FEDERAL COURT OF AUSTRALIA Manday Investments Pty Ltd v Commonwealth Bank of Australia (No 3) [2012] FCA 751 Citation: Manday Investments Pty Ltd v Commonwealth Bank of Australia (No 3) [2012] FCA 751 Parties: MANDAY INVESTMENTS PTY LTD ACN 074 281 084 and GEORGE ANAGNOSTOPOULOS, LILLIAN PAULA ANAGNOSTOPOULOS, RONALD WILLIAM ANDERSON AND ROSALINDA ANDERSON v COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 and BAVICH PTY LTD ACN 079 959 836 (FORMERLY AUSTRALIAN VALUATION SERVICES PTY LTD) AND DEAN ROBERT BAVICH File number: WAD 233 of 2008 Judge: MCKERRACHER J Date of judgment: 13 July 2012 Catchwords: PRACTICE AND PROCEDURE – whether the applicants had a reasonable prospect of success in pleading misleading or deceptive conduct by the bank's reliance on allegedly inaccurate property valuations – application for summary judgment by respondent bank and valuers pursuant to s 31A Federal Court Act 1976 (Cth) and r 26.01 Federal Court Rules 2011 – what onus if any on a party when all relevant evidence is held by the other CONTRACT – whether the applicants had a reasonable prospect of success in pleading breach of implied term of loan contract by the bank's reliance on allegedly inaccurate property valuations Held: applicants' breach of implied contractual term pleading should be summarily dismissed because the loan contract had expired and no automatic right of renewal TRADE PRACTICES – reliance and causation – consideration of applicants' conduct in chain of causation causing loss and reliance on valuations – held the respondents' causation argument (that the actions of the bank were unaffected by the valuations) could not be determined summarily because the question of what the bank would have done had the property valuations been higher could only be determined at trial by testing the evidence Held: however that the respondents' reliance argument should succeed insofar as the 'indirect causation theory' could not apply as there was no evidence that the applicants relied on the valuation at any time, they were not misled by the valuation and their own actions in selling the property were the cause of the loss Legislation: Federal Court of Australia Act 1976 (Cth) s 31A Federal Court Rules 2011 r 26.01 Cases cited: Byrne v Cooke [2010] QSC 76 Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2012] FCAFC 28 Digi-Tech (Aust) Ltd v Brand (2004) 62 IPR 184 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 6) (2007) 63 ACSR 1 Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 Manday Investments Pty Ltd v Commonwealth Bank of Australia [2011] FCA 681 Manday Investments Pty Ltd v Commonwealth Bank of Australia (No 2) [2012] FCA 283 Spencer v Commonwealth of Australia (2010) 241 CLR 118 Date of hearing: 5 June 2012 Date of last submissions: 11 June 2012 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 44 Counsel for the Applicants: GR Ritter QC Solicitors for the Applicants: Q Legal Counsel for the First Respondent: SK Dharmananda SC Solicitors for the First Respondent: Clayton Utz Counsel for the Second Respondents: HH Jackson Solicitors for the Second Respondents: DLA Piper Australia IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 233 of 2008 BETWEEN: MANDAY INVESTMENTS PTY LTD ACN 074 281 084 First Applicant GEORGE ANAGNOSTOPOULOS LILLIAN PAULA ANAGNOSTOPOULOS RONALD WILLIAM ANDERSON ROSALINDA ANDERSON Second Applicants AND: COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 First Respondent BAVICH PTY LTD ACN 079 959 836 (FORMERLY AUSTRALIAN VALUATION SERVICES PTY LTD) DEAN ROBERT BAVICH Second Respondents JUDGE: MCKERRACHER J DATE OF ORDER: 13 JULY 2012 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. Within ten days, the parties confer and file a minute to reflect the conclusions in the reasons for judgment published today. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 233 of 2008 BETWEEN: MANDAY INVESTMENTS PTY LTD ACN 074 281 084 First Applicant GEORGE ANAGNOSTOPOULOS LILLIAN PAULA ANAGNOSTOPOULOS RONALD WILLIAM ANDERSON ROSALINDA ANDERSON Second Applicants AND: COMMONWEALTH BANK OF AUSTRALIA ACN 123 123 124 First Respondent BAVICH PTY LTD ACN 079 959 836 (FORMERLY AUSTRALIAN VALUATION SERVICES PTY LTD) DEAN ROBERT BAVICH Second Respondents JUDGE: MCKERRACHER J DATE: 13 JULY 2012 PLACE: PERTH REASONS FOR JUDGMENT INTRODUCTION 1 The first respondent (the Bank) and the second respondents (the Valuers) apply for summary judgment against the applicants pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) (the Act). Alternatively, the Bank and the Valuers apply pursuant to r 26.01 of the Federal Court Rules 2011 (the Rules). Relevantly, this section and rule provide as follows: 31A Summary judgment … (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. … 26.01 Summary judgment (1) A party may apply to the Court for an order that judgment be given against another party because: (a) the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or (b) the proceeding is frivolous or vexatious; or (c) no reasonable cause of action is disclosed; or (d) the proceeding is an abuse of the process of the Court; or (e) the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding. (2) The application must be accompanied by an affidavit stating: (a) the grounds of the application; and (b) the facts and circumstances relied on to support those grounds. … 2 As noted in Manday Investments Pty Ltd v Commonwealth Bank of Australia [2011] FCA 681 (Manday No 1) and Manday Investments Pty Ltd v Commonwealth Bank of Australia (No 2) [2012] FCA 283 (Manday No 2), the events to which this proceeding relates took place over a decade ago. The application was filed at the eleventh hour of relevant limitation periods. There have been numerous restructures of the claims since that time. The central complaint made by the applicants is that a property was wrongly valued (the Valuation). The property, known as the Hunt Street property, is situated in South Hedland, Western Australia. The applicants say that because that security was undervalued, the Bank withdrew its financial support for the applicants resulting in their need to sell assets below value in a fire sale environment. The claims 3 The claims advanced by the applicants against the Bank are on two legal bases. The first is a claim for loss and damage from misleading and deceptive conduct as a result of the Bank's reliance on a $1.1 million valuation of the Hunt Street property. Secondly, there is a claim that the Bank breached an express or implied term of a loan contract by relying on the Valuation which was inaccurate because the real value was somewhere between $1.7 to $1.9 million. (the Contractual Argument) 4 As to the Valuers, the applicants contend that the Valuation misled the Bank and caused the Bank to take steps against the applicants which it would not otherwise have taken including transferring the applicants' file to a credit management division of the Bank (the CMU) in which recovery action was taken, higher interest and charges were imposed immediately and the sale of properties below their true value was hastened. By so misleading the Bank, it is argued, the Valuers caused the Bank to act in a way which inflicted loss and damage on the applicants. The arguments in summary 5 The respondents contend in this interlocutory application that even if the Hunt Street property had been wrongly valued (which is denied), that could have had no bearing on the events that unfolded because the Bank, in dealing with the applicants and their facility (which was due to expire) would have acted in exactly the same way. The error, if any, in the valuation, it is said, yielded no relevant consequences. It was causative of no loss (the Causation Argument). 6 A further basis for the Bank's application is that there was no relevant reliance by the applicants on the Valuation so as to ground a cause of action. The Bank highlights that there is no claim of reliance by the applicants themselves as distinct from the Bank (the Reliance Argument). The applicants contend that the liability stems from the Valuers misleading the Bank so that the Bank relied on the Valuation. Liability, it is said, flows from application of the 'indirect causation theory' described in Digi-Tech (Aust) Ltd v Brand (2004) 62 IPR 184 (at [147]-[156]) and Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (2008) 73 NSWLR 653 (at [16]) and per Daubney J in Byrne v Cooke [2010] QSC 76. I will return to the question of reliance but the primary debate focussed on what the Bank 'would have done' had the Valuation been accurate. 7 For reasons which follow, I consider the Bank's application should be partially allowed. My view is that: (a) the Bank's argument on the Causation Argument (what the bank would have done), cannot be determined summarily in favour of the Bank even though, as presently viewed, the evidence is in the Bank's favour. On this point, the Bank may succeed at trial but that cannot be finally determined until all the evidence is tested and has been evaluated; (b) next, the Reliance Argument (that the applicants themselves never relied on the Valuation) should succeed in part. It should not succeed only insofar as interest and other direct charges made without involvement of the applicants was concerned. It should succeed on those losses caused by the applicants' decisions to sell properties; (c) as to the Contractual Argument, assuming first that there can be such a term implied and assuming it has been breached, the applicants would only be entitled (by an award in damages or otherwise) to be put in the position they would have been in under the contract had there been no breach. The Bank had no ongoing obligations to finance the applicants regardless of the level of the Valuation. They had no ongoing contractual entitlements as the contact which was allegedly breached had come to an end. The contract case cannot succeed. PRINCIPLES RELEVANT TO SUMMARY JUDGMENT APPLICATIONS 8 Much has been written on this topic. In Spencer v Commonwealth of Australia (2010) 241 CLR 118 Hayne, Crennan, Kiefel and Bell JJ, in commenting on the then relatively new test of 'no reasonable prospect' in s 31A of the Act (now replicated in r 26.01 of the Rules) emphasised the difference in that expression both from the tests as previously applied in similar applications and from 'no real prospect' or 'no plausible claim' in other jurisdictions. Their Honours said (at[51]-[60]) (footnotes omitted): 51. First, the central idea about which the provisions pivot is "no reasonable prospect" (emphasis added). The choice of the word "reasonable" is important. If s 31A is to be seen as deriving from r 24.2 of the Civil Procedure Rules 1998 of England and Wales, its provisions underwent an important change in the course of their translation from that jurisdiction to this. The English rule speaks of "no real prospect"; s 31A speaks of "no reasonable prospect". The two phrases convey very different meanings. 52. Second, effect must be given to the negative admonition in sub-s (3) that a defence, a proceeding, or a part of a proceeding may be found to have no reasonable prospect of successful prosecution even if it cannot be said that it is "hopeless" or "bound to fail". It will be necessary to examine further the notion of "no reasonable prospect". But before undertaking that task, it is important to begin by recognising that the combined effect of sub-ss (2) and (3) is that the inquiry required in this case is whether there is a "reasonable" prospect of prosecuting the proceeding, not an inquiry directed to whether a certain and concluded determination could be made that the proceeding would necessarily fail. 53. In this respect, s 31A departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail. That this was the basis of earlier decisions may be illustrated by reference to two decisions of this Court often cited in connection with questions of summary judgment: Dey v Victorian Railways Commissioners and General Steel Industries Inc v Commissioner for Railways (NSW). … 56. Because s 31A(3) provides that certainty of failure ("hopeless" or "bound to fail") need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different inquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression "no reasonable prospect of successfully prosecuting the proceeding" by reference to what is said in those earlier cases. 57. Likewise, it is dangerous to apply directly what has been said in the United Kingdom about the application of a test of "no real prospect" or what has been said in United States decisions about summary judgment. The United Kingdom cases are directed to a different test. The controversies in the United States about what is sufficient to resist a motion for summary judgment, reflected in the recent decisions of the Supreme Court of the United States in Ashcroft v Iqbal and Bell Atlantic Corp v Twombly and in that Court's earlier decision in Conley v Gibson, turn upon the requirements of the Federal Rules of Civil Procedure applied to a system of "notice" pleading. The notion of what is not a "plausible" claim, discussed in Iqbal and Twombly, may in some cases overlap, but does not coincide, with the notion of "no reasonable prospect". How then should the expression "no reasonable prospect" be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is "no reasonable prospect". The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like "no reasonable prospect" is to be avoided. Consideration of the difficulties that bedevilled the proviso to common form criminal appeal statutes, as a result of judicial glossing of the relevant statutory expression, provides the clearest example of the dangers that attend any such attempt. 59. In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like "clearly", "manifestly" or "obviously") as "frivolous", "untenable", "groundless" or "faulty". But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word "reasonable", in the phrase "no reasonable prospect", be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a "frivolous", "untenable", "groundless" or "faulty" claim. 60. Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes. 9 Prior to Spencer there had been numerous contributions by single judges and the Full Court seeking to identify the correct approach. In Dandaven v Harbeth Holdings Pty Ltd [2008] FCA 955 Gilmour J set out relevant principles (at [5]-[6]) as follows: 5 Section 31A lowers the bar for obtaining summary judgment: White Industries Australia Ltd v Commissioner of Taxation (2007) 160 FCR 298. The second reading speech of the Migration Litigation Reform Bill 2005 which introduced s 31A stated that its purpose was to strengthen "the power of the courts to deal with unmeritorious matters by broadening the grounds on which federal courts can summarily dispose of unsustainable cases": Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 70 IPR 146 at [45]; Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd [2008] FCAFC 60 at [124]. 6 Success under s 31A does not require a demonstration that the case is hopeless or bound to fail. The following principles are of general application to an application under s 31A: (a) the Court must be very cautious not to do a party an injustice by summarily dismissing proceedings; (b) the Court ought not dismiss a claim based on a predictive assessment of prospects, where it is possible that if the claim went to trial, it may succeed; (c) in a case where evidence can give colour and content to allegations, and where questions of fact and degree are important, the Court should be more reluctant to dismiss a proceeding on the face of a pleading; (d) it is not Parliament's intention to require the Court to engage in lengthy and elaborate trials on an interlocutory basis for the purposes of determining whether or not a proceeding has no reasonable prospects of success. It may be necessary for the opposing party to provide no more than an outline of evidence, sufficient to show that there is a genuine dispute, to prevent the summary application becoming a trial; (e) if there is a real issue of fact or law to be decided, and the rights of the parties depend upon it, it is obviously appropriate that the matter goes to trial. It cannot be said that where there is a real factual dispute and that factual dispute must be resolved to determine whether the claim succeeds that there is 'no reasonable prospect of success'; (g) it ought not be used to shut out proceedings where, on a proposition of law, there may be room for doubt. On questions of law, an inquiry as to their merit should not be for the purpose of resolving them and also not simply to determine whether the argument is hopeless, but in order to decide if it is sufficiently strong to warrant a trial; (h) evidence of an ambivalent character will usually be sufficient to amount to reasonable prospects; (i) in determining if there are real issues of fact in issue so as to preclude summary judgment the courts must draw all reasonable inferences in favour of the non-moving party. See Genovese v BGC Construction Pty Ltd [2007] FCA 923 at [5]; Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd (2006) 70 IPR 146 at [42]-[48]; Hicks v Ruddock (2007) 156 FCR 574 at [13]; Bond v Barry (2007) 73 IPR 490 at [46]; Commonwealth Bank of Australia v ACN 000 247 601 Pty Ltd (in Liq) (formerly Stanley Thompson Valuers Pty Ltd) [2006] FCA 1416 at [30]; Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [21]; Jefferson Ford Pty Ltd v Ford Motor Company of Australia Limited [2008] FCAFC 60. 10 The Bank and the Valuers particularly rely upon a judgment of Gordon J in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd (2008) 167 FCR 372 where her Honour said (at [127]): Thirdly, each case must be considered separately. No particular hard and fast rules can be set down, only general principles. One principle is that the moving party bears the onus of persuading the court that the opponent has no reasonable prospect of success (see Crayford Freight Services Ltd v Coral Seatel Navigation Co (1998) 82 FCR 328 at 333). As noted earlier, however, s 31A has lessened the standard that must be met. In that regard, it must be emphasised that once a moving party has established a prima facie case that the opponent has no reasonable prospect of success, the opposing party must respond by pointing to specific factual or evidentiary disputes that make a trial necessary; general or non-particularised denials will be insufficient to defeat the motion: see Fortron Automotive Treatments Pty Ltd v Jones (No 2) [2006] FCA 1401 at [22]. In other words, it is inappropriate in defence of a claim for judgment under s 31A of the [Act] to seek to defend by merely putting a claimant to formal proof: Vans Inc v Offprice.Com.Au Pty Ltd [2006] FCA 137 at [12]. This is not a new concept. It finds earlier reflection in ss 190(4) and 191 of the Evidence Act 1995 (Cth) and O 33, 34 and 34B of the Federal Court Rules 1979 (Cth). (emphasis added) APPLICATION OF THE RELEVANT PRINCIPLES The Causation Argument 11 In their substituted statement of claim of 30 March 2012 (at [28]), the applicants plead: It was an implied term of the Loans that in deciding whether the value of the Securities was not to its satisfaction, and in forming an opinion whether a materially adverse change occurred to the financial position of the First Applicant, the First Respondent would only have regard to a current and accurate market valuation in respect of Hunt Street and the Securities (Implied Term). Particulars (a) It is necessary to imply such a term in order to give business efficacy to the Loans. (b) Such a term is obvious reasonable and equitable. (c) The implied term does not contradict any express terms of the Loans. 12 At [31], the applicants plead: Further and in the alternative, in using or placing reliance on the valuations and Valuation Certificates prepared by the Second Respondents, the First Respondent breached the Implied Term of the Loans. 13 And at [33]-[35], the applicants plead: [33] On or before 23 December 2002, the Loans were transferred to the CMU by the First Respondent. Particulars A letter dated 23 December 2002 from the First Respondent to the Applicants. [34] In about February 2003, the interest rates charged on the Loans were increased by about 1.3% in respect of the Bill Facility and about 1.7% in respect of the Better Business Loan as a result of the Loans being transferred to the CMU, resulting in additional charges being levied by the First Respondent over the duration of the Loans. Particulars The First Respondent's pricing model forms signed by Peter D'Alton on about 13 February 2003. [35] Due to its concern at the valuations in the Valuation Certificate and, in particular, the Later Valuation Certificates, the First Respondent informed the Applicants that it would not extend the Loans, which were to expire on 31 December 2002, unless the Applicants immediately listed some or all of the Securities for sale. Particulars A letter dated the 23 December 2002 from the First Respondent to the Applicants. 14 As to the consequences of the breach, the applicants plead at [40]-[43]: [40] The Applicants suffered loss and damage as a consequence of the conduct of the First Respondent and the Second Respondents, as pleaded in paragraph 25 above, and the reliance the First Respondent placed on that conduct as pleaded in paragraph 29 above. [41] Further to paragraphs 39 to 40 above, it was a breach of the Loans, as pleaded in paragraphs 30 to 31 above, for the First Respondent to transfer the Loans to the CMU and levy the additional charges, as pleaded in paragraphs 33 and 34 where the valuation for Hunt Street was as pleaded in paragraph 24. [42] The First Respondent had no contractual or other entitlement to compel the Applicants to sell the Securities as pleaded in paragraph 35 above. [43] The Applicants have suffered loss and damage as a result of the First Respondent's breach of contract as pleaded in paragraphs 30, 31, 41 and 42 above. 15 However, the respondents argue that given the Bank had no obligation to extend the facility at all, the applicants suffered no loss from the alleged breach of relying on an inaccurate valuation in forming a view as to whether it would do so or not. 16 The Bank makes the point, adopted by the Valuers, that the Bank could have moved on expiry of the facility on 31 December 2002. As established by Mr Peter William Ficko's affidavit, sworn on 18 April 2012, the expiry was automatic and did not depend on the Bank being satisfied as to any state of affairs. Irrespective of the Valuation, the Bank was entitled to extend or not extend the facilities. It follows that the Valuation of the Hunt Street property was irrelevant to what the Bank could do. In its written submissions the Bank asserts that Mr Ficko, a then Manager of the credit management area of the Bank, has provided an unequivocal statement that his recommendation would not have changed if the Valuation was $1.9 million. Further, Mr Ficko accepts (for the purposes only of a calculation) the applicants' approach on the question of the properties concerned, completes a calculation, and concludes that the Bank would have proceeded in the same way. 17 The reason for this conclusion is set out in Mr Ficko's affidavit. In summary the Bank was concerned about the applicants' overall financial situation, not only the value of the securities. Based on the applicants' asserted valuation of $1.9 million, the unsecured content of the loans would be just under $2 million. Mr Ficko deposes that the Credit Risk Rating would still have been classified as being a Troublesome and Impaired Asset (TIA) and the management of the file transferred to he CMU. The margin would have been either 107.3% or 104% (depending on certain assumptions) and even worse if only the four properties referred to in para 7 of the statement of claim were taken into account. 18 The heart of the complaint by the respondents (the Bank and Valuers) is that the affidavit evidence they rely upon, particularly the affidavit of Mr Ficko, shows clearly that the Valuation played no role in the Bank proceeding as it did in pressing the applicants to bring their affairs into order and, in particular, to sell various properties to repay debt. The Bank's argument, adopted by the Valuers, is that no evidence whatsoever has been put on by the applicants to prove their central proposition which is that the Bank would have acted differently had the Valuation of the Hunt Street property come in at the true figure which was $800,000 higher than that relied upon by the Bank. The Bank complains (and the Valuers support the complaint), that the applicants' case is that 'we don't know what the Bank would do therefore we have a case'. If that were indeed the applicants' case then, in my view, the respondents would have a valid complaint. I do not, however, believe that is the case advanced for the applicants. 19 The applicants in an analysis of the considerable internal documentation produced by Mr Ficko, stressed in lengthy oral submissions that there were indications of a variety of views within the Bank and that those who advocated the position on behalf of the applicants as against those who were purely considering the Bank's position were demonstrably more sympathetic to the applicants. The applicants argue that the documentation shows that there is evidence of a variety of views or conflicting views internally such that it cannot be said at this point that there are no reasonable prospects of showing that the Bank would have acted differently had the Valuation been 'accurate'. 20 The respondents complain that the applicants have failed to put on any evidence on this topic other than evidence of what they in fact did or communications that they had with representatives of the Bank and from which they infer that the Bank would not have acted adversely to the applicants had the Valuation been correct. I say nothing about the quality of that evidence at this stage. In my view, it suffices to say that once one is in the territory of the determining whether the applicants are likely to be able to establish what the Bank would or would not have done in 2002 and 2003 in relation to the applicant's debt situation, it is very difficult to reach a firm view with sufficient clarity at this stage to satisfy the s 31A test. 21 It cannot presently be said that the evidence is all one way in favour of the Bank and therefore the Valuers. Even if it were, it is at least possible that cross-examination or evidence of additional witnesses may give rise to a different impression than may presently be revealed from the documents. 22 While I accept that the respondents were entitled to fairly describe elements of the applicants' case as being speculative, that must inevitably be so when all of the evidence on the central topic is within the respondents' province. 23 The respondents also strongly argue that another $800,000 could not possibly have made any difference. That may well be a conclusion reached at trial but does not presently appear to be a conclusion which is open to me on a summary judgment basis. I can reach no conclusion at all, of course, on the topic of whether or not the Valuation was $800,000 lower than it should have been but if it were, it is not possible to say at this stage, even though the shortfall in valuations of other properties owned by the applicants were most conspicuous, that if the Valuation had been $800,000 higher it would have made no difference to the Bank's decisions. These are necessarily conclusions which must await trial. 24 In light of my conclusions, I have refrained from a detailed examination of the evidence and arguments. Having heard argument for the best part of a day, the area has been well traversed. Given I am likely to be the judge at trial, I consider it is better that I refrain from making observations as to the cogency of evidence at this point about the likelihood of various events occurring or not, particularly having regard to the way in which the applicants have now put their case. 25 It is enough to say for present purposes that I do not consider this aspect of the application for dismissal can be upheld at a summary stage. The Reliance Argument 26 The applicants contend that the misleading valuation from the Valuers caused the Bank to treat the applicants unfavourably in renewal of the facilities. As a result, on transfer of the applicants' files to the CMU, additional interest and charges were imposed on the applicants by the Bank. Consequently, the applicants were forced to sell the properties at an under value. 27 The applicants have not contended they relied on the alleged representation (the figure in the Valuation). To the contrary, the Bank received submissions from the applicants that the Valuation was wrong. 28 Damages for misleading or deceptive conduct cannot be recovered without reliance. The Full Court (Jacobson, Siopis, Nicholas JJ) recently reiterated that reliance must be established where an applicant claims to have suffered loss from a misrepresentation: De Bortoli Wines Pty Ltd v HIH Insurance Ltd (in liq) [2012] FCAFC 28 (at [59]-[61]). As noted by Giles JA (at [12]) in Ingot Capital, where the conduct of the applicant does not form a link in the causation chain, there can be recovery only where the act of the non-misleading party, induced by the misleading conduct by its very nature, causes the applicant's loss. As discussed further below, Ipp JA in Ingot Capital stated (at [610]): In a case based on misleading conduct directed against identified individuals, and the person alleged to have been misled is not induced by the conduct in question to act or refrain from acting, there is no "erroneous assumption" in the sense required to establish misleading or deceptive conduct. The absence of an erroneous assumption is fatal to the cause of action based on misleading conduct. That is so irrespective of whether that absence is regarded as a failure to prove that the conduct is misleading or as a failure to prove causation. (emphasis added) 29 The respondents contend that there are, relevantly, two classes of case: 1. where the claimant as representee claims to have relied upon the misrepresentations; and 2. where the claimant is not a representee, and does not claim to be, but claims that another person relied upon the misleading and deceptive conduct and that this caused loss to the claimant. 30 In Digi-Tech, the New South Wales Court of Appeal considered an argument raised by the appellants as to the 'indirect theory of causation'. The Court distinguished between cases where a claimant claims to have suffered loss by reliance upon a misrepresentation inducing a transaction, and other cases where misleading conduct causes a third party to act to the prejudice of the plaintiff. The Court observed (at [155]-[157]): 155 Stockland (Constructors) Pty Ltd v Retail Design Group (International) Pty Ltd followed the approach of Janssen-Cilag. Stockland, like Janssen-Cilag, was not a case where the plaintiff claimed damage caused by entering into a transaction induced by misleading conduct. In both cases the misleading conduct had caused others to act to the direct prejudice of the plaintiff. That is to say, the chain of causation was as follows: firstly, misleading conduct by the defendant; secondly, an innocent party is induced by the misleading conduct to act in some way; thirdly, the innocent party's act, by its very nature, causes the plaintiff loss. On this basis, no act of the plaintiff contributes to the loss. The chain of causation is complete without there needing to be any act or omission on the part of the plaintiff. 156 The Janssen-Cilag and Stockland category of claim is materially different to that which occurs when plaintiffs suffer loss because they, themselves, are induced by misleading representations to perform some act or omission by which they are prejudiced. The difference lies in the fact that in the first category of case no conduct on the part of the plaintiff forms a link in the causation chain. In the second category, the inducement of the plaintiff and his or her act or omission causing loss is an essential part of the chain. Without such inducement and a consequential act or omission on the part of the plaintiff there is indeed no linking chain between the misleading conduct and the plaintiff's loss. 157 This analysis demonstrates the fallacy of applying the so-called indirect theory of causation to this case. 31 In Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 6) (2007) 63 ACSR 1 (at [494]-[511]), McDougall J applied Digi-Tech. The plaintiffs claimed to have suffered loss by entering into transactions involving the sub-underwriting of the issue of a prospectus and the acquisition of securities. The case involved actual conduct on the part of the plaintiffs and was within the first category of causation case discussed in Digi-Tech. His Honour (at [496]) said '… the conduct complained of … provided the opportunity for the losses to occur, but did not relevantly cause them to be incurred'. 32 The decision was not disturbed on appeal. In obiter, Ipp and Giles JA endorsed the reasoning in Digi-Tech. Hodgson JA outlined his own view and expressly refrained from commenting as to whether or not it was consistent with Digi-Tech. 33 At [617]-[618], Ipp JA said: 617 The approach adopted in Digi-Tech is to be distinguished from cases such as Janssen-Cilag Pty Ltd v Pfizer Pty Ltd [1992] FCA 437; (1992) 37 FCR 526 where a person, by misleading conduct, induces another to act to the prejudice of the plaintiff. In the Janssen-Cilag Pty Ltd v Pfizer Pty Ltd category of case the plaintiff is a passive victim of misleading conduct. No action or omission by the plaintiff affects the loss it suffers. By contrast, in the Digi-Tech category of case, the plaintiff acts or refrains from acting to his or her prejudice by reason of conduct of a third party brought about by the defendant's misleading conduct; the plaintiff's conduct is a necessary link in the chain of causation. 618 The rationale of Digi-Tech is that loss incurred by plaintiffs in acting (or refraining from acting) to their prejudice can only be loss caused "by" conduct contravening s 52 if the plaintiffs are misled by that conduct. Likewise, in my view, such plaintiffs can only succeed in cases based on a contravention of s 995 if, in fact, they are misled. I stress that by "such plaintiffs" I mean plaintiffs who claim to have suffered loss brought about by their own actions or omissions coupled with misleading conduct by the defendants. As was noted in Digi-Tech, were it otherwise, such plaintiffs could succeed on the ground that, by making false representations, the defendants engaged in misleading conduct, even though the plaintiffs well knew the truth of the representations or were indifferent to them. As I have noted, different considerations apply to the Janssen-Cilag Pty Ltd v Pfizer Pty Ltd category of case. (emphasis added) 34 The Managing Director of Manday Investments Pty Ltd, Mr Anagnostopoulos as indicated in his witness statement of 23 January 2012, never believed nor was he induced by the Valuation to believe the value of the Hunt Street property was $1.1 million. The respondents argue that the 'damage' sustained by the applicants under the Hunt Street property first sales, did not come about by reliance (by anyone) on the Valuation. In particular, the applicants who effected the sales themselves, did not rely on the Valuation. 35 In the present case, the applicants attempted to dissuade the Bank from falling into error as they saw it. They knew of the allegedly misleading matter. They were not misled by it. 36 In my view the respondents' submissions on reliance must be accepted so as to dispose of those parts of the claim based upon the actions of the applicants as distinct from the actions of the Bank or the Valuers. This would appear to cover a substantial portion of the claim but would not cover charges immediately incurred by reason of the Bank's own decision to transfer the applicants' loan to the CMU division so as to immediately impose on the applicants a higher liability for interest and perhaps other charges. With the exception of those amounts, I consider the Bank and the Valuers should succeed in the application for dismissal of all those parts of the claim in relation to representations. Contractual Argument 37 As indicated above (at [7(c)]), and for reasons shortly stated there, I consider the contractual breach claim has no prospect of success. DISCRETIONARY FACTORS 38 The respondents also submit that in having regard to the object and purpose of s 31A of the Act I should take into account that the Bank's current estimate of the trial length is up to eight and a half days and a significant amount of work remains to be done by the respondents including responsive expert evidence in preparation for trial giving rise to solicitor/client costs of significant amount. As noted, the proceeding was commenced on 27 October 2008 shortly before the expiration of the six year limitation period. The applicants have amended their pleadings on numerous occasions since 27 October 2008. The Bank has continually highlighted the flaws it perceives in the applicants' case including by its letter dated 9 March 2012. 39 While I accept that there is force also in these contentions as to the cost and delay and obvious real difficulties with capacity for recollection of events from a decade earlier, I am not satisfied that they, taken together, should play a role in this instance. That is largely because it is unnecessary to do so. CONCLUSION 40 From the foregoing, it should be evident that I consider that it is not possible presently to conclude that the case against the Bank in relation to what it 'would' have done had the Valuation been at what the applicants say was the correct figure is sufficiently clear for the purpose of s 31A of the Act. Insofar as the applicants' claim relies upon that aspect, it should not be dismissed. 41 In relation to reliance, however, the applicants can only succeed in respect of those aspects of loss and damage caused by actions beyond their control. The Bank's transfer of the facility to the CMU and the additional interest and charges arising directly as a result of that action is to be contrasted with the decisions taken by the applicants to sell the properties at the urging of the Bank. The applicants did not take those steps because they relied on a misrepresentation. 42 The contractual claim cannot survive. 43 As a result of this analysis, the only aspect of the claim which is capable of going to trial is that part of the claim which relies upon interest and other charges immediately imposed by the Bank consequent upon receipt of the Valuation which was said to be misleading. 44 The respondents have had the dominant success in the application and, in my view, should receive two/thirds of their costs. The order to be made is as follows: 1. Within ten days, the parties confer and file a minute to reflect the conclusions in the reasons for judgment published today. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 13 July 2012