses and other losses that were sufficiently likely to result from the breach of duty to make it proper to hold that they flowed naturally from the breach of duty" [per McHugh J at 913]. 143 Gaudron J observed at 905: Where economic loss is said to have resulted from a transaction entered into in reliance upon negligent advice or information, the approach of this Court has not been confined to looking at the immediate situation brought about by entry into the transaction. That is because, as was pointed out in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 527 "[w]ith economic loss, as with other forms of damage, there has to be some actual damage" and not simply "[p]rospective loss". And where a transaction involves benefits and burdens, "no loss is suffered until it is reasonably ascertainable that, by bearing the burdens, the plaintiff is 'worse off than if he had not entered into the transaction'." It was pointed out in Wardley that "[t]he kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. Wardley was concerned with an action for damages for breach of s 52 of the Act. However, there is no reason in principle why the position should be any different in tort. 144 Further authority, if it be needed for the proposition that a lender's measure of damages in a "no transaction" case is the total loss sustained as a result of its entry into the transaction, is afforded by Baxter v F W Gapp and Co Ltd [1939] 2 KB 271, which was applied by Clarke J in Trade Credits Ltd v Baillieu Knight Frank (NSW) Pty Ltd (1985) 12 NSWLR 670 at 672. Baxter v F W Gapp was distinguished by a Full Court of the Supreme Court of Victoria in Duncan and Weller Pty Ltd v Mendelson [1989] VR 386, on the ground that, in that case, the lenders had bound themselves to enter into the loan transaction independently of the negligence of the valuer to which part only of the lenders' loss was attributable. 145 In the present case, conformably with the conclusion reached by Lindgren J at first instance in MGICA, the Bank's loss in the present case comprised the principal and unpaid interest under the loans to Denis Dean which, as at 12 August 1992, amounted to $857,215.53 together with unpaid rates, taxes and other statutory charges, auctioneer's commission, advertising and other expenses of the sale and legal expenses in connection with the sale less the gross proceeds of sale, namely $110,000. WAS THERE A CAUSAL LINK BETWEEN THE SUBJECT VALUATION AND THE BANK'S LOSS? 146 It was contended on behalf of the respondent that, in approving the loan agreements, the Bank had not relied on the subject valuation provided by the respondent. Counsel for the respondent pointed to the witness statement of Mr Wakefield, the Assistant Regional Manager for the Bank, who indicated: "On the basis of the P.F. Hann & Co valuation I tentatively approved the loan on the 11th September 1990." 147 Mr Wakefield did not give oral evidence. However, Counsel for the respondent submitted that it was clear from Mr Fidler's evidence that Mr Wakefield had approved the loan without having paid regard to the subject valuation. It was submitted that the only valuation which Mr Wakefield had taken into account in approving the loan agreements had been the valuation prepared by Hann and addressed to Sandhurst. That valuation was dated 8 November 1988 and, on the basis of a proposed four lot plan of subdivision, valued the subject property as $1,003,200. 148 It cannot be disputed that Mr Wakefield, as Assistant Regional Manager of the Bank, had "tentatively approved the loan" on 11 September 1990 and had confirmed that approval by memorandum directed to Mr Fidler dated 13 September. It was also common ground that Mr Fidler had written to a Mr Brendan Kelly at "Stubbs, Wallace & Partners". That letter, dated 14 September 1990, offered finance for Mr Dean's property development subject to the receipt by the Bank of certain specified documents which did not include the subject valuation. That letter also contemplated that "a formal letter of offer will issue on receipt" of the requested documents. That formal letter of offer, dated 11 October 1990, was subsequently sent by Mr Fidler to Denis Dean and also contained no reference to the subject valuation. 149 In his written submissions, Counsel for the Bank contended: "The evidence of Mr Fidler establishes clearly that on 11th September 1990, the only Hann valuation which the bank saw and had regard to was a valuation not the subject of any claim in this proceeding, a valuation dated 21st November, 1988." 150 Counsel then referred to passages from the transcript of the evidence of Mr Fidler, including the following: Q. Now Mr Fidler so that the only valuation that you had before there was any decision to approve was the valuation as at November, 1988 is that right and the one that we have been discussing is that right? A. That is the one." 151 A close examination of the whole of the relevant evidence, however, does not support a finding that the only valuation which the Bank had was that prepared as at November 1988. Mr Fidler clearly stated that he had retained a photocopy of the valuation prepared by Mr Hann and addressed to Sandhurst. That evidence, abridged and somewhat truncated, is repeated above, though I did not understand Mr Fidler to assert unequivocally that the Bank did not have a copy of the subject valuation in its possession on 13 September 1990 when, in Mr Wakefield's words, he "tentatively approved" the loan agreements. As I understood Mr Fidler's evidence, it went no further than that he was unable to say whether the Bank had the subject valuation before 13 September 1990. 152 It is not clear from the evidence when the subject valuation was received by the Bank. I infer, however, from the date on the subject valuation that it was received on or after 9 August 1990. Furthermore Mr Fidler's evidence clearly indicated, and I did not understand this to be contested by Counsel for the respondent, that the subject valuation was in Mr Fidler's possession when the letter of 11 October 1990, approving the loan agreements, was sent by the Bank to Denis Dean. 153 It may well have been that the Bank did not refer in either the letters of 14 September or that of 11 October to the subject valuation because it already had it in its possession. In any event, the letters of 13 September sent, as I infer, to Mr Dean's accountant, and the letter of 11 October sent to Denis Dean, clearly indicate that the Bank's approval of the loan agreements was conditional. It was not disputed that the Bank had a copy of the Sandhurst valuation, that Mr Fidler had requested Denis Dean to obtain a copy of that valuation addressed to the Bank and that such a copy was in the Bank's possession before the letter of approval of 11 October. It was, in my view, open to the Bank before the moneys were drawn down on 30 November 1990 to resile from the loan arrangements. It follows from the absence of any resiling from the loan agreements by 30 November 1990 that the Bank had relied upon the subject valuation by that date. Accordingly, it cannot be said that in deciding to approve the loan agreements, the Bank had not relied on the opinions and the information contained in the subject valuation. 154 The respondent also contended that the chain of causation had been broken by the Bank's failure to obtain personal guarantees from the directors of Denis Dean, its omitting fully to investigate the financial position of Denis Dean, and by the fact that no mortgage debenture was taken over the assets and undertaking of Denis Dean. The respondent also contended that the Bank's control of the conduct of the Denis Dean loan account had been negligent. In my view, these matters go to the question of whether the Bank has been guilty of contributory negligence rather than to whether the respondent's negligence in preparing the subject valuation had ceased to be an effective cause of the Bank's loss. The issue of contributory negligence is discussed in a later part of these reasons. THE BANK'S CLAIM UNDER SS 52 AND 82(1) OF THE TRADE PRACTICES ACT AND LIMITATION OF ACTIONS. 155 Counsel for the Bank, in written submissions, referred the Court to the comments of Lindgren J in MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 at 356 where his Honour observed: "I think that the supply of Mr Kenny's valuation report dated 19 April 1990 and his letter dated 13 February 1991 conveyed representations, not only that the opinions expressed in them were held, but also (a) that the opinions were based on reasonable grounds; (b) that they were the product of the exercise of due care and skill; and (c) that they were, after making due allowance for their nature as opinions as to the market value of real estate as at a particular time, safe to be relied upon and not outside the range of latitude properly to be allowed to them. And later at 357: "I think that the valuation of $5.5 million was so far removed from the true value of the order of $3.9 million to $4 million as to be misleading or deceptive." 156 That approach taken by his Honour was not disturbed on appeal by either the Full Court or the High Court. I have already indicated, that in my view, the subject valuation was so far in excess of what could reasonably have been regarded as the true value of the subject property that the opinions expressed in it could not have been based on reasonable grounds or the product of the exercise of due care and skill. However Counsel for the respondent submitted further that the Bank's claim was statute-barred by operation of s 82(2) of the Trade Practices Act which provides that any action under s 82(1) of that Act may be commenced "at any time within 3 years after the date on which the cause of action accrued." 157 In written submissions, it has been contended on behalf of the respondent that the cause of action arose on 30 November 1990, being the date upon which the funds were drawn down in favour of Denis Dean. It was further submitted, however, that the "actual damage" sustained by the Bank commenced, in the absence of an overdraft facility provided to Denis Dean, on the date when Denis Dean failed to meet the interest payments as they fell due under the loan agreements. Mr Delany for the respondent submitted that the evidence disclosed that, by 18 April 1991, the loan account had been overdrawn and that, by 2 May 1991, the cheque account had been overdrawn for a period in excess of 62 days. Accordingly, so it was submitted, damage had been suffered at the latest 62 days earlier, when the cheque account, which had no overdraft facility, became overdrawn. 158 From that premise, it was argued on behalf of the respondent that, as the cause of action under s 82(1) of the Trade Practices Act had arisen on 30 November 1990 and as the actual damage sustained by the Bank had been incurred in February 1991 (being 62 days before 2 May 1991), then the Bank's cause of action, even on the view most favourable to the Bank, had accrued more than three years before the date on which the present application had been filed. 159 On the other hand, it was contended in the written submissions of Counsel for the Bank that its cause of action had accrued at the time when the subject property was sold. In support of this contention, Counsel invoked the observations of Lindgren J in MGICA (supra) at 317 that: "Absent a sale, there would always have remained the possibility that the market might recover." 160 Counsel submitted that, as the subject property had been auctioned on 18 June 1993, the present application had been filed within a year of that sale and, therefore, within the three years allowed by the Trade Practices Act. 161 Section 82(2) of the Act requires that an action under s 82(1) may be commenced, "at any time within 3 years after the date on which the cause of action accrued." Although the question of onus of proof in this area is a vexed one, it seems that a party seeking to rely upon limitation of actions provision carries the evidentiary burden of establishing facts necessary to show that the limitation period has run. The application in this proceeding was filed on 5 May 1994. Accordingly, it seems the respondent had the onus of establishing facts tending to show that any cause of action under s 82(1) of the Act available to the Bank accrued on or before 4 May 1991. 162 In Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, the High Court had to consider, for the purposes of s 82(2) of the Trade Practices Act, the date upon which a cause of action accrued, an element of which was the granting of an indemnity against a future loss allegedly obtained as a result of misleading and deceptive conduct. 163 At 527 Mason CJ, Dawson, Gaudron and McHugh JJ observed: When a plaintiff is induced by a misrepresentation to enter into an agreement which is, or proves to be, to his of her disadvantage, the plaintiff sustains a detriment in a general sense on entry into the agreement. That is because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff. But, as will appear shortly, detriment in this general sense has not universally been equated with the legal concept of "loss or damage". And that is just as well. In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events. In such a situation, there would be an ever present risk of undercompensation or overcompensation, the risk of the former being the greater. 164 At 532, after considering English authorities on the point, their Honours continued: If, contrary to the view which we have just expressed, the English decisions properly understood support the proposition that where, as a result of the defendant's negligent misrepresentation, the plaintiff enters into a contract which exposes him or her to a contingent loss or liability, the plaintiff first suffers loss or damage on entry into the contract, we do not agree with them. In our opinion, in such a case, the plaintiff sustains no actual damage until the contingency is fulfilled and the loss becomes actual; until that happens the loss is prospective and may never be incurred. A deferred liability may stand in a different position but there is no occasion here to discuss that matter. 165 Their Honours then went on at the foot of p 532: The conclusion which we have reached with respect to the time when the plaintiff first suffers loss in respect of contingent loss or liability accords with the comment of Gaudron J in Hawkins v Clayton (1988) 164 CLR 539 at 601: "If the interest infringed is an interest in recouping moneys advanced it may be appropriate to fix the time of accrual of the cause of action when recoupment becomes impossible rather than at the time when the antecedent right to recoup should have come into existence, for the actual loss is sustained only when recoupment becomes impossible." 166 Gaudron J went on to point out [at 602]: "It would be too simplistic to restrict analysis of economic loss merely to a consideration of reduced value or increased liability." The conclusion which we have reached is reinforced by the general considerations to which we referred earlier. It is unjust and unreasonable to expect the plaintiff to commence proceedings before the contingency is fulfilled. If an action is commenced before that date, it will fail if the events so transpire that it becomes clear that no loss is, or will be incurred. Moreover the plaintiff will run the risk that damages will be estimated on a contingency basis, in which event the compensation awarded may not fully compensate the plaintiff for the loss ultimately suffered. These practical consequences which would follow from an adoption of the view for which the appellants contend outweigh the strength of the argument that the principle applicable to the cases in which the plaintiff acquired property (or a chose in action) should be extended to cases where an agreement subjects the plaintiff to a contingent loss. In such cases, it is fair and sensible to say that the plaintiff does not incur loss until the contingency is fulfilled. 167 At 537, Brennan J observed: "The quantification of the diminution in value of an asset or of a liability incurred or the value of any benefit acquired may not be ascertainable at the time when the burden of the transaction is borne. In that event, the suffering of any loss cannot be said to occur before it is reasonably ascertainable (not before it is ascertained) that the burdens which the plaintiff has borne are greater than the value of the benefits that the plaintiff has acquired or will acquire. In other words, no loss is suffered until it is reasonably ascertainable that, by bearing the burdens, the plaintiff is "worse off than if he had not entered into the transaction." (original emphasis) 168 In the judgment on appeal to the High Court in Kenny & Good v MGICA, Gaudron J observed [(1999) 73 ALJR 901] at 905: "The interest that a mortgage lender seeks to protect by obtaining a valuation of the proposed security is not simply an interest in having a margin of security over and above the mortgage debt. Rather, it is that, in the event of default, it should be able to recoup, by sale of the property, the amount owing under the mortgage. And that is also the interest of a mortgage insurer. It is the risk that recoupment might not be possible that calls the valuer's duty of care into existence. And it is the interest in recoupment that is infringed by breach of that duty. Moreover, the time that loss occurs (and hence the time when the tort is complete) is when recoupment is rendered impossible. In the case of a mortgage transaction, that will occur when it is reasonably ascertainable that sale will result in a loss. At the earliest it will be when default occurs and, at the latest, when the property is sold." 169 At 32 Gummow J observed: Whatever may have been the situation upon the facts of the various appeals in Banque Bruxelles, the cause of action of MGICA in negligence accrued when the damage to its interest (as indicated above) was sustained. This was, at the earliest, when the mortgagor defaulted, and certainly when the property was sold. 170 Later at 33 his Honour observed: MGICA's risk of non-payment "crystallised" at the moment of realisation, when the relationship between the market value of the property and the moneys secured became fixed in the relevant sense. MGICA sustained an economic loss arising from the fall in the property market as a result of the valuation because the value of the property had been negligently overstated in circumstances where MGICA would not have entered into the transaction but for the valuation. The "loss" which is recoverable was sustained at the time of default and not at the time of entering into the transaction 171 In Nykredit Mortgage Bank plc v Edward Erdman Group Ltd (No2) [1998] 1 All ER 305 at 310, Lord Nicholls of Birkenhead observed: "It should be acknowledged at once that, to greater or lesser extent, quantification of the lender's loss is bound to be less certain, and therefore less satisfactory, if the quantification exercise is carried out before, rather than after, the security is ultimately sold. This consideration weighed heavily with the High Court of Australia in Wardley Australia Ltd v State of Western Australia (1992) 109 ALR 247. But the difficulties of assessment at the earlier stage do not seem to me to lead to the conclusion that at the earlier stage the lender has suffered no measurable loss and has no cause of action, and that it is only when the assessment becomes more straightforward or final that loss first arises and with it the cause of action. (original emphasis) Indeed, for the cause of action to arise only when the lender realises his security would be a highly unattractive proposition. It would mean that, however obvious it may be that the lender will not recover his money, he cannot start proceedings. He must wait until he manages to sell the property, a process which may be protracted. This would be a surprising stance for the law to take. It would be all the more surprising when one has in mind that a lender's cause of action against his negligent valuer for breach of contract, as distinct from a claim in tort, arises when the negligent valuation is given. If disaster is evident and the lender were to sue his valuer for breach of contract without waiting until he had realised his security, it is inconceivable that the court would award only nominal damages. The court would do its best to assess the loss. This prompted the trenchant observation of Bingham LJ in D W Moore & Co Ltd v Ferrier [1988] 1 All ER 400 at 411, [1988] 1 WLR 267 at 280: 'If in a contractual claim for negligence, the court would have awarded other than nominal damages, I do not see how it can be said that an action in tort based on the same negligence would have been bound to fail for want of any damage as an essential ingredient of the cause of action.' As Mr Briggs QC submitted, no accountant or prospective buyer, viewing the loan book of a commercial lender, would say that the shortfall in security against outstanding loans to defaulting borrowers did not represent a loss to the lender merely because the securities had yet to be sold. Realisation of the security does not create the lender's loss, nor does it convert a potential loss into an actual loss. Rather it crystallises the amount of a present loss, which hitherto had been open to be aggravated or diminished by movements in the property market. I can see no necessity for the law to travel the commercially unrealistic road." 172 His Lordship then continued at 311: "An alternative less extreme possibility is that the cause of action does not arise until the lender becomes entitled to have recourse to the security. I am not attracted by this, as a proposition of law. This suggestion involves the proposition that until then, as a matter of law, the lender can never suffer loss, and the lender can never issue a writ, whatever the circumstances. That does not seem right to me. This proposition, like the date of realisation submission, loses sight of the staring point: that the lender would not have entered into the transaction had the valuer given proper advice. If the basic comparison shows a loss at an earlier stage, why should the lender have to wait until the borrower defaults before issuing his writ against the negligent valuer? There may be good reason why the lender wishes to start proceedings without delay." 173 His Lordship then commented: "I must now comment briefly on the leading authorities in this field. With the possible exception of the Australian case of Wardley Australia Ltd v State of Western Australia (1992) 109 ALR 247, the actual decisions in all these cases accord with the approach outlined above." 174 After reviewing English authority on this point, his Lordship continued at 312: "In Wardley Australia Ltd v State of Western Australia (1992) 109 ALR 247 the High Court of Australia considered the meaning of "loss or damage" in the context of a cause of action for the recovery of loss or damage by s 82 of the Trade Practices Act 1974. The court held that the indemnity given by the state generated a contingent liability and that the state, as the person misled into giving the indemnity by misrepresentations, did not suffer loss or damage for the purposes of the statutory cause of action until, in short, the contingency occurred. Of the wider observations made in the course of the judgments, Brennan J stated that a transaction which involves benefits and burdens results in loss or damage only if an adverse balance is struck. Loss cannot be said to be suffered until it is 'reasonably ascertainable' that by bearing the burdens the plaintiff is worse off than if he had not entered into the transaction." 175 Lord Hoffmann observed at 316: Proof of loss attributable to a breach of the relevant duty of care is an essential element in a cause of action for the tort of negligence, Given that there has been negligence, the cause of action will therefore arise when the plaintiff has suffered loss in respect of which the duty was owed. It follows that in the present case such loss will be suffered when the lender can show that he is worse off than he would have been if the security had been worth the sum advised by the valuer. The comparison is between the lender's actual position and what it would have been if the valuation had been correct. There may be cases in which it is possible to demonstrate that such loss is suffered immediately upon the loan being made. The lender may be able to show that the rights which he has acquired as lender are worth less in the open market than they would have been if the security had not been overvalued. But I think that this would be difficult to prove in a case in which the lender's personal covenant still appears good and interest payments are being duly made. On the other hand, loss will easily be demonstrable if the borrower has defaulted, so that the lender's recovery has become dependent upon the realisation of his security and that its security is inadequate. On the other hand, I do not accept Mr Berry's submission that no loss can be shown until the security has actually been realised. Relevant loss is suffered when the lender is financially worse off by reason of a breach of the duty of care than he would otherwise have been." 176 In Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 73 ALJR 901 Gaudron J, at 905, contemplated that the date of accrual of a cause of action could occur at any time between a default of payment by the borrower and the sale of the security at a time when "it was reasonably ascertainable" that a sale would result in a loss. The footnote to that passage indicates that her Honour adapted this expression from the observations of Brennan J in Wardley at 537 quoted above. She also referred in the same context to the passage from the speech of Lord Nicholls in Nykredit at 312 which has been quoted above. Gummow J was also of the view that the cause of action could accrue at any time between an act of default by the borrower and the sale of the security. 177 I find little difference in the approach of Brennan J in Wardley and Lord Hoffmann in Nykredit to the question of the date upon which a cause of action accrues. In Brennan J's view, it is not "before it is reasonably ascertainable (not before it is ascertained) that the burdens which the plaintiff has borne are greater than the value of the benefits that the plaintiff has acquired or will acquire." According to Lord Hoffmann it is when "the lender can show that he is worse off than he would have been if the security had been worth the sum advised by the valuer." 178 I find nothing in Brennan J's observations which requires that the date of the accrual of the cause of action must always be after the date of the act of default by the borrower. It is conceivable that a lender sustains loss, and therefore the cause of action accrues, from the date on which funds are advanced upon inadequate security to an insolvent borrower notwithstanding that an act of default may not yet have occurred by the date stipulated by the relevant loan agreement for the first payment of principal or interest has not yet arrived. In my view, it could be clear, at that stage that, in the words of Brennan J in Wardley, it was "reasonably ascertainable that the burdens which the plaintiff has borne are greater than the value of the benefits that the plaintiff has acquired or will acquire. 179 In cross-examination of Mr Fidler, Mr Delaney of Counsel for the respondent referred to what he termed a "diary note in relation to the account being overdrawn $3000" and dated 4 April 1991. However, it appeared that Mr Fidler had not been able to locate this document. Counsel then referred to what he described as "a letter on 18 April 1991 signed by Geoff Storer." Although Mr Fidler had apparently been able to find that letter in the relevant file of the Bank, it was not tendered in evidence. Counsel asked Mr Fidler: "Now, that is a letter, is it not, that says to Dean that the account is currently overdrawn $14,519 and asking for funds to be lodged to place the account in order; is that right? Mr Fidler replied: "Yes." 180 Counsel then referred Mr Fidler to a letter dated 2 May 1991 which was not tendered in evidence although Mr Fidler, who had signed it, read from it the following: "We advise the above cheque account has been overdrawn $20,364.21 without arrangement in excess of 62 days and as such we would appreciate you depositing sufficient funds to place the account in credit. Should you be unable to reconcile this balance or have any queries please do not hesitate to contact us." 181 Although it has not been possible to refer to either the letter dated 18 April 1991 or that of 2 May 1991for its terms or effect, Mr Fidler accepted, and I did not understand Counsel for the Bank to dispute, that each was to the effect put by Counsel for the respondent and read into evidence by Mr Fidler and each had been sent to Denis Dean. Nor did it seem to be contested that Denis Dean's account had been overdrawn for a continuous period "in excess of 62 days" when the letter dated 18 April, was sent to it. 182 I regard the letter sent by the Bank to Dennis Dean dated 18 April 1991 as an effective notice for the purposes of s 76 of the Transfer of Land Act (Vic) (cf s 57(3)(d) of the Real Property Act 1900 (NSW) and S 84(2) of the Property Law Act 1974 (Qld) and Form 7 of the Second Schedule.). It follows, therefore, that pursuant to s 77 of the Transfer of Land Act (Vic) and clause 11 of the mortgage from Dennis Dean to the Bank, the Bank became entitled to exercise a power of sale over the subject property three days after the letter dated 18 April 1991. However, for reasons already given, I consider that the Bank's cause of action against the respondent accrued when, to paraphrase Brennan J in Wardley, it was "reasonably ascertainable that the burdens which the Bank had borne were greater than the value of the benefits that it had acquired or would acquire" 183 No evidence was proffered to indicate that, when the loan agreements were made, Dennis Dean was insolvent and I therefore conclude that the Bank's cause of action accrued when Dennis Dean defaulted in the payment of moneys due under the loan agreements. It was common ground that the accounts of Dennis Dean with respect of the loan agreements had been irregular after the moneys were drawn down on 30 November 1990. Taking the view of the evidence most favourable to the Bank, the letter dated 18 April 1991 supports a finding that an act of default occurred no later than 62 days before the sending of that letter. That was more than three years before the filing of the application in this proceeding. Accordingly, the applicant's claim pursuant to s 52 and s 82(1) of the Trade Practices Act 1974 is statute-barred by s 82(2) of that Act. 184 Similarly, s 37(2) of the Fair Trading Act 1985 (Vic) provides that an application for the recovery of damages pursuant to that Act "may be commenced at any time within three years after the date on which the cause of action accrued." Consistently with the reasoning indicated above, the present application, insofar as it seeks damages pursuant to the Fair Trading Act is also statute-barred. However, the availability to the respondent of this defence is of no more than academic significance because, as I have already indicated, the Bank has succeeded in establishing the liability of the respondent, in the same measure of damages, for the tort of negligence at common law. By s 5 of the Limitations of Actions Act 1958 (Vic) actions founded on tort shall not be brought after the expiration of six years from the date on which the cause of action accrued. MITIGATION OF DAMAGES 185 On behalf of the respondent it has been submitted that the Bank failed to mitigate the loss which it sustained as a result of the negligence (presumed for the purposes of this part of the argument, but not conceded) of the respondent. In this context, Counsel for the respondent pointed, first, to the provision by the Bank to Denis Dean in September 1991 of what were called "new facilities". 186 However, it will be recalled that the fixed term/fixed interest loan of $400,000 made to Denis Dean was not repayable until 3 September 1993 whereas the commercial bill facility for $375,000 matured on 30 September 1991. Interest under the latter facility was not paid as it fell due and, according to Mr Fidler's internal memorandum of 30 September 1991, Denis Dean's original intention to reduce debt by selling a lot on the proposed plan of subdivision had not been proceeded with "due to the property down-turn". Accordingly, Denis Dean requested that "the $375,000 be allowed to extend for another two years". However, that request was refused so there was no provision by the Bank of "new facilities" to Denis Dean. 187 It was next put that, since Denis Dean had defaulted in payment of interest under the loan agreements as early as April 1991, the Bank had been unduly dilatory in not offering the subject property for sale before June 1993. However, it is to be borne in mind that the "property down-turn" noted in Mr Fidler's memorandum of 30 September 1991 had commenced, on the evidence, by mid-1991. It was not predictable by the end of 1991 that the market would continue to deteriorate. Indeed, the evidence does not permit a finding as to when the market "bottomed" after the down-turn noted by Mr Fidler. In these circumstances, I am not persuaded that it was unreasonable for the Bank to rely for a time on the arrears of interest being recouped from improved profitability of the Powder Coaters and garage businesses which Denis Dean was conducting on part of the subject property. 188 A salutary reminder of the need for care and restraint in assessing a plea, by way of defence, of a failure to mitigate damages in a case like this is to be found in these observations of Lord Macmillan in Banco de Portugal v Waterlow & Sons Ltd [1932] A.C. 452 at 506: "Where the sufferer from a breach of contract finds himself in consequence of that breach placed in a position of embarrassment the measures which he may be driven to adopt in order to extricate himself ought not to be weighed in nice scales at the instance of the party whose breach of contract has occasioned the difficulty. It is often easy after an emergency has passed to criticize the steps which have been taken to meet it, but such criticism does not come well from those who have themselves created the emergency. The law is satisfied if the party placed in a difficult situation by reason of the breach of a duty owed to him has acted reasonably in the adoption of remedial measures, and he will not be held disentitled to recover the cost of such measures merely because the party in breach can suggest that other measures less burdensome to him might have been taken." 189 Considerations of the same kind have left me unpersuaded that the Bank's delay between September 1991 and June 1993 in effecting a mortgagee's sale of the subject property was unreasonable. It was not until early 1993 that Denis Dean was ordered to be wound up and it is not clear from the evidence that its financial position was such that the Bank had no prospect of any dividend from the winding up. Moreover, in the absence, which I have already noted, of evidence that the industrial market in Shepparton was noticeably in a continuing decline during 1992, I am unable to conclude that it was unreasonable for the Bank to defer a safe until June 1993. It may equally have been reasonable for the Bank to expect to achieve the benefit of some correction of the earlier down-turn by deferring the sale. Even if an expectation of that kind were unduly optimistic, an earlier sale would only have mitigated the Bank's loss by causing interest to cease to accrue on so much of Denis Dean's indebtedness as was represented by the net proceeds of sale. 190 Nor am I persuaded that a failure to mitigate in the requisite sense arose from the circumstances surrounding the sale which did occur in June 1993. The criticism was made on behalf of the respondent that the contract of sale imposed a condition requiring the purchaser to assume responsibility for outstanding sewerage and road construction works and to provide bank guarantees of the performance of those works in the sums of $85,000 and $50,000 to the Shepparton Water Board and the Shire of Shepparton respectively. It will be recalled, however, that, on the day of the auction, Mr Gough advised prospective purchasers that those guarantees would only be required if the land were acquired by a purchaser who intended to proceed with the proposed plan of subdivision. Somewhat inconsistently, it was suggested on behalf of the respondent that the subject property should have been advertised as having potential for subdivision. It was not unreasonable, however, for the Bank's advertisement to confine itself, as it did, to describing the subject property as "Excellent investment opportunity with further development potential." 191 In my view, it was either apparent or readily ascertainable by any prospective purchaser that some progress had been made towards effecting a proposed subdivision and that the guarantees of $85,000 and $50,000 were required by the Shire authorities in that connection. I also believe that the progress which had been made towards subdividing the subject land would generally have been regarded as enhancing its value. However, any prospective purchaser who was minded to retain the land without subdividing it could easily have found out, as Mr Shellie did on the day of the auction, that provision of the bank guarantees would not be required if the proposal to subdivide were abandoned. 192 Some point was sought to be made on behalf of the respondent that a change in the date proposed for the conduct of the auction constituted a failure to mitigate. The Bank on 2 April 1993 instructed Ellis Gough Real Estate Pty Ltd ("Ellis Gough") to advertise and submit the subject property to auction on Friday 4 June 1993. By letter to the Bank dated 27 April 1993 Ellis Gough confirmed that the date of the auction had been altered to 18 June 1993. All newspaper advertisements and signboards seem to have nominated the latter date and there is no evidence that any advertising expenditure was thrown away as a result of the change in date. Nor is there any evidence to suggest that any potential purchasers were confused or deterred by the postponement which gave Ellis Gough a further two weeks to market the subject property. Accordingly, I do not regard that postponement as contributing at all to a failure by the Bank to mitigate its loss. 193 Nor do I consider that the Bank has been shown to have failed to mitigate its loss because it did not extract a higher price from the ultimate purchaser than $110,000. He had been the highest bidder at $90,000 and there was nothing to indicate that any other prospective purchaser would have overtopped that bid by more than $20,000. Nor was there any evidence to suggest that, in the absence of competing offers the ultimate purchaser, Mr Shellie, was prepared to offer more than $110,000. 194 In Henderson v Amadio (No.1) (1995) 62 FCR 1 at 194, Heerey J observed: A plaintiff is only required to do what is reasonable to mitigate the loss caused by the defendant. What is or is not reasonable in the circumstances is a question of fact: Sotiros Shipping Inc v Shmeiet Solholt [1983] 1 Lloyds Rep 605 at 608. The onus is on the defendant to show that the loss proved could have been minimised or avoided altogether by the taking of some step which the plaintiff could reasonably have taken but did not take: Goldburg v Shell Oil Co of Australia (199) 95 ALR 711 at 714. 195 I do not consider that the Bank's failure to obtain, in or after September 1991, a personal guarantee from the directors of Denis Dean other than Mr Dean himself, a mortgage debenture charge over the other assets and undertaking went to mitigation in the sense explained in Henderson v Amadio. Those matters arise more appropriately in a consideration of the defence of contributory negligence which is discussed below. Therefore, for reasons which I have endeavoured to explain, the respondent has not discharged its onus of establishing a failure by the Bank to mitigate its loss in any of the respects to which attention has been drawn. CONTRIBUTORY NEGLIGENCE 196 On behalf of the respondent it has been contended that the Bank was guilty of contributory negligence in failing to insist on compliance with the stipulation, as a condition of the loan agreements, that the directors of Denis Dean should furnish personal guarantees. In a similar way it was pointed out that the Bank had failed to take a mortgage debenture over the assets and undertaking of Denis Dean itself. Thirdly, Counsel for the respondent pointed to the disregard by the Bank of its own stipulation that "Draw down of $100,000 - to be placed in cash management account and progressively paid out on production of invoices from Board of Works etc. (Bank cheques payable to those bodies sent direct)." 197 Reference was made also to the failure of the Bank, until well after it advanced the balance of the loan moneys, to analyse the financial statements which it had insisted in the letter of 14 September 1990 be provided by Denis Dean by 31 October 1990. Attention was drawn as well to the apparent failure of the Bank to obtain copies as requested of the Memorandum and Articles of Association of Dennis Dean or the Trust Deed pursuant to which it was constituted the trustee of the Dean Family Trust. The test to be applied in evaluating whether a defence of contributory negligence has been made out is whether the plaintiff or applicant has failed to exercise reasonable care to safeguard its own interests. Acceptance of that test led Lindgren J in MGICA (1992) Ltd v Kenny & Good Pty Ltd (1996) 140 ALR 313 to observe, at 383: "The respondents have not proved that MGICA failed to exercise reasonable care to safeguard its own interests. What will constitute the exercise of reasonable care must depend on the risk to be guarded against. The risk here was that PCL would suffer a loss against which MGICA had undertaken to indemnify it. MGICA would suffer that loss only if it transpired that Beca defaulted and the Mortgage and guarantee failed to protect PCL from loss. The greater the LVR ratio, the greater the care a mortgage insurer might be expected to exercise. The evidence does not persuade me to conclude that with its LVR ratio of 65% apparently satisfied, MGICA's failure to suspect, to seek verification and to make further inquiry, in the various ways indicated in the respondents' submissions constituted a failure by MGICA to take reasonable care to protect itself from loss." 198 What amounts to reasonable care by an applicant to safeguard its own interests has to be determined according to the factual circumstances surrounding the transaction and the degree of skill or astuteness which can reasonably be imputed to the lender. Thus, in Nyckeln Finance Co Ltd v Stumpbrook Continuation Ltd [1994] 2 EGLR 143 the plaintiff finance company lent an amount of Ł21 m to finance the purchase of office premises in the City of London. The premises had been valued for mortgage lending purposes by an officer of a predecessor of the defendant at Ł30.5 m. However, the purchase price was only Ł23.5 m. Judge Fawcus sitting as a Judge of the High Court found that the lender was "to a degree at fault" in making the loan "without properly satisfying itself as to the reliability of the valuation" in the light of the discrepancy between the valuation and the purchase price. He concluded that the appropriate deduction from the damages recoverable by the plaintiff for its contributory negligence was twenty 20%. 199 In Cash Resources Australia Pty Ltd v Ken Gaetjens Real Estate Pty Ltd (1994) Aust. Torts Reports 81-276 the plaintiff, a money lending and debt factoring company, took a second mortgage over an area of land and a factory and buildings, mainly cold storage facilities, as security for a loan to a meat processing company. The property had been valued by the defendant as a "going concern" at $2.2 million. However, the property was subsequently sold for $715,000 which was insufficient to reimburse the first mortgagee. The plant and equipment which had been included in the "going concern" valued by the defendant was not owned by the meat processing company. It was held that the plaintiff had been guilty of contributory negligence because it knew or should have known that the meat processing company did not own the plant or equipment in the sense that it could be passed to a purchaser of the land. The percentage of loss apportioned to the plaintiff as a result of its contributory negligence was 25%. 200 In Kendall Wilson Securities Ltd v Burraclough [1986] 1 NZLR 576 a solicitor's nominee company had lent $150,000 on the security of a mortgage over land which had been valued by the respondent valuer at $295,000. The valuer was found to have been in breach of a duty of care owed to the lender but the lender was held to have been contributorily negligent because its solicitor principal had failed to apply the ordinary skill and care of a solicitor responsible for advancing trust funds by not inspecting the balance sheet of the borrower or otherwise exploring its financial position. On this basis, the Court of Appeal reduced the damages recoverable by one third. 201 A similar approach was taken to the issue of contributory negligence by Smith J in Challenge Bank Ltd v V.L. Cooper & Associates Pty Ltd (1995) Aust. Tort Reports 81-35 where his Honour observed, at 62, 617: "In all the circumstances, however, the situation was one where it could not be said that the bank was negligent in looking after its own interests in lending the money provided that it had obtained adequate security. But the bank officers were negligent in their assessment of the risks and thus deprived themselves of the opportunity to require further appropriate security. Properly assessed there were obvious and unusual risks and uncertainties affecting the borrower's ability to pay the instalments. At best the extent of their ability to do so was unclear. An additional mortgage over the Gladstone Road property was an obvious option. The money was being borrowed in part to develop that property. I am satisfied that the property was available as a security and that, while there is no direct evidence, it would, on the probabilities, have been given as security if required. The value of the Gladstone Road land is not entirely clear but the borrowers asserted that it was worth $75,000 in their loan application. The nominal security could, therefore, have been increased by about 20 to 25%. In light of the valuation of the Noble Park property, this would have, at the time, appeared to have provided sufficient protection for a loan carrying the abovementioned risks and uncertainties when it was made. If it was not available as a security, then it would have been negligent to lend the money without other equivalent security. In determining an appropriate apportionment, it seems to me that the correct view is that the primary and major responsibility for the loss lay with the valuer and that the fault of the bank occurred in circumstances that were created by the valuer. If the valuer had prepared its report and valuation with reasonable care I am satisfied that the loan would not have been made. The valuation was also significant in that it gave the bank a false impression of the asset backing available to it as its security. Further, my assessment of the situation is that the contributory negligence of Challenge was not such as to have been likely to have caused the loss but, if reasonable care had been taken, such care would in all probability have reduced its loss. Its negligence merely, in my view, had the result that it did not seek further security. In all the circumstances I consider it appropriate that Challenge should be required to bear 25% of the loss it suffered." 202 In the present case, it is not clear that extracting personal guarantees from Mr Dean and his wife or taking a debenture charge over the plant equipment and undertakings of Denis Dean as a "going concern" would have achieved any effective increase in the value of the security realizable by the bank. A personal guarantee was subsequently obtained from Mr Dean but, as I infer, his separate assets were insufficient for recourse to them to ameliorate the Bank's loss. Nor does it appear that a detailed analysis of the financial statements of Denis Dean as at 30 June 1990 would have led to the Bank's refusing to enter into the loan agreements. 203 In H.I.T. Finance v Lewis & Tucker Ltd [1993] 2 EGLR 231 the negligent valuation was Ł2.2 million and the advanced secured on the property was Ł1.54 million. Wright J observed, at 235: "The "cushion" apparently provided by the property, on the basis of the defendant's valuation was accordingly Ł660,00. In such circumstances, even if the borrowers turned out to be complete men of straw, the lenders were entitled to regard themselves as being more than adequately covered not merely in respect of the capital sum lent, but also any likely loss of interest, and indeed all the costs and expenses likely to be incurred in foreclosing upon and realising the security. In such circumstances, although the hypothetical lender might not unreasonably feel irritated at being put to the trouble of having to realise his security rather than enjoying the fruits of his investment in a peaceful manner and in accordance with the terms of his contract, it is very difficult to see how such a lender could properly be characterised as being "imprudent". I am not suggesting that the prudent lender, merely because he has the comfort of more than adequate security, is entitled to shut his eyes to any obviously unsatisfactory characteristics of the proposed borrower. Plainly a lender would not be acting prudently if he made a loan in circumstances where he had substantial reason for suspecting the honesty of the borrower. Such circumstances might well call into question the provenance of the security itself, quite apart from the possibility that the lender might be put at risk by some other form of fraudulent behaviour on the part of his borrower. No such suggestion is made in the present case, and no evidence has been put before me which would justify such a suggestion had it been made." 204 The evidence does not permit a finding in the present case that there was any ground, at the time when the loan was made, for suspecting dishonesty, or other "unsatisfactory characteristics" of Denis Dean or its principals. However, different considerations apply to the Bank's disregard of its own stipulation that the balance of the loan ($100,000) left after discharging the mortgage in favour of Sandhurst, should only be disbursed in payment for the performance of developmental works on the subject property. Had that prudent stipulation been adhered to, Denis Dean's indebtedness to the Bank and, consequently, the shortfall on realization of the security would have been less by $100,000 or the value of the subject property would have been enhanced by the works for which the balance of the loan moneys should have been disbursed. That enhancement, had it occurred, would, presumably, have been reflected in an increase in the price obtained on the mortgagee's sale. The Bank's negligence in paying the balance of $100,000 to Denis Dean in disregard of its own prudential stipulation, I consider, should be reflected in a reduction of 20% in the damages recoverable by it for the respondent's negligent valuation. CONCLUSION 205 In summary, I have been led to conclude that the Bank has established that the respondent's submission to it of the subject valuation was in breach of a duty of care owed to the Bank and was misleading and deceptive conduct in contravention of s 52 of the Trade Practices Act. The Bank's cause of action under the Trade Practices Act has been barred by expiration of the time limit imposed by s 82(2) of that Act. However, the cause of action in negligence had not been barred when the present proceedings were instituted. The Bank has established that the whole of the loss which it sustained as a result of making the loans to Denis Dean was caused, in the requisite sense, by the respondent's negligence. The measure of that loss is that applicable to a "no transaction" case, i.e. the whole of the moneys advanced together with accrued interest and the costs associated with the mortgagee's sale, less the gross proceeds from that sale. There will be judgment for the Bank for damages calculated in that way reduced by 20% for the Bank's contributory negligence. I shall hear Counsel if necessary, on the question of interest and costs and shall reserve liberty to apply. I certify that the preceding two hundred and five (205) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RYAN. Associate: Dated: 13 September 1999 Counsel for the Applicant: Mr G Watkins Solicitor for the Applicant: Russell Kennedy Counsel for the Respondent: Mr J Delany Solicitor for the Respondent: Phillips Fox Dates of Hearing: 5, 6, 7, 8 and 9 August 1996, 4, 5, 6, 7, 8 and 9 February 1997 Written Submissions filed: 17 February, 13 March and 22 April 1999. Date of Judgment: 13 September 1999