FEDERAL COURT OF AUSTRALIA Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 1568 TRADE PRACTICES – liability for contravention of s 52 Trade Practices Act 1974 (Cth) ("the TP Act") arising from sale of shopping centre determined in previous proceedings – determination of cross-claim and liability of second and third respondents in respect of the contravening conduct of the first respondent under s 75B of the TP Act – cross-respondent was director of company purchasing shopping centre and also the solicitor acting for the purchaser – whether the cross-respondent was acting in the capacity of solicitor for the applicant prior to the exchange of contracts for the purchase of the relevant property – whether retainer implied by conduct. NEGLIGENCE – solicitor – breach of retainer – implied retainer – whether solicitor acting for purchaser had a duty to make proper inquiries or to provide advice that inquiries be made prior to the exchange of contracts, in relation to the contract for sale of the property and its provisions concerning the solvency or financial standing of tenants. EQUITY – cross-respondent's liability in equity to make contribution to the cross-claimants' liability for damages – power to order equitable contribution in relation to a liability to pay damages under s 82 of the TP Act – whether there existed a common obligation or co-ordinate liability between the parties to the cross-claim – assessment of the proportion and amount of contribution. DAMAGES – assessment of damages on the claim and cross-claim – consideration of valuers' reports in respect of the determination of damages. Trade Practices Act 1974 (Cth) ss 52, 75B, 82 Bialkower v Acohs Pty Ltd & R A Bashford Consulting Pty Ltd (1998) 83 FCR 1, followed Street & Halls v Retravision (NSW) Pty Ltd (1995) 56 FCR 588, cited Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (unreported, Young J, Supreme Court of NSW, 15 July 1996), considered Jones v Mortgage Acceptance Nominees (1996) 63 FCR 418, considered Re Steel [1979] Ch 218, cited Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281, applied Magenta Nominees Pty Ltd v Richard Ellis (Western Australia) Pty Ltd [1995] FCA 671, applied HANAVE PTY LIMITED v LFOT PTY LIMITED (formerly JAGAR PROJECTS PTY LIMITED)(Cross-Claimant) and PAUL EWEN MITCHELL TRESIDDER(Cross-Claimant) and JOSEPH RAYMOND GLEW(Cross-Claimant) and ROBERT BURKE (Cross-Respondent) NG 721 of 1995 MOORE J 11 NOVEMBER 1999 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 721 OF 1995 BETWEEN: HANAVE PTY LIMITED Applicant AND: LFOT PTY LIMITED (formerly JAGAR PROJECTS PTY LIMITED) First Respondent/Cross-claimant PAUL EWEN MITCHELL TRESIDDER Second Respondent/Cross-claimant JOSEPH RAYMOND GLEW Third Respondent/Cross-claimant ROBERT BURKE Cross-respondent JUDGE: MOORE J DATE OF ORDER: 11 NOVEMBER 1999 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Subject to order 2, the first and second respondent pay the applicant the sum of $750,000 by way of damages. 2. At the time of satisfaction of order 1, the cross-respondent pay the first and second cross-claimant the sum of $375,000 by way of contribution. 3. Submissions on costs to be filed and served within 21 days. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 721 OF 1995 BETWEEN: HANAVE PTY LIMITED Applicant AND: LFOT PTY LIMITED (formerly JAGAR PTY LIMITED) First Respondent/Cross-claimant PAUL EWEN MITCHENN TRESIDDER Second Respondent/Cross-claimant JOSEPH RAYMOND GLEW Third Respondent/Cross-claimant ROBERT BURKE Cross-respondent JUDGE: MOORE J DATE: 11 NOVEMBER 1999 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 31 August 1998, I dismissed an application by Hanave Pty Ltd ("Hanave") who had sought relief against LFOT Pty Ltd (formerly Jagar Projects Pty Ltd)("Jagar"), Mr Paul Tresidder and Mr Joseph Glew: see (1998) ATPR 41-658. For reasons adverted to in a judgment of 11 November 1998 concerning costs, I made no orders in relation to a cross claim brought against Mr Robert Burke. 2 In a judgment of 1 April 1999 a Full Court, by a majority, made the following orders in an appeal from my judgment of 31 August 1998: (see (1999) ATPR 41-687) "1. The appeal be allowed. 2. The orders made on 31 August 1998 be set aside and in lieu thereof judgment be entered for Hanave Pty Limited against the first respondent, Lfot Pty Limited. 3. The matter be remitted to the primary Judge for determination of the issue of the liability of each of the second and third respondents with respect to the contravening conduct of the first respondent, for determination of the cross claim and an assessment of damages on the claim and cross claim. 4. Lfot Pty Limited pay Hanave Pty Limited's costs of this appeal and the hearing below." 3 I will now deal with each of the matters reserved for my further consideration in the sequence in which they are referred to in the orders of the majority of the Full Court. I will not deal with any matter which was not either expressly or by necessary implication reserved for my further consideration notwithstanding submissions that have been made suggesting I should. Liability of each of the second and third respondents for the contravening conduct of the first respondent 4 In my reasons of 31 August 1998 I said the following about the liability of Glew and Tresidder: "The aiding and abetting allegations I should say something about the case against Glew and Tresidder dependent on the operation of s 75B of the Trade Practices Act 1974. However, I will do so briefly because Hanave has not made out a case against Jagar for damages under s 82. Thus whatever operation s 75B might otherwise have had, it has no legal consequences creating liability for damages in the present case. The case against both of them, as it relates to the conduct of Jagar I have found contravened s 52, proceeded on the basis that each knew of the contents of the property report. That is, they knew it described Barbara's Storehouse as a high quality tenant. Glew said he did not know that description had been used in the property report. I accept his evidence. Tresidder's evidence was to the effect that he did know but believed the description was appropriate. He believed this because while a description of a tenant as a high quality one conveys, he accepted, that the tenant would pay the rent, it did not convey, he thought, that the tenant paid on time in accordance with the lease. However, aiding and abetting specified conduct is established by proof of the knowledge of the essential elements of the conduct: see Yorke v Lucas (1985) 158 CLR 661. Tresidder knew of Barbara's Storehouse's record of payment, knew of its description as a high quality tenant and knew the property report would be provided to intending purchasers. Tresidder's conduct satisfies the precondition to personal liability created by s 75B." 5 My finding that Glew did not know that the description of Barbara's Storehouse Pty Ltd ("Barbara's Storehouse") as a high quality tenant appeared in the property report, is still relevant to the question of his liability under s 75B of the Trade Practices Act 1974 (Cth)("TP Act"). As I read the reasons of both Wilcox and Kiefel JJ, their Honours treat the conduct of Jagar of failing to disclose the incentive payment as conduct cumulative in its effect. That is, the contravening conduct of Jagar which the majority found had caused loss or damage, was the description of Barbara's Storehouse as a high quality tenant together with the failure to disclose the incentive payment. Thus, because Glew did not know of the description in the property report, he cannot be liable under s 75B. On the other hand, I found that Tresidder did know of both the description and Barbara's Storehouse's record of rent payment. What must now be addressed is whether he also knew of the provisions of clause 8.3, the obligation to disclose and/or the failure to disclose the incentive payment. Tresidder's evidence was that he skimmed the contract. However his evidence as to whether he was aware of clause 8.3 was vague. At one point he suggested he had not seen clause 8.3, at another that he would not have taken any notice of it and at another he would not have put the two together. That is, he would not have made the connection between the terms of clause 8.3 (presumably including the heading "Lease Incentives") and the payment that had been made to Barbara's Storehouse. In cross examination he accepted that the payment could be characterised as an incentive payment. In my reasons of 31 August 1998, I said the following about Tresidder: "Neither Slatyer nor Tresidder particularly impressed me as witnesses. … …Tresidder, when giving evidence, appeared to me often evasive in the sense that he sought to answer questions in a way entirely favourable to his case and, in so doing, deliberately avoid giving an answer that might in some way damage his case." 6 I am satisfied Tresidder was aware at the time of the sale of the Leichhardt property that the contract, which he signed, required disclosure of lease incentives, that the payment of the $60,000 could be characterised as an incentive and that the $60,000 was not disclosed. He thus knew of the essential elements of the conduct that the majority of the Full Court concluded was conduct contravening s 52 which caused Hanave loss or damage. As to the required knowledge see Wheeler Grace & Pierrucci Pty Ltd v Wright (1989) 16 IPR 189, Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1994) ATPR 41-315, Richardson & Wrench (Holdings) Pty Ltd v Ligon No. 174 Pty Ltd (1994) 123 ALR 681 and Westbay Seafoods (Aust) Pty Ltd v Transpacific Standardbred Agency Pty Ltd [1996] FCA 630. By operation of 75B, Tresidder is personally liable for the consequence of Jagar's conduct for the purposes of the operation of relevant provisions of the TP Act. The cross claim 7 The cross claim is founded on the proposition that prior to exchange of contracts on 20 July 1994, Burke, as the principal of Gilbert Mane, was acting as a solicitor for Hanave in the purchase of the Leichhardt property and his conduct was negligent and in breach of his retainer. The cross-claimants submitted the retainer was to be implied. 8 It was not in issue that after exchange Gilbert Mane acted for Hanave on the conveyance. In issue was the role, if any, of Gilbert Mane before exchange. Gilbert Mane had acted for Hanave since about 1992. Between 1979 and about 1992, Gillis Delaney acted as solicitors for Hanave. At the time Gilbert Mane started acting for Hanave, Mr Mane was the principal of the firm. Burke was admitted to practice as a solicitor in 1991. By 1994 he was able to practice as a sole practitioner and he then acquired the firm of Gilbert Mane. He acquired it in at least the sense that Mane left the firm as a partner though continued in some role as a consultant and Burke carried on practice under that name. Prior to and after the purchase of the Leichhardt property, Gilbert Mane acted for Hanave. There is nothing in the evidence to suggest that any other firm was acting for Hanave in 1994. Much of the work Gilbert Mane was doing for Hanave before and after the purchase was acting for Hanave as lessor in the letting of its properties. For that work, Gilbert Mane's costs were met by the lessee. 9 Burke gave evidence that there had been occasions when he chastised clients of Gilbert Mane who had failed to consult the firm prior to purchasing a property at auction and prior to exchange. 10 There was no express retainer for Gilbert Mane to act before exchange. Indeed there was no evidence of an express retainer, either written or oral, after exchange. Gilbert Mane simply, by at least immediately following exchange, assumed the role of solicitor for Hanave. It was common ground that at that latter point Gilbert Mane was retained by Hanave. In my reasons for judgment of 31 August 1998 I dealt with Burke's evidence about the capacity in which he acted before exchange: "It is to be recalled that the contracts were exchanged on 20 July 1996, a day after the auction. The draft of the contract had been sent to Burke on 11 July 1994. When giving evidence Burke was quite emphatic that when he attended the auction and prior to that, he had been acting in his capacity as director of Hanave, and not as its solicitor, as he had also been at the time of exchange. There are some objective signs that this is so. The letter of 28 June 1994 from Laing & Simmons forwarding him a copy of the property report was directed to "Mr Robert Burke, Hanave Pty Ltd". On 18 July 1994 Kyle sent Burke a fax addressed to "Hanave Pty Ltd" and a letter of 20 July 1994 to Laing & Simmons enclosing the deposit was on Hanave letterhead and signed by Mr Burke above the typed description "Director". However on 19 July 1994, shortly after the auction but before exchange, Burke was sent a facsimile from Kyle addressed to "Gilbert Mane". The fax was the one enclosing the revised tenancy schedule. Burke's explanation for the fax being addressed to him at "Gilbert Mane" was that he must have given Kyle a Gilbert Mane business card at the auction because he did not have any Hanave business cards. In the contracts which were exchanged on 20 July 1994 the purchaser's solicitor was identified as "Gilbert Mane" and next to the typed "Ref" there was written "Robert Burke". During the course of his evidence Burke said that when he read the draft contract he did so as a director of Hanave. The clear import of his evidence was that he thought about the matter at the time and consciously elected to act as director and not as a solicitor. I have not found his evidence on these matters at all convincing. In my view Burke simply acted as himself. He was a solicitor conducting a legal practice in which he regularly acted for Hanave in a comparatively informal way. For example, no register was kept of when files on Hanave matters were opened. He was also a director of that company. In my opinion, he would generally have given no thought to the capacity in which he acted in situations such as when he was reading the draft contract. The fact that he gave Kyle a Gilbert Mane business card simply exemplifies that, at any given time, he was not drawing the comparatively rigid distinction which he sought to maintain when giving evidence. The following appears in Burke's cross-examination: [Counsel for the respondents]: 'If I could just clarify this, as I understand it the evidence that you have given yesterday and confirmed today is that there was no solicitor acting for Hanave prior to exchange? ---Yes. And you did not tell Hanave that it would be prudent for them to retain a solicitor prior to exchange, did you?---Tell myself? Or your brother or Mr Vogel who happened to be the other directors?---I knew there was a solicitor available at very close call. Who was that?---Me. Well if that was the case why did you not act, your firm act prior to the exchange?---There was no need for a solicitor prior to exchange. In other conveyances that you have acted on can you recall any occasion when you have acted as a solicitor on a purchase but only after exchange?---Yes. How many times have you done that?---When clients come to me and say they have bought something on auction, can I look at this contract. Would it be correct to say that in most cases you have actually been retained to act for a purchaser on a purchase for the entirety of matter, that is prior to exchange?---That's the normal transaction. Well, if this is not the normal transaction what I do not understand is why you did not act or offer to act for Hanave prior to exchange?---Wasn't required. That is a view that you formed?---That was a view that I formed.' This evidence is disingenuous. In my opinion, the distinction constantly drawn by Burke about acting as director on the one hand and solicitor on the other is one of convenience only, designed to answer the cross claim." 11 It is relatively clear from Burke's evidence that in reviewing the draft contract for sale prior to auction he was exercising his legal professional skill and judgment. In Phipson on Evidence (14th ed) the following is said at 20-16 about the creation of the relationship of solicitor and client in the context of discussing legal professional privilege: "Neither a formal retainer, nor the payment of fees, is necessary to constitute the relationship of solicitor and client; it is enough if the adviser is in anyway consulted in his professional character." 12 Notwithstanding this statement of principle, it is sometimes difficult to identify precisely the capacity in which a person is acting and, in particular, whether the person is acting as a legal adviser. These problems were adverted to by Deane J in Waterford v The Commonwealth (1987) 163 CLR 54 at 86 and exemplified in Standard Chartered Bank of Australia Ltd v Antico (1995) 36 NSWLR 87 at 93 in which Hodgson J drew a distinction between a person acting as a director with legal knowledge participating in a commercial decision on the one hand and the same person acting as solicitor for the company on the other. While these cases concern legal professional privilege they illustrate situations where it is necessary to ascertain the capacity in which a legally qualified officer of a company is acting. In the present case the steps Burke took of scrutinising the draft contract and effectuating exchange were of the essence of the work of a legal practitioner: cf Solicitors' Liability Committee v Gray & Winter (1997) 77 FCR 1. That his firm later acted on the conveyance tends to confirm the capacity in which he acted prior to exchange when scrutinising the draft contract as being that of solicitor for Hanave. 13 The existing relationship between Hanave and Gilbert Mane in which that firm was doing all the company's legal work associated with property transactions, the use by Burke of his professional skills and judgment in reviewing the draft contract before exchange, the conceded existence of a retainer, never expressly given, after exchange and the view Burke held that solicitors should be retained prior to exchange all point, in my opinion, to the existence of a retainer prior to exchange: see Day v Mead (1987) 2 NZLR 443 at 459 and also Jackson and Powell on Professional Negligence (4th ed) (1997) at para 4-03 and the cases cited. It can be implied, in my opinion, that Gilbert Mane was retained prior to exchange to take all reasonable steps necessary to permit the purchase of the property by exchange of contracts and thereafter to take all reasonable steps to effectuate the purchase up to and including settlement. 14 The question that then arises is whether the retainer was breached or Burke acted negligently. The applicants read affidavits from two witnesses to give what was advanced as expert evidence about the usual practice of solicitors acting in a purchase of the type presently under consideration. It was admitted over objection: as to the relevance of such evidence see Amadio Pty Ltd v Henderson (1998) 81 FCR 149 at 217. The first witness was Mr William Macquarie who, regrettably, died before the hearing. Macquarie carried on practice as a sole practitioner in Wollongong. He had served continuously on conveyancing committees of the Law Society of New South Wales since 1982 during which time he was Chairman of the conveyancing practice committee for four years and chairman of the property law committee for three years. He was, at the time of swearing his affidavit in August 1996, a member of the property law committee of the Law Society of New South Wales. He had lectured on conveyancing practice and drafting at the College of Law and at the University of Wollongong. He had been a member of the drafting committee responsible for the preparation for the code of practice for the sale and purchase of residential property which was approved by the Law Society of New South Wales in December 1990. He had chaired a sub-committee of the property law committee of the Law Society of New South Wales that drafted the Law Society form of commercial lease which is now in use by the profession. In his affidavit he referred to a range of documents he had been provided with as background to the provision of his opinion and he set out various assumptions he made. After referring to various provisions in the contract for sale of the Leichhardt property he proffered the opinion: "In my opinion, in these circumstances, it would have been common practice for any prudent solicitor exercising reasonable skill to advise the purchaser that inquiries should be made concerning the solvency or financial standing, of each of the tenants." He later expressed the opinion that: "A prudent solicitor exercising reasonable skill would have advised the purchaser about the desirability of making quality inquiries prior to the bidding at auction or the exchange of contracts. A prudent solicitor exercising reasonable skills would have advised the purchaser that the quality inquiries about tenants should be undertaken. In my opinion, such inquiries would have included the following: (a) carry out a credit check on each of the tenants; (b) have the purchaser's accountant check the books of the vendor for so far as they relate to the rental income and outgoings of the property, and to report on the rent performance of the tenants, income and outgoings and percentage returns; (c) talk to the tenants or have the agent who would be appointed as agent for collecting rent, talk to the tenants about the level of business and their satisfaction with the centre." 15 While due allowance has to be made for the fact that Macquarie's opinion was not tested in cross-examination, evidence to similar effect was given by Mr Neville Moses. Moses is a solicitor and partner of Messrs Murphy and Maloney and since 1972 has been a member of the Law Society conveyancing and property committees and was a member of the drafting committee on the 1992 standard form of contract for sale. He was the Challis lecturer in Conveyancing at the University of Sydney between 1969 and 1975. Again Moses referred to material he had been provided with and assumptions he made before expressing the opinions he did. Moses' evidence was that a solicitor acting in accordance with usual practice would, when acting for a purchaser of a shopping centre such as the Leichhardt property, advise the client to make due diligence inquiries in relation to the leases and the tenants prior to entering into any agreement to purchase if material is available to investigate the status of the leases, the commercial viability of the tenants, the future prospects of the tenants and the commercial worth of any guarantees obtained from the tenants. In the absence of material of this type it would have been standard practice for a solicitor acting for the purchaser to have ensured there were provisions in the contract which gave the purchaser the right to rescind or claim a reduction in price if the leases fell short of the standard required by the purchaser in relation to commercial, financial and legal matters. In cross examination, Moses accepted that the need to advise in the way he suggested would depend on the commercial sophistication of the client. 16 In the contract for sale there was, in clause 11.3, an express provision that Jagar made or gave no warranties as to the solvency or financial standing of any tenant and the purchaser was to be taken to have satisfied itself on those matters. The clause read: "11. PURCHASER TAKES LEASE AS IS 11.1 The purchaser acknowledges having inspected every Lease referred to in Schedule 1 and is satisfied as to the terms of the Lease and (subject to any vendor warranties expressly contained in this contract) the legal effect and operation thereof. 11.2 The purchaser is not entitled to object, requisition or make a claim, or to rescind or terminate this contract if any covenant in the Lease, the Lease itself (or any guarantee given in support of the Lease, or any covenant contained in any such guarantee) is void, unenforceable or illegal. 11.3 The vendor makes no warranty as to the solvency or financial standing of any tenant and the purchaser is taken to have satisfied itself in this regard." In my opinion a solicitor retained generally to act on the purchase, as Gilbert Mane was, should advise a client, in this case Hanave, that having regard to the express provisions of clause 11.3, it would be prudent for inquiries to be made about these matters before exchange. It would then be a matter for the client, in this case Hanave, to make a considered judgment of the commercial risks of not doing so: see Pola v Commonwealth Bank of Australia [1997] FCA 1476 at p 14; (1998) AustTortsR 81-460 and more generally Montague Mining Pty Ltd v Gore [1998] FCA 1334. 17 There is no evidence of any such advice having been given. Indeed it appears from the following cross examination of Burke that he probably did not understand what the clause meant: "What I am saying is you have sworn an affidavit, this one of 2 June, saying in relation to the contract – and there is a clause in the contract that there is no warranty about financial standing, that is clause 11 that you are commenting on? --- That's correct. You did not expect the vendor to warrant to the applicant anything as to the financial standing or solvency of any of the tenants. So, what I am asking is; that is why you did not ask Jagar, as it then was, the vendor, to tell you anything about them. You did not expect it? -- This is a warranty to the future. They're warranting to the future. No. If you want to go to the contract, document 3 in our discovery which is the actual contract as signed by yourself, I think, 11.3 talks about: The vendor makes no warranty as to the solvency or financial standing of any tenant and the purchaser is taken to have satisfied itself in this regard. I would like you to read over the whole of clause 11 and just ask you some questions about it? – Okay. That clause was telling you that at that time, that is at the time of entering into the contract, the vendor was giving Hanave, the purchaser, no warranty about those matters that are in 11.3? – That's not how I understood it. Is that not what it says? -- I did not understand that to mean that they could hide their debts. No, is that not what it says? ---- I understood it. No, is that not what it says? – I'm telling you what I understood --- No, I do not want to know what you understood at the moment. I want you to say is that not what that clause says, there was no warranty with respect to those matters? – I understood that as I've told you. That there was no warranty? – For the future. Well no, it is no warranty as at that moment of the contract, is it not? -- That's not how I understood it. Is it possible that you misunderstood that clause? – It's not how I read that clause." This theme was repeated a little later in the cross-examination: "So, you did not expect them to give any guarantee or assurance in any way as to the financial standing or solvency of the tenants in respect of Leichhardt? --- As I said before, for future obligations, I didn't understand that that was the way that they could hide things from the purchaser. It was not a way that they could get around the Trade Practices Act, that was not my understanding of 11.3 and it is still not my understanding of 11.3." 18 It appears Burke understood the warranty to relate to the future, and probably the payment of rent in the future and not the circumstances of the tenants at the time of sale including circumstances that might then have been known to Jagar. This apparent misunderstanding may well explain, at least in part, why Burke in his capacity as a director of Hanave, made no inquiries on behalf of Hanave about the financial circumstances of the various tenants notwithstanding that, as Hanave's solicitor, he ought to have known that the prudent course would have been to have done so. In my opinion, Burke as principal of Gilbert Mane breached his retainer and was negligent in not giving Hanave advice to make inquiries about the solvency and financial standing of the tenants. In the circumstances there is no reason to believe, in my opinion, that the advice would not have been acted on and inquiries made. It is probable the true position would have been disclosed and the purchase would not have proceeded at least on the terms it did. 19 The cross-claim against Burke depends on not only a breach of the retainer and/or negligence being demonstrated but also the existence of a right to contribution. None can be asserted by the cross-claimants under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) in relation to liability under s 82 of the TP Act: see ANZ Banking Group Ltd v Turnbull and Partners Ltd (1991) 33 FCR 265 and Bialkower v Acohs Pty Ltd & R A Bashford Consulting Pty Ltd (1998) 83 FCR 1 at 11. However it was submitted by the cross-claimants that contribution could be ordered by applying long established and well recognised equitable principles: see generally Kitto J in Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 350-352. 20 The source of power to order equitable contribution in relation to a liability to pay damages under s 82 arising from conduct contravening s 52 of the TP Act if no relevant state statute confers the power is an open questions: see the observations of the Full Court in Bialkower v Acohs Pty Ltd (supra) at 13. However the power has been accepted to exist, at least arguably, in several of the decisions of single judges referred to in Bialkower v Alcohs Pty Ltd and, indeed, was accepted to exist by the trial judge, Merkel J, in that case itself: see (1997) 144 ALR 528 at 539. This case, as I perceive the facts and the applicable law, illustrates why the power should be accepted to exist and I proceed on the basis it does if the equitable principles creating an obligation to effect contribution are satisfied. 21 Before a court can order equitable contribution between parties, the parties must share a "common obligation" or "co-ordinate liabilities" to "make good the one loss": Dering v Earl of Winchelsea (1787) 1 Cox Eq Cas 318; 29 ER 1184; Street & Halls v Retravision (NSW) Pty Ltd (1995) 56 FCR 588 at 597 per Gummow J; Bialkower v Acohs Pty Ltd (supra) at 12. In the present case the liabilities are the liability of Jagar and Tresidder under the TP Act for Hanave's loss resulting from Jagar's misleading and deceptive conduct on the one hand, and the liability of Burke for Hanave's loss resulting from his negligence and breach of retainer on the other. 22 Co-ordinate liability may arise from different causes of action: Street v Retravision (NSW) Pty Ltd (supra) at 597 per Gummow J; Bialkower v Acohs Pty Ltd (supra) at 12. As Gummow J said in Street v Retravision (NSW) Pty Ltd (supra) (at 597): "It would be taking too narrow a view of the matter and give insufficient weight to the preference equity has for substance to form to hold that there could be no common obligation if there were different 'causes of action' against the co-obligors. In BP Petroleum Development Ltd v Esso Petroleum Co Ltd [1987] SLT 345 at 347, Lord Ross preferred the statement of the criterion as whether the liability 'is of the same nature and the same extent'. This was the phrase used by Lord Chelmsford in Caledonian Railway Co v Colt (1860) 3 Macq 833 at 844. In BP Petroleum, an oil tanker owned by Esso damaged a jetty in the Shetlands. By contract with the port authority, BP was liable to it for the damage to the jetty and by statute Esso was liable to the port authority for the same damage. His Lordship held that, BP having paid the authority, it might recoup half of its outgoing from Esso. It was not the point that the common obligations to the port authority arose as to BP from contract and as to Esso from statute. The liability of the parties was 'of the same nature and the same extent' because each was liable to the authority to make good the damage to the jetty." (emphasis added) In Bialkower v Acohs Pty Ltd (supra) the Full Court said (at 12): "It is sufficient if two people are both liable in respect of the one loss, even if they are liable on different causes of action." 23 As Lee J observed in Trade Practices Commission v Manfal Pty Ltd (No 3)(in liq.) (1991) 33 FCR 382 at 385 the categories of co-ordinate liability are not closed: see also Edingbay Pty Ltd v Aroni Colman [1999] VSC 216. . 24 However for liabilities tobe "co-ordinate", they must be to make good the same loss, and must be "of the same nature and the same extent" or "in the same degree": BP Petroleum Development Ltd v Esso Petroleum Co Ltd (supra) at 347 per Lord Ross; Caledonian Railway Co v Colt (1860) 3 Macq 833 at 844 per Lord Chelmsford, both cited by Gummow J in Street v Retravision (NSW) Pty Ltd (supra) at 597. In my opinion the liablities of Jagar and Tresidder on the one hand and Burke on the other are to make good the same loss, namely Hanave's loss resulting from the purchase of the shopping centre and the liabilities are co-ordinate. 25 Thus Burke may be liable in equity to make contribution and it is necessary to determine whether he is and in what amount or proportion. The unsettled state of authority on quantification was highlighted by Young J in Mike Gaffikin Marine Pty Ltd v Princes Street Marina Pty Ltd (unreported, SC(NSW), Young J, 2092/92, 15 July 1996): "There is very little authority as to how one should approach questions of contribution in the present type of case. [contribution in relation to costs] There seem to me to be three possible answers to the question in what shares would it be conscionable for the third and fifth defendants to bear between themselves the costs which have to be paid to the plaintiff. The first is that as "equality is equity" the third and fifth defendants should each bear a moiety of the costs. The second is that they should bear the costs in the proportion that $120,000 bears to $272,783. The third is that the contribution should be according to the amount of "fault". It is clear from my reasons for judgment and from the comments that I have already made that the cause causans of the plaintiff's costs was more attributable to the third defendant than to the fifth defendant. However, as far as I know there are no authorities showing that this is the proper method of approaching assessment of contribution." The view of Davies J in Jones v Mortgage Acceptance Nominees (1996) 63 FCR 418 at 422 appears to be simply that the apportionment should be "just": "[T]here is no cogent reason why equity should not aid the identification of the tortfeasors who ought to contribute and the ascertainment of what would be a just contribution." (emphasis added) However, the Full Court in Bialkower v Acohs Pty Ltd (supra) made the following observations about this statement (at 12-13): "However, despite the observation of Davies J in Jones at 422 […] that he could see no reason why equity "should not aid … the ascertainment of what would be a just contribution", we doubt whether the general law of contribution authorises an apportionment such as that made by the primary judge. Contribution is "founded on equality": Albion at 351, though it is true that "equality" in the maxim "equity is equality" is not literal equality, but proportionate equality: Re Steel [1979] Ch 218 at 225-226." 26 It appears from this passage that the Full Court was approving the observations of Sir Robert Megarry VC in Re Steel [1979] Ch 218 at 226 who, in turn, was discussing remarks of Fry J in Steel v Dixon (1881) 17 ChD 825. Sir Robert Megarry VC was considering how the residue of an estate should be distributed amongst beneficiaries who had received legacies in nominated but differing amounts and said (at 226): "The other [authority] is Steel v. Dixon (1881) 17 Ch.D 825. There, at p.830, Fry J is discussing the rule that as between co-sureties there is to be equality of the burden and of the benefit. The judge says, "When I say equality I do not mean necessarily equality in its simplest form, but what has been sometimes called proportionable equality"; and he then explains that if the sureties are sureties for unequal amounts, they must contribute proportionately to the amount for which each is a surety. That, of course, is a very different case from this: but I think it is valuable as correcting any assumption that equality necessarily means mathematical equality. When the maxim "equality is equity" comes to be applied, it often, and I think usually, will mean mathematical equality, in that no other basis of equality can be discerned: but given suitable circumstances a true equality of treatment may require the application of a mathematical inequality, and instead a proportionate equality." 27 Thus the burden and the benefit are ordinarily to be divided equally unless there are "suitable circumstances" in which "a true equality of treatment" requires "proportionate equality". 28 I now turn to the question in the present proceedings of whether and the extent to which Burke should be required, by way of contribution, to satisfy Hanave's loss. In my judgment of 31 August 1998 I concluded that the conduct of Jagar did not cause Hanave loss so as to give rise to liability under s 82 of the TP Act. The majority of the Full Court concluded that the conduct I viewed as contravening s 52 together with Jagar's failure to disclose the incentive payments caused Hanave's loss in the sense that it was at least one decisive consideration leading to the decision of Hanave to purchase the property. Kiefel J, with whose reasons Wilcox J agreed, described the contravening conduct as having been "of significance to any rational prospective purchaser and to operate as influential when considering an investment in the centre, or the price paid for it." What are the hallmarks of a "rational prospective purchaser" and why, as a matter of fact, Burke was to be treated as having them is not clear. Nonetheless I am plainly bound to give effect to what appears to have been a finding of fact by Kiefel J that the contravening conduct of Jagar "must be taken to have been of significance" to Burke in deciding, on behalf of Hanave, to purchase the property which was worth less than the purchase price. Kiefel J appears to have accepted, however, that Burke had been careless and his carelessness may, at the least, have contributed or did contribute to Hanave's decision to purchase but, as a matter of law, that carelessness provided no answer to a claim founded on the combined operation of ss 52 and 82 of the TP Act. Wilcox J did not expressly deal with Burke's carelessness but his Honour can be taken to have agreed with Kiefel J's observations given his general agreement with her Honour's reasons. Any consideration of contribution has to be by reference to the view the Full Court took of the effect of the conduct of Jagar and not the view I earlier expressed. 29 It must be assumed that Burke, as director of Hanave, was induced into believing that each of the tenants, and in particular Barbara's Storehouse, was a high quality tenant by the combined effect of the property report which he was sent on 28 June 1994 and the draft contract he was sent on 11 July 1994 which did not disclose the incentive payments. However it was when he received the draft contract that he should have appreciated, as Hanave's solicitor, the desirability of undertaking inquiries about the solvency and financial standing of the tenants. There was no practical or commercial reason why those inquiries could not have been undertaken prior to exchange and, if properly advised, Hanave would have undertaken them. In my opinion a cause of Hanave's loss was Burke's failure to advise Hanave to undertake the inquiries. It is inconceivable, in my opinion, that the combined effect of the description of the tenants as high quality tenants and the failure to disclose the incentive payments would have caused Burke, in his capacity as a director of Hanave, to reach such a level of confidence about the solvency and financial standing of the tenants as to ignore or not act on advice that should have been given about making further inquiries. I do not read the reasons of the majority of the Full Court as precluding this conclusion. It is, of course, somewhat artificial to speak of Burke effectively giving himself advice though it must be borne in mind that it was Hanave which was entitled to the advice. However as a practical matter Burke, because he was also acting as Hanave's solicitor, should have realised that further inquiries were desirable because of the terms of clause 11 of the contract and realised there was no impediment to them being made on Hanave's behalf. Had he realised they should have been made, he would have made them on behalf of Hanave even if, in making them, he was doing so in his capacity as director. Had this occurred and had, for example, he read the tenancy files maintained by Jagar and accessed rent records, the position of the tenants would have been made apparent to Hanave at least in substantial part. Burke, in my opinion, should share the burden with Jagar (and indirectly Tresidder) for the loss Hanave suffered. In my assessment, it is for Burke to bear one half of Hanave's loss and Jagar (and Tresidder) one half. Damages 30 The purchase price of the property was $2,550,000. During the hearing two experts gave evidence about the value of the property. Hanave called Mr Philip Barlow who provided various valuations based on a number of assumptions. He provided two valuations of the property as at 20 July 1994 (the day of exchange) but both were based on actual rents. One was for $1,962,183 and the other was for $1,697,350. The respondents called Mr John Howes who also provided several valuations based on a number of assumptions. He utilised three bases for valuing the property as at 20 July 1994. One resulted in a value of $2,100,000, another in a value of $2,150,000 and another in a value of $1,870,000. He ultimately proferred a valuation of $2,000,000. 31 I will return shortly to the evidence of the valuers but I should say something now about the applicable principles. The starting point in assessing damages under s 82 of the TP Act is the difference between the real value of the thing acquired at the date of acquisition and the price paid. So much is apparent from the joint judgment of the High Court in Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281 at 291. However the Court went on to say: "Nevertheless, although the value is assessed as at the date of acquisition, subsequent events may be looked at in so far as they illuminate the value of the thing as at that date. A distinction is drawn, however, between subsequent events that arise from the nature or use of the thing itself and subsequent events that affect the value of the thing but arise from sources supervening upon or extraneous to the fraudulent inducement. Events falling into the former category are admissible to prove the value of the thing, those falling into the latter category are inadmissible for that purpose. Thus, the takings of a business subsequent to purchase are generally admissible, not only to prove that a representation concerning the takings was false but also to prove the true value of the business as at the date of purchase. Even when some difference exists between the conditions under which the business was conducted before and after purchase, evidence of subsequent takings may be admissible, "subject to due allowance being made for any differences in relevant conditions". But if it is established that the decline in takings has been caused by business ineptitude or unexpected competition, evidence of subsequent takings is not admissible to prove the value of the business as at that date, events such as ineptitude and unexpected competition being regarded as supervening events." 32 There was, in substance, agreement between the valuers about what the net annual market rent was at the time of exchange, namely $174,980. However issues arose about the treatment of the rents due under the leases to the extent that they exceeded the market rent and to the extent to which events following exchange and rents received thereafter should be considered in arriving at a valuation. The general expertise of each valuer was not challenged. 33 Howse's evidence was compelling and he was prepared to concede matters in cross examination. One was the relevance of the absenceof bank guarantees for the leases. He was cross examined extensively about his first method of valuing the property based on the rents reserved under the leases and his use of a rate of 15% to capitalise the lease rents to arrive at a valuation of $2,100,000. However nothing emerged from that cross examination that suggests to me any error in his approach. His second valuation was based on rent received from the commencement of each lease to the date of transfer of the title of the property in August 1994. He paid regard to Barbara's Storehouse's difficulties in paying the full rent in July and August 1994, the drop in Talk the Ted's rent and Table Eight's threat to leave. He did not rely upon the actual rental payments of Barbara's Storehouse after August 1994. Adopting a capitalisation rate of 13%, he arrived at a value of $2,150,000. His third valuation of $1,870,000 was based on calculations adopting market rents and capitalising them using a lower rate and making adjustments for under or over renting for the term of existing leases. During cross examination he accepted that the rate of capitalisation was too low in respect of that component of the rent paid by Barbara's Storehouse that exceeded the market rent because there was no bank guarantee for the rent. Howse expressed the opinion that the capitalisation rate should be 18% for that rent within resultant value of $1,840,000 rather than $1,870,000. While he did not express an opinion about a reduced valuation by this method on his ultimate valuation of $2,000,000, it can be assumed it had some impact. 34 Barlow's valuations were based substantially on his knowledge of events occurring after the purchase of the property by Hanave. Hanave's management of the property after purchase was, in my opinion, markedly different from that of Jagar prior to sale. Jagar was committed to promoting the complex as a factory seconds outlet and did so with some success. Hanave was not. It did little more than collect rent, effect necessary repairs and when a vacancy arose attempt, with no measure of sophistication, to secure a new tenant. The Leichhardt property was but one of the considerable number of properties managed by Hanave and it received limited attention. Hanave's management approach was not pro active like that of Jagar and it did not maintain the character of the complex which Jagar had gone to some lengths to create. These changes make it inappropriate, in my opinion, to determine without qualification a valuation based on events that occurred after the acquisition of the property by Hanave and, in particular, on vacancies that arose and their effect on the rental stream and the pattern of rental payment after acquisition. The way in which the property was managed by Hanave can, in my opinion, be fairly described as "a difference in relevant conditions" for which some allowance should be made in assessing Hanave's loss. 35 Counsel for Hanave sought to focus on events after Hanave's purchase of the property from another perspective. It was submitted that because Barbara's Storehouse left shops 1 and 2 and moved to a smaller shop within eight months of the date of the contract, and then a further four months later ceased to pay any rent, it was appropriate not only to have regard to these events but also to discount entirely the rents reserved under the lease to the extent they exceeded market rents. The relevant valuation, it was submitted, was that based on the market rents and reference was made to the judgment of Lehane J in Flemington v Raine & Horne (1997) 148 ALR 271 especially at 311. Barlow's valuation on this basis was $1,306,958 and Howse's was $1,367,769. That approach, however, appears to ignore entirely the existence of the leases requiring the payment of rents in excess of the market rents. 36 Some balance has to be struck between the approaches of the two valuers in determining Hanave's loss, though there is an element of imprecision in that balancing process: see Spencer v The Commonwealth (1907) 5 CLR 418 at 442, and Magenta Nominees Pty Ltd v Richard Ellis (Western Australia) Pty Ltd [1995] FCA 671. I assess the loss suffered by Hanave as $750,000. Damages in this sum should be awarded. Costs 37 On one view order 4 made by the Full Court deals with the costs of the hearing before me to the point where I gave judgment on 31 August 1998. Thus, on that view, the only costs in relation to the cross-claim, in which the cross-claimants have substantially succeeded, I need to consider would be the costs of the directions hearing on 6 May 1999 and the preparation of the written submissions. However the cross-claimants have sought an opportunity to make submissions on costs. Any such submissions, from any party, should be filed and served within 21 days of today. I certify that the preceding thirty seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. Associate: Dated: 11 November 1999 Counsel for the Applicant and Cross-respondent: Mr G McVay Solicitor for the Applicant and Cross-respondent: Gilbert Mane Counsel for the Respondent and Cross-claimant: Mr C Hodgekiss Solicitor for the Respondent and Cross-claimant: Hunt & Hunt Written submissions completed: 29 July 1999 Date of Judgment: 11 November 1999