New South Wales Supreme Court CITATION : Commonwealth Bank of Australia v Hollier & Ors [2001] NSWSC 805 revised - 27/09/2001 CURRENT JURISDICTION: Equity Division Commercial List FILE NUMBER(S) : SC 50098/98 HEARING DATE(S) : 7/8/00-10/8/00,14/8/00,26/2/01-28/2/01,1/3/01,5/3/01-8/3/01,12/3/01-15/3/01,19/3/01-22/3/01,26/3/01-29/3/01, 2/4/01-5/4/01, 9/4/01, 3/5/01, 5/7/01, 18/7/01 JUDGMENT DATE : 13 September 2001 Commonwealth Bank of Australia (Plaintiff) William Edward Hollier (1st Defendant) Janifer Lee Hollier (2nd Defendant) George Smith Holliday (3rd Defendant) George William Sanders (4th Defendant) Stephen David McCloy (5th Defendant) Cancarra Pty Ltd (6th Defendant) Cloudgard No 43 Pty Ltd (7th Defendant) Ninot Pty Ltd (8th Defendant) Miltup Pty Ltd (9th Defendant) Walenora Pty Ltd (10 Defendant) Stenoak Pty Ltd (11th Defendant) Ian Allibon Plumbing Pty Ltd (12th Defendant) Bruce John Sanders (13th Defendant) Ian Paul Allibon (14th Defendant) Caron Grace Allibon (15th Defendant) Graham Erland McCloy (16th Defendant) PARTIES : Jennifer Joan McCloy (17th Defendant) Reginald Patrick Flannery (18th Defendant) Victoria Boyd (19th Defendant) James Mercer Anderson (20th Defendant) Yvonne Lillian Anderson (21st Defendant) Matthew James Bliss (22nd Defendant) Catherine Margaret Bliss (23rd Defendant) WE Hollier & JL Hollier (1st Cross Claimants) GJ Leonard & Leonard Consultants Pty Ltd & CJ Sneddon & CJ Sneddon & SN Roxby t/as Maxim Consulting Corporate Advisors (Cross Defendants to 1st Cross Claim) WE Hollier and JL Hollier (2nd Cross Claimants) Cancarra Pty Ltd (Cross Defendant to 2nd Cross Claim) GS Holliday, GW Sanders, SD McCloy, Cancarra Pty Ltd, Cloudgard No 43 Pty Ltd, Ninot Pty Ltd, Miltup Pty Ltd, Walenora Pty Ltd, Stenoak Pty Ltd, Ian Allibon Plumbing Pty Ltd, BJ Sanders, IP Allibon, CG Allibon, GE McCloy, JJ McCloy, RP Flannery, VBoyd, JM Anderson, YL Anderson, MJ Bliss, CM Bliss (3rd Cross Claimants) WE Hollier, JL Hollier (Cross Defendants to 3rd Cross Claim) GJ Leonard & Leonard Consultants Pty Ltd & CJ Sneddon & CJ Sneddon & SN Roxby t/as Maxim Consulting Corporate Advisors (4th Cross Claimants) S Madden & Madden & Associates Pty Ltd (Cross Defendants to 4th Cross Claim) WE Hollier and JL Hollier (5th Cross Claimants) Commonwealth Bank of Australia (1st Cross Defendant to 5th Cross Claim) S Madden and Madden & Associates Pty Ltd (2nd Cross Defendants to 5th Cross Claim) JUDGMENT OF : Brownie AJ M Walton SC; R S Hollo (Plaintiff) P W Larkin (1st & 2nd Defendants) No appearance (6th Defendant) A L McVoy (Various other defendants) COUNSEL : No appearance (18th & 19th Defendants) G Inatey SC; W V McManus (Cross defendants to Amended Third Cross Claim) I D Faulkner (Cross Defendants to Fourth Cross Claim) J B Simpkins; I G Roberts (Cross Claimants) J C Kelly SC; D A Casperson (Respondent to Motion) D L Williams (Respondent to Motion) L E Taylor (Plaintiff) Robinson Creais (1st & 2nd Defendant) Harris Wheeler (3rd - 5th, 8th - 17th, 20th - 23th Defendants) No appearance (6th Defendant) SOLICITORS : Sparke Helmore (7th Defendant) No appearance (18th & 19th Defendant) Phillips Fox (Cross Defendants to 1st Cross Claim) Colin Biggers & Paisley (Cross Defendants to Amended Third Cross Claim) Minter Ellison (Cross Defendants to Fourth Cross Claim) CATCHWORDS : The case involves a number of separate disputes of fact, and the application of settled rules of law to those factual disputes. Trade Practices Act 1974 (Cth) LEGISLATION CITED : Fair Trading Act 1987 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Supreme Court Act 1970 (NSW) Pym v Campbell (1856) 6 E & B 370; 119 ER 903 Bleyer v Neville Jeffress Advertising Pty Limited (unreported, 15 December 1987, NSWCA) Macedone v Collins (1996) 7 BPR 97,628 Maguire v Makarounis (1997) 188 CLR 449 Fitzpatrick v Waterstreet (unreported, 17 December 1998, NSWCA) Beach Petroleum N L v Kennedy (1999) 48 NSWLR 1 CASES CITED : Farrington v McBride [1985] 1 NZLR 83 O'Halloran v RT Thomas & Family Pty Limited (1998) 45 NSWLR 262 Ryde Municipal Council v The Royal Ryde Homes (1970) 19 LGRA 321 Eaton & Sons Pty Ltd v Warringah Shire Council (1972) 172 CLR 270 Pearson v Leichardt Municipal Council (1993) 93 LGERA 206 Kavanagh v Akhtar (1998) 45 NSWLR 588 Medlin v State Government Insurance Commission (1995) 182 CLR 1 DECISION : See paragraph 318 of the judgment IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST BROWNIE AJ 13 SEPTEMBER 2001 50098/98 - COMMONWEALTH BANK OF AUSTRALIA V HOLLIER JUDGMENT 1 Brownie AJ: Pursuant to an arrangement conventionally called "the bill facility", the plaintiff advanced money to the members of a syndicate, the first to twelfth defendants. They repaid most, but not all of the money advanced, and the plaintiff now sues them, as well as certain guarantors, for the balance outstanding and interest; and it also seeks to enforce a security it took. Although many issues were litigated, no party challenged any aspect of the plaintiff's case in chief. The Background Facts 2 The facts constituting the background to the substantive defences and the cross-claims are complex. In 1995, the eighth defendant, Ninot Pty Ltd ("Ninot") conducted a motel business from one part of a building at Nelson Bay, then called Nelson Tower, and now called Nelson Towers I, to distinguish it from the building the subject of this litigation, Nelson Towers II. At that time, the land on which Nelson Towers II now stands was vacant land, adjacent to Nelson Towers I, and it was owned by a company in receivership. When the receiver put the land on the market for sale, the directors of Ninot (the fourth defendant, Mr George Sanders and his children, namely the thirteenth defendant, Mr Bruce Sanders, and the latter's sisters, Ms Statham and Ms Carroll) considered that it was in the interests of Ninot that Ninot acquire the land, in part to forestall the possibility of a development involving unwelcome competition to Ninot's motel business; and Ninot in fact bought the land, for $450,000. It seems that the zoning of the land was such that if a multistorey building was constructed, the lower two floors of that building might be used for commercial purposes, but the upper floors might be used for residential purposes. 3 Ninot considered various proposals for the possible development of the land, retaining an architect, Mr Laing, and a builder, Cancarra Pty Ltd ("Cancarra", the sixth defendant). Cancarra traded under the name of Flannery Constructions. Its directors appear to have been the eighteenth defendant, Mr Flannery, and the nineteenth defendant, Ms Boyd; and it employed Mr Harkin, an accountant by training, as its financial controller. In time, a project was promoted, by Cancarra, to this general effect: a syndicate of investors would be formed; the syndicate would buy the land from Ninot, and would then employ Cancarra to construct a six storey building there; the syndicate members would initially contribute a sum sufficient to enable the syndicate to buy the land and to pay various preliminary expenses, and then the syndicate would borrow from the plaintiff the funds necessary to finance the construction of the building; after completion of the construction work, a Strata Plan would be registered; and the land would be partitioned between the syndicate members. 4 Persons wishing to become syndicate members chose a unit (or units) "from the plans." Each unit had a value attributed to it, and the values varied between different units. Each syndicate member was required to pay a "first payment", followed by a "second payment", calculated as a fraction of the value of the unit, and upon completion of the building work, a "final payment", again calculated by reference to the value of the unit. The aggregate of the sums payable by way of final payment was to be used to repay the money advanced by the plaintiff to the syndicate, that is, the money used to pay Cancarra for the construction of the building. 5 Plans were prepared, showing a proposed building. The plans were varied from time to time, but at an early stage, they showed the ground floor, or Level 1, containing parking spaces, and an area for use as a shop. Level 2 contained three units, known as Units 1, 2 and 3, which were generally fit for use as motel accommodation or holiday letting. For zoning purposes that was regarded as commercial use. The four upper floors contained three units on each floor (Units 4, 5 and 6 on Level 3; Units 7, 8 and 9 on Level 4; Units 10, 11 and 12 on Level 5; and Units 13, 14 and 15 on Level 6), fit for residential use. 6 Initially, the sum that the syndicate proposed to borrow from the plaintiff was some $3.1 million, but ultimately it was about $3.5 million including some capitalised interest. 7 The first and second defendants, Mr and Mrs Hollier ("the Holliers"), conducted a retail business from leased premises, situated nearby. They became aware of the proposed project, and they (or, at least, Mr Hollier on their behalf) took the view that they would be better off if they acquired an interest in some part of the proposed building, acquiring owned premises rather than leased premises from which to conduct their business, and avoiding an expected sharp rise in the rent that they were then paying at their existing premises. Initially, they were interested in only Units 2 and 3, on Level 2 of the proposed building, but eventually they wanted to take, and did take an interest in all of the three units on Level 2. Their doing that resulted in a number of significant changes to the then design of the building: instead of Cancarra constructing a building, Level 2 of which would be fully fitted out for generally residential use (as distinct from "residential" for zoning purposes), rather than commercial use, that level was now to be constructed as "an empty shell", suitable for use for commercial purposes. The Holliers themselves were to fit it out, after taking possession of it from Cancarra. 8 In the meantime, it proved difficult to attract a sufficient number of investors for the project as a whole. The plaintiff said in effect (as did at least one other potential lender to the syndicate) that it would not agree to advance the money needed for the construction phase of the project, unless all units in the proposed building had been pre-sold, that is, unless the membership of the then proposed syndicate was complete. After some months of effort, the position was reached where four units remained unsold. A little later, the persons who had by then agreed to become syndicate members agreed to take up another two units, sharing the cost of buying those two units between themselves in agreed proportions, and Cancarra agreed to take up a third of the unsold units; and there was then one unit left unsold. Much of what is now litigated resulted from what happened in relation to that last unit. 9 By this time, either Cancarra or Ninot had incurred a liability for fees in connection with the project, to five persons or entities, called collectively "the professionals". The first of these five was Nelson Bay Real Estate Pty Ltd. Mr Alymer was associated with this company, in a way not clearly explained by the evidence. The second was Mr Laing, Ninot's architect, already mentioned. The third was a solicitor, Mr Blakemore, a partner in the firm of McDonald Johnson. The fourth was an accountant, Mr Sneddon, and persons or entities associated with him, the detail of which no longer matters: I will refer to Mr Sneddon and these others collectively, where it is not necessary to be more precise, as "the Sneddon interests". The fifth was at least nominally Kim Harkin, the wife of Mr Michael Harkin of Cancarra: perhaps she acted only on behalf of and/or instead of her husband, but if so, it does not matter. As a group, these five "professionals", or persons or entities associated with them, were owed fees, and there was a chance that if the project did not proceed, their fees would not be paid. 10 Against this background, a proposal was made to the general effect that the professionals, through a unit trust, would participate in the project. In short, each professional would take up units in the unit trust; the trustee of that trust would acquire the last unsold unit in the building; each professional would defer the payment of its outstanding fees, until the building work had been completed, when the professionals' unit would be sold; at that time, expected to be about a year or more later, each professional would be paid its outstanding fees plus the equivalent of 15% interest; and the professionals would have no further or other interest in the project. This proposal was ultimately put into effect, the trustee of the trust being a company called Cloudgard No. 43 Pty Ltd ("Cloudgard", the seventh defendant). A consequence of this was that the plaintiff agreed to proceed as if all the units had been pre-sold, so that it was prepared to advance the money sought, and the venture was therefore able to proceed. 11 Amongst themselves, the syndicate members (including Cancarra) entered into a Development Deed. That deed required its parties to enter into a building contract, the parties to which were the syndicate members (including Cancarra) as "the Principal", and Cancarra as "the Builder". The syndicate members (including Cancarra) agreed upon a mechanism for checking progress claims made by Cancarra as builder, and for the payment of those progress claims. In brief, at this stage, Madden Associates Pty Ltd ("Madden Associates") was appointed as the syndicate's quantity surveyor; it was to check each progress claim, as it was made by Cancarra, and to tell the Sneddon interests its views; and the Sneddon interests were then, on behalf of the syndicate, to draw down from the plaintiff, out of the funds agreed to be advanced under the terms of the bill facility, the sum needed to pay Cancarra what was then due, and to pay that sum to Cancarra. 12 At the date of the deed, 24 June 1996, the design of the building had not been finalised, and the deed provided for possible variations. Clause 5.4 provided:- "The Builder and the purchasers acknowledge the following in relation to lot 31 which is being sold to William Edward Hollier and Jennifer (sic) Lee Hollier ("Hollier"):- (i) the price of $525,000.00 is an estimated price and may vary having regard to final architectural and engineering design. (ii) the final price for lot 31 will be determined and agreed upon by the Builder and Hollier as soon as possible after architectural and engineering designs and costing are available. (iii) nothing in this Clause 5.4 will increase or decrease the price of any other lot in the Development." 13 "Lot 31" was a reference to the Strata Plan mentioned at [3] above. It equates to Units 2 and 3. At an early stage, the Holliers wished to buy only those two units, but in fact they bought Units 1, 2 and 3, and they and Cancarra never reached any agreement of the kind contemplated by clause 5.4(ii). 14 In June 1997, Cancarra asserted that it had brought the building to practical completion, and it made a 14th and final progress claim. Madden Associates recommended to the Sneddon interests that a certain sum be paid; the Sneddon interests arranged for the plaintiff to advance a further sum to the syndicate; and when the syndicate had received the proceeds of this advance, it made a last payment to Cancarra. 15 By about this time, Mr Hollier had become dissatisfied with various aspects of what Cancarra had done, and what it claimed in respect of the Holliers' units, that is, the work done in respect of Level 2. After various protests, the Holliers refused to pay the sum asked of them by the Sneddon interests, as being a calculation of the "final payment" payable upon completion of the building work, apportioned amongst the various syndicate members. The other syndicate members all paid the sums asked of them, so that there was paid to the plaintiff all that the plaintiff asked for, except the sum asked of the Holliers, who paid nothing. The plaintiff now sues for this sum, that is, the amount originally apportioned as being payable by the Holliers, as calculated by the Sneddon interests, and interest. No question arises about the calculation of this sum, as distinct from questions about the value of the work done by Cancarra. 16 In a practical sense, the defendants may now be divided into three groups: first, the Holliers; secondly, a group of defendants who did not appear on the hearing; and thirdly, a group who have come to be known as "the general defendants". The defendants in the second group are Cancarra, Cloudgard, Mr Flannery, and Ms Boyd. Cancarra is in liquidation, and Mr Flannery and Ms Boyd, who were guarantors, entered into a composition with their creditors; and the plaintiff did not proceed against these three defendants. Cloudgard apparently has no assets at this stage, but the plaintiff did proceed against it. The fifth defendant, Mr Stephen McCloy, was formerly one of the general defendants, but before the end of the trial he had left that group, presumably because he was unable or unwilling to fund the further conduct of the litigation. He made two witness statements, and he attended for cross-examination on those statements, but otherwise he took no part in the hearing. I will treat him as if he was one of the defendants who did not appear. 17 The Holliers eventually took up Units 1, 2 and 3; Cloudgard took up Unit 7; Cancarra Unit 12; and Mr Stephen McCloy Unit 14. 18 The general defendants comprise the following: the third defendant, Mr George Holliday, who took up the shop on Level 1 of the building, not given a Unit number; Ninot, which eventually took up Units 4 and 6; the fourth defendant, Mr George Sanders, who took up Unit 5; the ninth defendant, Miltup Pty Ltd ("Miltup"), which took up Unit 11; the tenth defendant, Walenora Pty Ltd ("Walenora"), which took up Unit 13; the eleventh defendant, Stenoak Pty Ltd ("Stenoak"), which took up Unit 15; the twelfth defendant, Ian Allibon Plumbing Pty Ltd ("Allibon"), which took up Unit 8; the thirteenth defendant, Mr Bruce Sanders, who was a director of Ninot, and a guarantor; the fourteenth and fifteenth defendants, Mr and Mrs Allibon, who were directors of Allibon, and guarantors; the sixteenth and seventeenth defendants, Mr Graham McCloy (a brother of Mr Stephen McCloy) and his wife, who were directors of Miltup, and guarantors; the twentieth and twenty first defendants, Mr and Mrs Anderson, who were directors of Walenora, and guarantors; and the twenty second and twenty third defendants, Mr and Mrs Bliss, who were directors of Stenoak, and guarantors. 19 Units 9 and 10 were taken up by the following syndicate members, as a group, in the following proportions: Mr George Holliday 7.69%; Mr George Sanders 7.69%; Mr and Mrs Hollier 23.09%; Ninot 15.39%; Allibon 7.69%; Mr Stephen McCloy 7.69%; Miltup 7.69%; Stenoak 7.69%; Walenora 7.69%; and Cancarra 7.69%. 20 After the completion of the construction of the building, Cancarra arranged for the sale of Unit 7. It seems that each of the professionals was then paid its outstanding fees, plus 15%. Certainly, McDonald Johnson was. 21 The precise legal mechanism by which McDonald Johnson took part in all this was as follows: McDonald Johnson had a "service company", Huntlaw Pty Ltd ("Huntlaw"); Huntlaw took up 8,000 units of $1 each, representing, it seems, a debt owed to McDonald Johnson of $8,000, in a unit trust called Nelson Towers II Unit Trust; the trustee of that trust was Cloudgard; additionally, Huntlaw held 10 shares in Cloudgard from June 1996 to August 1997; neither Mr Blakemore nor any of his partners were ever directors of Cloudgard, which appears to have been administered at all times by the Sneddon interests; and after the sale of Unit 7, Huntlaw's units in the trust were redeemed for $1.15 per unit. It seems that the other "professionals" were involved by a generally similar mechanism, but this is assumed rather than proved. 22 I will deal with the issues litigated in this sequence:- (a) The issues between the plaintiff and the Holliers. (b) The issues between the plaintiff and the general defendants. (c) The issues between the general defendants and McDonald Johnson - in short, claims for breach of fiduciary duty and in negligence. (d) The issues between the Holliers and "the Maddens", that is, Mr Madden who controlled Madden Associates, and that company. (e) The issues between the Holliers and the general defendants. 23 Earlier, there were various cross-claims brought involving the Sneddon interests. These were abandoned during the trial, with some outstanding questions about costs adjourned until after judgment. Some of the allegations made in various pleadings were also abandoned during the trial. The issues between the plaintiff and the Holliers 24 A number of defences to the plaintiff's claim, originally taken, have been abandoned, and need not be mentioned now. As against the plaintiff, the Holliers now rely essentially upon only one set of facts, as supporting both a substantive defence, and also cross-claims against the plaintiff. In the Amended Fifth Cross-claim they pleaded that the plaintiff represented:- "... that in providing the Bill Facility, progress claim inspections would be undertaken by the Bank and that funds released to the Builder would not exceed: (i) 90%; or (ii) alternatively, 100% of the value of the works completed to the date of such inspection, less progress claims already made." 25 The making of this representation was said to ground the tort of negligence, and also to constitute a breach of the provisions of section 52 of the Trade Practices Act resulting in an entitlement to damages under section 82, as well as being the basis for a substantive defence, under section 87. (At various points in the case, the provisions of the Fair Trading Act were also invoked. Since both statutes are, relevantly, in the same terms, I will not again mention the latter statute.) 26 The plaintiff had a policy that, where it agreed to advance money in respect of a project like this one, it would not actually pay over to a borrower a greater sum than the present estimated value of its primary security. That is, before the time of any actual advance, it wished to satisfy itself that the sum then advanced did not exceed the then value of the mortgaged land, with a partly constructed building on it. For this purpose it assumed that the value of the land and the partly constructed building approximated to the value of the vacant land, plus the cost to that date of the work actually carried out on that building. It assumed that, if the borrower defaulted, the plaintiff itself could eventually have the outstanding building work carried out for approximately the balance it had agreed to advance, but had not yet actually advanced, and that upon completion of the building work, it could if necessary then sell the property, remaining at all times fully secured. This policy, not itself the subject of contention, forms the backdrop to the representation that the Holliers rely upon. 27 They say that the representation pleaded was constituted by three matters: first, a statement made orally by Mr Handley of the plaintiff at a meeting of potential syndicate members on 3 April 1996; secondly, by Mr Handley's letter to Mr Sneddon of 27 May 1996; and thirdly, by an amended version of that letter, dated 12 June 1996. The letter of 27 May is quite lengthy, but central to some of the issues in the case, and I append a copy of it to these reasons for judgment. The part of the letter that is relevant now appears on page 3:- "Progress payment inspections will be undertaken by the Bank's valuer, with funds released being assessed on the basis of 90% of the value of the work completed to date, less any previous progress payments." 28 On 12 June 1996, Mr Handley made some manuscript alterations on a copy of this letter, and sent the amended copy to Mr Blakemore. The amendment presently relevant consisted of his marking with an asterisk the sentence just quoted, and writing against that passage the words:- "Progress payments will be paid against full assessment of 'work completed to date'". 29 It is not easy to say, with any confidence, just what it was that was said at the meeting of 3 April 1996, by whom, or in what context: no two witnesses said the same thing. Nobody made any (relevant) contemporary record of what was said, and no witness seems to have been asked to remember what it was that was said, or the context in which it was said, until 1999, or later. If what the Holliers contend for was said, it must be disappointing to them that no other witness supports that version, either in pleadings or in evidence, particularly as, if their version is accepted, it would give the general defendants a defence to the plaintiff's claim, and a cross-claim against the plaintiff. 30 In his evidence in chief, Mr Hollier described what happened at this meeting. An agenda distributed before the meeting contained an item referring to the appointment of a Project Liaison Officer. The chairman of the meeting, Mr Sneddon, said:- "Only one written submission has been received, that of a Mr Gary Carlin submitted by Bill and Jan Hollier." He continued:- "Bill can you indicate the costs of this person for the duration of the project." Mr Hollier said:- "Yes, I can. It would be approximately $30,000.00 and while some of you may not agree I believe that given the value of the project we as joint venturers need someone independent to look after our interests." Mr Stephen McCloy said:- "This is only a small project. We don't need to waste money." Mr Harkin said:- "I want to introduce Stephen Madden to the gathering as the quantity surveyor who would if elected independently value and lodge the progress claims with the joint venturers' accountants. Also don't forget the Commonwealth Bank will have its own people inspecting the works. Isn't that so Phil [Handley] ?" Mr Handley said:- "Michael [Harkin] is correct. The bank will have its own people inspecting and valuing the works before progress claims are paid." Mr Sneddon said:- "There seems to be no support for the appointment of Mr Carlin because of costs so I call for nominations of a Project Liaison Officer from the floor." Mr Bruce Sanders said:- "I'll do it. I'm there all the time anyway and my office is close by." 31 There was no support for Mr Hollier's motion for the appointment of Mr Carlin, and Mr Bruce Sanders was elected to the position of Project Liaison Officer. As well, Mr Madden was elected as the quantity surveyor for the syndicate. (No party questioned the validity or efficacy of these appointments, made before the syndicate was actually constituted.) 32 In her evidence in chief, Mrs Hollier described the discussion. She said that Mr Sneddon introduced Mr Madden, who offered to do the syndicate's quantity surveying work for $3,000. Mr Graham McCloy commented on the discrepancy between this sum and the amount quoted on behalf of Mr Carlin, $30,000; and Mr Sneddon said that Mr Madden was just starting his business and was prepared to do the work for $3,000 "to keep his name out in the field". She said that Mr Handley then said: "The bank will also have their valuer checking the costing of the job before the money is paid to the builder"; then either Mr Graham McCloy or Mr Stephen McCloy said: "How many checks do we need, for heaven's sake?"; and Mr Handley said: "Yes, you will have the bank and Stephen Madden checking us. Remember Reg Flannery is buying one of the units himself, so that he will be wanting everything to be okay." (In fact, it was Cancarra that was buying one unit, but this is significant only to the extent that it throws light on the accuracy or otherwise of what was said, or remembered by Mrs Hollier.) 33 The first point that the plaintiff makes in answer to this defence and these cross-claims is that, on none of these four versions (Mr Hollier, Mrs Hollier, the original letter of 27 May, and the amended letter) did the plaintiff make the representation pleaded, quoted at [24]. There are two separate strands to this submission: first, that the plaintiff released the funds to the syndicate rather than to Cancarra, as had always been the proposal; and secondly, that the plaintiff did not represent that it would not release funds exceeding 90%, or 100%, of the value of the works completed; rather, it said that the amount released would be assessed on the basis of the value of the works completed. 34 Whilst I think that the first of these points is correct, it does not seem to be to be decisive, and I put it aside. At least arguably, the result of the release of the funds to the syndicate would result in a payment to Cancarra of a sum in excess of the sum to which Cancarra was entitled, to the detriment of the Holliers. 35 The second point seems more significant: on either version of the letter, the plaintiff's point seems to be a good one, and the evidence of Mr Hollier does not detract from that point. The statement that Mrs Hollier attributes to Mr Handley ("The bank will also have their valuer checking the costing on the job before money is paid to the builder") is closer to the representation pleaded, but does not go far enough: she does not attribute to Mr Handley the statement that the plaintiff would not release the funds before the builder had done the work, as distinct from the statement that the plaintiff's valuer would check the costing before the syndicate paid the builder. 36 But the plaintiff's case, on this point, is stronger than that. At the meeting of 3 April 1996, the syndicate members decided to appoint Mr Madden as their quantity surveyor, so that he would check the progress claims made by Cancarra, and report to the Sneddon interests; and the Sneddon interests were then, on behalf of the syndicate, to draw down from the plaintiff an appropriate sum, and pay what ever amount was then properly payable to Cancarra as a progress claim; and the syndicate members decided not to appoint Mr Carlin as the syndicate's Project Liaison Officer to check the claims made by Cancarra. 37 Further, Mr Handley said that he made a statement to the meeting to the effect that the inspection and valuation of the partly completed building work was for the benefit of the plaintiff only, and not for the benefit of the syndicate members. I doubt that any of those present at this meeting has any truly accurate recollection of any of the detail of what was actually said, either as to the supposed representation, or the supposed qualification to that representation. In this context, it does not seem to be without significance that the Holliers did not raise the allegations now made, for some years. It is true that they made witness statements in 1999 and June 2000, but in those statements they dealt with this topic only in passing, and their then pleadings did not make the allegation now made. 38 I am satisfied that, more likely than not, Mr Handley said something to the general effect that the plaintiff would have its own inspections carried out when assessing requests for the draw down of funds by the syndicate, but I am not satisfied that he said words to the effect pleaded. I think that, more likely than not, he did say words to the general effect of the qualification of which he gave evidence. Although Mr Hollier generally denied it, Mrs Hollier effectively acknowledged having had an understanding to that general effect; they each seem to have understood, at least in an imprecise way, the reason why it was that the plaintiff had the policy I have mentioned; and Mr Hollier acknowledged that he did not understand the plaintiff to be undertaking a responsibility on behalf of the Holliers to look after their interests. 39 Mrs Hollier also said that she inferred that, although the plaintiff was going to be looking after its own interests, it would also be looking after the Holliers' interests. However, she drew this inference not from what Mr Handley said, but from what some unidentified people said at the meeting. That does not seem to me to be significantly different to the evidence on this point of Mr Handley, who said that the topic of the plaintiff's inspections was raised, "and perhaps it was implied at the time that the bank would be looking after the interests of the syndicate members". However, he could not recall who said this, and later he described his words of qualification as "basically only a one-line conveyance." 40 Nor do I think that the Holliers have established reliance, in any relevant sense, upon the supposed representation. Really, they have asserted no more than that they were comforted by the making of the representation. 41 Both the substantive defence and the cross-claims therefore fail, at a factual level, and I need not deal with the further arguments advanced by the plaintiff. I should however observe that the matters set out in paragraphs 23 and 24 of the plaintiff's written submissions appear to present an insurmountable discretionary barrier to the Holliers' defence under section 87: Mr Hollier conceded, in substance, that his real dispute was with Cancarra, and not the plaintiff, that the Holliers owed the plaintiff the sum claimed, and that he was really only seeking time to pay the plaintiff, whilst he resolved his difficulties with Cancarra. Cancarra is, as already mentioned, now in liquidation. The issues between the plaintiff and the general defendants 42 All of the various defences pleaded by the general defendants, as well as the cross-claims brought by them against McDonald Johnson, depend essentially upon one set of facts. In the plaintiff's letter to Mr Sneddon of 27 May 1996, the plaintiff said that certain security "must be" provided, and it identified 13 securities: a mortgage by the syndicate over the land, guarantees unlimited in amount by named persons, and then, at pages 2 and 3 of the letter (attached):- "8. A guarantee, limited to $48,000 from GJL Developments Pty Limited; 9. A guarantee, limited to $48,000 from Ron Laing; 10. A guarantee, limited to $48,000 from Kim Harkin; 11. A guarantee, limited to $48,000 from Michael Alymer; 12. A guarantee, limited to $24,000 from Brian Blakemore ..." 43 The aggregate of the five sums just mentioned is $216,000. It will be recalled that the group called "the professionals" had agreed to take up, between them, Unit 7 in the proposed building. The value assigned to that unit was $299,250. The evidence does not establish how the plaintiff arrived at the figure of $216,000, or how it apportioned this sum between the five proposed guarantors, although presumably it bore some relationship to the fees owing to the five professionals. The company GJL Developments Pty Ltd was within the group I call the Sneddon interests. 44 Mr Blakemore refused point blank to give the guarantee sought from him, and, after some negotiations between Mr Handley and Mr Sneddon, Mr Handley sent to Mr Blakemore a copy of the letter of 27 May, with manuscript alterations. Relevantly, he put asterisks beside each of items 8 to 12, just quoted, and then wrote:- "Proposed securities No'd 8, 9, 10, 11 and 12 are not required and will be substituted with guarantee $216,000 by [Cloudgard]". (sic) 45 There are a multitude of disputed circumstances, but some things are clear. Generally speaking, either Mr Sneddon or Mr Harkin communicated with the plaintiff on behalf of the syndicate members about obtaining the bill facility, and negotiating its terms. The plaintiff's letter of 27 May was sent to Mr Sneddon, as the representative of the syndicate. He sent copies of the letter to all (or almost all) of the persons affected, whether as borrowers or guarantors, and he faxed a copy to Mr Blakemore on the afternoon of 27 May, under cover of a note reading: "Copy of CBA finance approval for your information". 46 Mr Blakemore says, and I accept, preferring his evidence to that of Mr Handley, that at about this time, Mr Handley asked Mr Blakemore when Mr Blakemore was going to sign the guarantee, and Mr Blakemore replied:- "You have got to be joking. I'm not giving a guarantee. I'm a lawyer not a developer. The investment is to help the syndicate. I am only in this for my unpaid fees." 47 This was said, after two earlier conversations, the first between Mr Blakemore and his partners, and the second when Mr Blakemore had told Mr Sneddon and/or Mr Harkin that McDonald Johnson would not participate in the project except to recover its unpaid fees, and that the firm would not give any guarantee. 48 On 12 June 1996 Mr Handley faxed to Mr Blakemore a copy of the letter of 27 May, altered, with the alterations signed. Thereafter, a number of documents, mostly dated 24 June 1996, were executed, including the Development Deed, a supplementary deed, the mortgage and a number of guarantees, and various banking documents. In short, the plaintiff took on settlement the securities mentioned in the letter of 12 June rather than the securities mentioned in the letter of 27 May. The general defendants say that by reason of these circumstances, coupled with their lack of knowledge that the plaintiff acted in this way, they are entitled to relief against the plaintiff on one or more of the following bases:- (a) A condition precedent to their being liable to repay to the plaintiff the money advanced was not fulfilled. (b) The terms of the letter of 27 May were express terms of the mortgage. (c) The terms of the letter of 27 May were implied terms of the mortgage. (d) So many of the general defendants who are guarantors rather than principal debtors are entitled to equitable relief. 49 The various defences taken by the general defendants depend upon disputed questions of fact, which overlap, and which also overlap with the issues between the general defendants and McDonald Johnson: what was said during a series of meetings; what the authority of Mr Sneddon was, and in what capacity he negotiated with the plaintiff from time to time; what the authority of Mr Blakemore was, and in what capacity he dealt with the plaintiff from time to time; what authority Mr Handley had from the plaintiff to vary the terms of the plaintiff's offer of 27 May, and if he lacked the relevant authority, whether the plaintiff ratified his conduct; and what the general defendants believed to be the position as to the respective positions of the plaintiff, Mr Sneddon and Mr Blakemore. 50 On the case of the general defendants, they were led to believe and they believed that they and the professionals "were all in this together", and that the persons mentioned in paragraphs numbered 8 to 12 of the letter of 27 May were all going to give guarantees. The details of the asserted beliefs and understandings of the general defendants and their witnesses varied, but broadly speaking, they said that if they had known that Cloudgard was giving a guarantee rather than the persons named in paragraphs 8 to 12 of the letter of 27 May, they would have acted differently. 51 McDonald Johnson pleaded the facts they relied upon, and the witness statement of Mr Blakemore of 16 May 2000 spelt out the detail of the basis upon which McDonald Johnson, through Huntlaw, took an interest in the project: see [21]. Surprisingly, most of the general defendants said that they were unaware of this, often saying words to the general effect that they thought the professionals were investors, just as the other syndicate members were, and that there was no reason why the professionals should not have given unlimited guarantees, as the general defendants did. One is left to wonder how it came about that the general defendants, having embarked upon the litigation, came to continue with the litigation, and what issues they came to court expecting to fight. 52 There were at least three meetings of proposed syndicate members: the first on 30 November 1995, the second on or about 1 February 1996, and the third on 3 April 1996. There may have been other meetings, as well as various discussions between the persons concerned. 53 I will start with the position of Ninot, and two of its directors, Mr George Sanders and Mr Bruce Sanders. In the events that happened, Ninot took Units 4 and 6, and Mr George Sanders took Unit 5 in his own name, although he said that he took that unit on behalf of Ninot; and he is still living in that unit. Buying Unit 5 in his own name, he was one of the syndicate members, and a principal debtor of the plaintiff. Mr Bruce Sanders became a guarantor, since he was one of the directors of Ninot. As late as 21 June 1996 his sister Ms Statham was described as a member of the syndicate. How and why this situation changed is unexplained, as is the failure of the plaintiff to seek securities from Ms Statham and Ms Carroll, both of whom were directors of Ninot, and the failure of the general defendants to observe, or to do anything about the failure of the plaintiff to ask for or to take guarantees from them. 54 Ninot purchased the vacant land for $450,000, and some few months later it entered into some arrangement with Cancarra, the detail of which is not proved, to the general effect that Ninot would sell the land to the syndicate for $500,000, later changed to $550,000, on terms that Ninot (or, perhaps, its nominee) would take up three units in the project then proposed, obtaining in respect of each such unit a discount of about $100,000 off the price otherwise payable. This arrangement was not recorded in any document put into evidence, but it was carried into effect when Ninot and Mr George Sanders took up their three units, each at a discounted price. On the face of the evidence, some stamp duty was thereby improperly avoided, and some capital gains tax was improperly deferred and/or avoided. There is a question whether the other syndicate members had any or any adequate notice of these arrangements, and it may be that they were adversely affected by the transaction being structured in this manner. 55 These matters are relevant, not merely to questions of credit, but also in a more direct sense: one question to be answered is what Ninot, Mr George Sanders and Mr Bruce Sanders would have done if they had known of the change in the securities required by the plaintiff; and this unusual arrangement between Ninot and Cancarra has to be taken into account. Ninot had secured advantages, which might have been lost or at least put in jeopardy if the proposed project had not proceeded. Apart from this concealed or partly concealed profit, Ninot wished to control the development of the site, situated next door to its existing motel business, or at least to be in a position where it could exercise some measure of control over the possible use of the site. 56 Mr George Sanders and Mr Bruce Sanders said, in summary, that Ninot was in a position to exercise this control. The explanation was not fully developed, but was to the general effect that the Nelson Towers I site and the vacant land, upon which the Nelson Towers II now stands, was then the subject of a single title; that a Strata Plan had been registered in respect of that title; and they said that Ninot's ownership of other Strata Titles meant that Ninot could effectively control any decision made by the Strata Title body corporate concerning the future use of the site. 57 Another aspect of the matter is that Ninot was, in about June 1996, the owner of the site; it had financed its purchase of the site by bank overdraft; it was incurring significant holding charges in respect of the site, and the site was producing no income; Mr Bruce Sanders told Mr Hollier, apparently in 1995, that Ninot did not have sufficient capital to develop the site by itself; and months of work had gone into working out a way to develop the site to Ninot's advantage. In June 1996, Ninot could expect that, if it sold the site, it would be able to pay off its bank overdraft out of the proceeds of the sale of the site. 58 There were other reasons why, it was said, Ninot, Mr George Sanders and Mr Bruce Sanders would have been content to proceed with the transaction, if told of the plaintiff's changed security requirements. At an early stage, Ninot proposed to take the three units on Level 2, perhaps for use in conjunction with its existing motel business at Nelson Towers I. Later, it was arranged that the Holliers would take Units 2 and 3, and that Ninot would instead take two units on Level 3. Later still, it was arranged that the Holliers would take Units 1, 2, 3, and that the Ninot interests would take Units 4, 5, and 6. These exchanges resulted in changes in the designated values of the various units, and, it seems, the Ninot interests thereby obtained a further advantage of $70,000. 59 Additionally, the project seems to have been regarded by all concerned as a good one, viewed commercially, with investors expecting to make a profit on their investments of the order of 20%, over a period of a little more than a year; and so far as the evidence shows, this expectation would have been met but for the events giving rise to this litigation. 60 In his evidence in chief, Mr George Sanders spoke of the meeting of 30 November 1995. He said that Mr Bliss raised a question about one of the provisions in the draft of the Development Deed then in circulation, and in the course of dealing with this Mr Blakemore said: "Everybody in the deed is giving cross guarantees …". (This, I find, is not accurate.) He said that at the meeting in early February 1996, Mr Sneddon said that the professionals, whom Mr Sneddon then identified as Mr Blakemore, Mr Laing, Mr Alymer and himself, had agreed to take one unit, and that it was proposed and then agreed that the other investors take up one other unsold unit. (This is also inaccurate, both as to the identity of the professionals concerned, and as to the sequence of events. In particular, I accept that the proposal that the professionals take up a unit was not put to Mr Blakemore before the meeting of February 1996.) Mr Sanders said that at the meeting of 3 April 1996 Mr Blakemore said: "We are all in this together. The professional advisers are giving guarantees to the bank. Everything should be all right". In late May or early June 1996 Mr Sneddon showed him a copy of a letter of 27 May. He described in detail how he read it, and what he thought about some of its terms. He knew that G J L Development Pty Ltd was a company associated with the Sneddon interests because, as a former solicitor, he had arranged for the incorporation of that company. 61 In contrast to this apparently careful examination of the letter of 27 May, he signed each of the documents placed in front of him by "someone from the bank", without reading them. He said that if he had been told that there had been any change in the names of the guarantors listed in the letter of 27 May he would not have signed the Development Deed or the mortgage, but would have discussed the matter with his fellow investors and sought an explanation as to why he was personally liable, but those buying through Cloudgard were not, and he would not have been prepared to go through with the purchase of Unit 5, unless the persons named in paragraphs 8 to 12 of the letter of 27 May gave personal guarantees. He said that he would not have signed the documents in question "because I believed we all had to sign". He said the same, in relation to his execution of the documents on behalf of Ninot. 62 His cross-examination destroyed this facade. It emerged (eventually) that he had been struck off the roll of solicitors for dishonest conduct, more than twenty years ago. Time is a great healer, but he displayed no sign of discomfort when taxed with these matters. He said at one stage that he regarded the risk of guarantors being called upon as a slight risk. Later, he denied that this was so, but by reference to the transcript, he was compelled to withdraw this denial. His explanation about his state of mind lacked credibility. He is an experienced businessman, and it does not seem uncharitable to describe his and Ninot's dealings in relation to the project as Machiavellian. 63 On 28 May 1996 Mr Blakemore wrote to various potential syndicate members, seeking instructions whether to proceed to settle the contract for the purchase by the syndicate of the site from Ninot, before the plaintiff gave final (as distinct from conditional) approval to the proposed bill facility, and before the execution of the Development Deed. Mr George Sanders signed a letter of authority, seemingly with such alacrity, enthusiasm and lack of attention to detail that he left it to Mr Blakemore to work out which of two inconsistent sets of instructions he was giving, but as he acknowledged, he intended at that stage to proceed with the sale. So far as I can tell, by about the end of May 1996, he had manoeuvred himself and Ninot into a position that was so favourable that he and it would have been extraordinarily reluctant to let the project falter, particularly as the chance that the plaintiff would ever actually call upon a guarantor to pay was a slim one. 64 He said that, from the terms of the letter of 27 May, he understood that the professionals were being asked to give limited guarantees; and he said that this was the first time it had been suggested to him that anyone was to give a limited, as distinct from an unlimited guarantee. Asked how he reconciled that understanding with the statement he attributed to Mr Blakemore at the meeting of 3 April, he acknowledged that he understood that the position of the professionals was different to that of the other investors: the professionals were seeking to recover their fees, and "to clinch the deal", by buying the last unsold unit. The matter had been discussed at the meeting of 3 April, when Mr Sneddon had explained the position. Nevertheless, he asserted a belief that the professionals would make a profit on the ultimate sale of the unit, and he adhered to his version that Mr Blakemore had said, on 3 April: "We are all in this together". His evidence generally was unconvincing, and his evidence about his mental processes quite unconvincing. In particular, I do not believe what he says he would or would not have done, had he been told of the plaintiff's changed attitude about the securities it sought. 65 Mr Bruce Sanders described himself as the general manager of the Sanders Group of companies, which includes Ninot. He said, and I accept, that he left the legal and financial aspects of the development to his father. He described his reading and understanding of the terms of the letter of 27 May, and his subsequent thought processes, in terms similar to the terms his father used. Cross-examined about his thought processes, his evidence carried no conviction; and my strong impression is that he regarded the overall transaction as very much in Ninot's interest, and that he would not have willingly put the project in jeopardy, had he been told about the change in the plaintiff's security requirements. I consider that, more likely than not, he would have regarded the transaction as so favourable from the point of view of Ninot and himself that the changes would have seemed unimportant. I do not accept what he says about his thought processes. 66 The first witness called in the case of the general defendants was Mr Anderson. He was so unimpressive a witness that, at the time, the decision to call him as first witness seemed surprising. However, three weeks later, that decision did not seem particularly surprising. Mr Anderson was a plumber by trade, later a publican, and at the time of the events in question was retired, but somehow involved in construction work involving home units in the Terrigal area. He had a firm of accountants acting for him, and he knew Mr Harkin of Cancarra, as Mr Harkin had previously been employed by that firm. 67 Mr Harkin telephoned Mr Anderson, to suggest that Mr Anderson invest in the then proposed project. Mr Anderson travelled to Nelson Bay, considered the proposal, and decided that he did not want to be involved, because he thought that the units then planned were too small. Some time later, Mr Harkin again contacted Mr Anderson, and again suggested that the Andersons become involved as investors. By then, the plans for the proposed building had been changed, and the units were to be larger in size. In addition, Mr Harkin offered Mr Anderson two further inducements: a price discount of $20,000; and an opportunity for Mr Anderson's son, who is a bricklayer, to obtain the bricklaying subcontract from Cancarra, in respect of the construction of the building. Mr Anderson satisfied himself that the proposed investment would be a good one, and he told Mr Harkin that he (or Walenora) would become involved. 68 Just how Mr Anderson satisfied himself about these matters is not entirely clear, but his accountant (a partner in the firm that had formerly employed Mr Harkin) advised him against the investment, on the basis that the accountant thought that the unit Walenora purchased was over-priced. Notwithstanding that advice Mr Anderson decided to proceed, because he thought that the price asked was reasonable. By May 1996, he was keen to proceed with the project, and intended to live in Unit 13, after completion of the construction work. 69 It seems that Mr Anderson attended some meetings of proposed syndicate members, including the meeting of 3 April 1996, but he gave no evidence suggesting that anything significant was said on these occasions. He seems to have had virtually no recollection of what happened on these occasions. He made it plain that he trusted Mr Harkin, and that he relied very extensively upon what Mr Harkin told him about the proposed investment. He apparently appointed Mr Harkin as his delegate in respect of one or more of the meetings. As far as I can tell, he did not pay any attention to any of the details of the project before receiving from Mr Sneddon a faxed copy of the letter of 27 May. It seems that he had had several discussions with Mr Harkin, who had told him in general terms what was going on, and it seems certain that whatever understanding Mr Anderson had, prior to his receipt of a copy of the letter of 27 May, was gained from what Mr Harkin had told him. He said that his understanding, before reading this letter, was to the effect that a group of professionals were to take up one unit between them, as investors, and that all of the investors were to be equally liable to the plaintiff to repay the money which the plaintiff was to advance to the syndicate. I think it is clear that he had no accurate understanding of the difference between the position of a principal debtor and the position of a guarantor, or about the liability of the persons concerned being a joint and several liability, and that what he said about these matters was unreliable. 70 He described in detail what he gleaned from reading the letter, and what he thought about it. In short, believing that the persons buying through Cloudgard were investors, investing for profit, he believed that they should be equally liable with all the other investors, and he would not have signed any of the relevant documents later on, had he known of the plaintiff's changed requirements about the securities it required. 71 Long before the end of his cross-examination, this last proposition had been completely discredited. In the first place, his starting point, that he gave careful consideration to the terms of the letter of 27 May, seems unlikely to be true: he gave little attention to any aspect of the matter before seeing that letter, except the purely commercial question whether the venture was commercially attractive; he appears to have accepted without question what Mr Harkin told him, and to have relied entirely upon Mr Harkin; he signed various documents on at least two separate occasions, one in an office in the building at Newcastle where Mr Sneddon had his office, and the other on the bonnet of Mr Harkin's car at Liverpool, without attempting to understand what it was that he was signing, much less its detail. 72 He remembered that Walenora took an interest in Unit 10, together with the other body of general investors, but either never understood or had forgotten that Walenora also took an interest in Unit 9. He disclaimed any idea that the professionals took their unit as a mechanism for being paid outstanding fees, and could scarcely be persuaded whilst in the witness box to even consider this possibility. Until he read the letter of 27 May, he thought that only Mr Sneddon, Mr Blakemore and Mr Harkin were involved in the group now called the professionals. When he read that letter, he says that he saw that Mr Sneddon was not named as a guarantor, but he did nothing about that circumstance, and made no inquiries about it. He knew nothing about several of the other guarantors named. 73 He conceded that he thought that the risk that any of the guarantors would be called upon was a slight one, because he saw the project as being commercially sound, but when taxed with that concession and his statement that had he known of the change in the securities required by the plaintiff he would not have signed the relevant documents, his evidence became less and less persuasive. Nor could he give any satisfactory explanation as to what he had thought, when he read the letter of 27 May, as to why the persons named in paragraphs 8 to 12 were only giving limited guarantees. Until he saw the letter, no one had said anything to him about limited or unlimited guarantees; and he seems to have had only a vague perception that the investors, and the natural persons associated with the investor companies, would be equally liable to the plaintiff. He said that he surmised that the figures totalling $216,000, mentioned in paragraphs 8 to 12 of the letter, represented only the value of the unit that Cloudgard was buying, but could not reconcile this statement with his supposed belief that Cloudgard was an investor for profit, and no different to all the other investors who were giving unlimited guarantees, nor with his statement that he thought there was no risk of a default by Cloudgard. 74 He said that what was important to him was that the people named were giving guarantees, although he did not know who they were, or, in some cases, anything about their financial positions; and then he said that, if the letter of 27 May had said that the plaintiff required Cloudgard to give a guarantee limited to $216,000, instead of the five guarantees totalling $216,000 mentioned in paragraphs 8 to 12 of that letter, he did not know whether he would have been content with that. His case therefore fails, factually, at that point alone. 75 On 21 June 1996 the plaintiff sent a letter to Mr Anderson, enclosing a copy of the guarantee he was being asked to sign. Amongst other things, that letter named the various principal debtors, for whom he was to be a guarantor, including Mr Sneddon. He acknowledged having received and read this letter, and having noticed that Cloudgard was named. Asked about his assertion of the importance to him of the persons named in paragraphs 8 to 12 of the letter of 27 May, and those persons not being mentioned in the letter of 21 June as guarantors, he said: "It was translated into Cloudgard, I took it to be the guarantee"; and he said that at the time that was enough for him. 76 I am not sure that the letter of 21 June really should have put Mr Anderson on notice as to who was and was not giving a guarantee, but he did not attempt to defend his previously expressed views along these lines. 77 However, towards the end of his cross-examination, Mr Anderson was asked what he would have done if the letter of 27 May had named Cloudgard as guarantor, rather than the five persons mentioned in paragraphs 8 to 12, and he said, first, that he would have asked Mr Harkin for an explanation, and then that he did not know what he would have done: he might have regarded Cloudgard's guarantee as adequate. All in all, Mr Anderson's evidence simply does not provide an acceptable factual basis either for the defence taken by the general defendants to the plaintiff's claim or for the cross-claim brought by the general defendants against McDonald Johnson. 78 The evidence of Mrs Anderson is ultimately deficient in the same respects. She left most of the details to her husband, and seems to have relied largely upon what he told her, and upon what Mr Harkin told the two of them. She attended perhaps two or three meetings of proposed syndicate members, but could say virtually nothing about what was said on those occasions. Whilst unable to remember a great deal, she was far too enthusiastic in saying, apparently at each opportunity, that she regarded Mr Blakemore as the project solicitor, and as "our solicitor", and that she relied upon him to look after her interests, but that understanding came either from her reading some documents describing him as the project solicitor, or from what someone, probably Mr Harkin or her husband, told her. 79 She seems to have had only a hazy idea of the technicalities of the organisation of the syndicate, of the bill facility and of the detail of the securities that the plaintiff sought and obtained, and whilst she spoke of reading the letter of 27 May, and of what she thought about it, I am not satisfied either that she did give that letter any real consideration at the time, or that her description of what she thought about it is reliable. 80 For example, she said that she understood that the professionals, through Cloudgard, were going to buy one unit, as investors on the same basis as the other investors, and she said that she understood that Mr Sneddon would therefore be giving a guarantee, but when asked what she thought, considering that he was not named as a guarantor in the letter of 27 May, she gave unsatisfactory answers, before saying that she did not notice that he was not named as a guarantor, and then that she probably did not turn her mind to the question at the time. 81 At another point she said that if the letter of 27 May had named Cloudgard as a guarantor, rather than the persons named in paragraphs 8 to 12 of the letter, she would have had no concern, provided that Cloudgard gave a guarantee for the full amount borrowed. Given that the persons named in paragraphs 8 to 12 were only giving limited guarantees, it is not easy to accept the qualification that a guarantee from Cloudgard would have had to be unlimited as to amount. 82 If one accepts that she turned her mind to the question at the time (and I do not accept this), she rationalised the matter by thinking that if the plaintiff satisfied itself that the securities taken, considered cumulatively, were adequate, then she and her husband would have been safe giving unlimited guarantees. Assuming this much, it seems to follow that the satisfaction of the plaintiff about a guarantee from Cloudgard for $216,000 should be equated with the satisfaction of the plaintiff about guarantees from the persons named in paragraphs 8 to 12 of the letter, totalling that sum. 83 I think it is clear that she would have acted as her husband suggested. 84 Mr Bliss is a plumber. He and his wife controlled a company called Coastline Plumbing (Australia) Pty Limited ("Coastline"), which in and before 1995 carried out subcontract plumbing work for Cancarra from time to time. In about 1995 Coastline gave Cancarra a quotation for the subcontract plumbing work in relation to the Nelson Towers II project. Mr Bliss then spoke to Mr Peek, an estimator employed by Cancarra, saying: "If I can get this job, I am definitely interested in buying one of the units"; and Mr Peek replied, saying that the job was going ahead, and that Coastline had quoted the best price; and he referred Mr Bliss to Mr Flannery. In cross-examination, Mr Bliss denied that there was a significant connection between his deciding to buy the unit and Coastline obtaining the plumbing subcontract, and he said that the investment was attractive for other reasons. 85 Mr Bliss then spoke to Mr Flannery and to Mr Harkin. The latter told him that in order to obtain bank finance, it would be necessary to sell 80% of the units, and that Cancarra needed Mr Bliss to commit himself to the project. (It seems clear that the plaintiff required all of the units to be pre-sold. The discrepancy between this requirement and the suggestion that only 80% had to be pre-sold was not explored in evidence, and it may be that the figure of 80% represented an expression of hope at an early stage, before the plaintiff made its attitude clear.) Mr Bliss responded that he would talk to his accountant, and he then spoke to Mr Harkin again, about the possibility of buying the unit in the name of his "super fund". (Later, this in fact occurred: the purchase was made in the name of Stenoak, as trustee of a superannuation fund called Bliss Investment Unit Trust.) 86 Mr Bliss did speak to his accountant, Mr Honan, and at some later stage spoke again to Mr Harkin, asking:- "Can I do a contra on the plumbing work? Say $40,000"; and Mr Harkin replied: "I don't see a problem with that as long as your accountant thinks he can handle it." Mr Harkin then wrote to Mr Bliss on 7 December 1995, saying amongst other things:- "Your contract price will be as per the agreed quotation amount. Your unit price is $335,250. A variation to your contract of (say) $40,000 for work on your unit etc will be deducted from your contract and purchase price. … We have spoken to Neil [Honan] who seems happy with this arrangement. However, should he or yourself wish to vary the above arrangement in any way we are open to discussions." 87 In due course, Stenoak entered into the Development Deed, as the purchaser of Unit 15 for the nominated price of $335,250. It made a "first payment" of $5,000 and a "second payment" of $85,489. Ultimately it was agreed as between Cancarra and Stenoak that the sum payable by way of "final payment" would be reduced by $59,656. That was one of the circumstances that attracted the suspicion of Mr Hollier that he and his wife had somehow been duped, and led to his refusal to make the "final payment" asked of the Holliers. 88 The evidence does not enable an accurate finding to be made as to how the sum of $59,656 was calculated. Mr Bliss said that it was made up of three components: about $20,000 represented the value of work done by Coastline for Cancarra on a different job altogether, not charged by Coastline as against Cancarra in respect of that other job, but credited to Stenoak in respect of the purchase of Unit 15 in Nelson Towers II; about $15,000 to $18,000 represented a sum agreed upon as between Stenoak and Cancarra as compensation to Stenoak for defective work carried out by Cancarra in respect of Unit 15; and the balance of about $22,000 to $25,000 represented work done and materials provided by or on behalf of Mr Bliss, being part of the work contracted to be done by Cancarra for the syndicate. 89 As to the first of these components, $20,000, Mr Bliss acknowledged that this amounted to dishonest conduct: Coastline was thereby enabled to avoid a taxation liability. Worse, the evidence suggests, but does not definitely establish that he did this after taking advice on the topic from his accountant, Mr Honan, and his solicitor, Mr Wylie. I hasten to add that Mr Honan is not a party and did not give evidence, and that whilst Mr Wylie was called as a witness, his evidence was limited to an entirely different topic, and was given on a relatively early limited interlocutory application, before the above facts emerged in evidence, and nobody asked him any question about the supposed "contra". 90 As to the second component, about $15,000 to $18,000, there was not much debate. However, the incident tends to provide at least a little support for the Holliers' complaint that the workmanship of Cancarra was generally unsatisfactory. As to the third component, about $22,000 to $25,000, there is again a suggestion that what was done as between Cancarra and Stenoak was to the disadvantage of the other investors, and particularly the Holliers: whilst a lot of the work done and materials provided by Mr Bliss, the subject of this credit, related to Unit 15, some of it related to the roof (that is, the common property) immediately above Unit 15. In the end, however, I do not think this goes beyond the level of suggestion or suspicion, although it tends to put the conduct and attitude of the Holliers in a more favourable light. 91 The first component is more troublesome. On the case of the Holliers, the amount that they were asked to pay by way of "final payment" was too high; and one matter that led to their being asked to pay more than was proper was the fact that Stenoak was given this improper credit. It may be that this topic has an impact in relation to the issues between the Holliers and the general defendants. 92 It was also suggested that the "contra" from a different job was $40,000, and not $20,000, as well as that one of the factors motivating Mr Bliss in arranging the "contra" was a concern on his part about the solvency of Cancarra. He denied both propositions, and I accept his denials. Notwithstanding his apparent views about taxation matters, he seemed to me to be a generally truthful, if sometimes unreliable witness. 93 As between the plaintiff and the general defendants, and as between the general defendants and McDonald Johnson, the matters just discussed were ventilated, partly in relation to the credit of Mr and Mrs Bliss, and partly as going to the question whether, if they had known of the change in the plaintiffs' security requirements, between 27 May and 12 June 1996, they would have acted differently. 94 Unlike some of the other investors, Mr Bliss was keenly interested in the detail of how the project was to be structured, and how it would work. In December 1995 he received a draft of the Development Deed, and he consulted his solicitor, Mr Wylie, who gave him detailed written advice about it. Later, there were discussions between Mr Wylie and Mr Blakemore (who had prepared the original draft) about the terms of the proposed deed, and various amendments were negotiated. Mr Bliss apparently incurred an expense of about $3,000 in relation to this advice and these negotiations, leading me to infer that quite a lot of work was done in this regard. 95 One of the matters discussed between Mr Wylie and Mr Blakemore (and, perhaps, others) related to a proposal that all of the persons purchasing units be jointly and severally liable in relation to the mortgage debt. In February 1996 Mr Wylie wrote, describing this provision as "harsh", and suggested that the project be restructured. Nothing came of this request, presumably because of the plaintiff's attitude that it would accept nothing less, but the incident points to the likelihood that Mr Bliss (who received a copy of the relevant letter from Mr Wylie, and sent a further copy of it to Mr Harkin) actually directed his mind to this topic, before May 1996. 96 The occasion when Mr Bliss decided to commit himself (or Stenoak) to the purchase of a unit was a meeting of potential syndicate members, probably in early February 1996. Mr Bliss told the meeting that he had spent some $3,000 on legal advice, and raised various questions that were still troubling him. Mr Blakemore responded, saying that he had discussed the matter with Mr Wylie. In chief, Mr Bliss said that Mr Sneddon then said: "Look, the professionals involved are buying a unit amongst ourselves. We would not be going into it if we did not think it was a good deal and everything was in order with the documentation". Mr Bliss then said: "Okay, I'm in." In cross-examination, he put it differently, saying that Mr Sneddon said: "We are all in this together. Why would we be buying the unit, something to that effect, why would we be going into this if it was a bad deal?" At another point he said that Mr Blakemore did not say everyone was in the project together - Mr Sneddon said those words. 97 I do not accept that Mr Sneddon said the words attributed to him by Mr Bliss, although I think it may be that Mr Sneddon said something to the general effect that he was, or that he and others were satisfied with the documentation, and perhaps that he (Mr Sneddon) considered the project to be commercially sound. It was not true that the professionals were buying a unit, as investors, and I do not accept that Mr Sneddon or Mr Blakemore ever said as much, or stood by without comment, when someone else attributed such a statement to them. 98 Before that meeting, Mr Bliss had satisfied himself generally about the commercial aspects of the project. Apart from the "contra", he saw other advantages to himself in the project, including the opportunity to fit his unit out according to his own wishes rather than as Cancarra proposed; and the site was close to his home, so that he would be able to look after the maintenance of the unit himself, rather than have to employ others to do this. He carried out some investigations into the value of the units, thought that the site was located in an exceptionally good position, and regarded the investment as a good one, particularly if he himself could have some involvement with the building workmanship, so as to be able to check its quality. Another consideration for him was that some stamp duty could be saved, if the syndicate members bought the land, and later partitioned it amongst themselves once the Strata Plan had been registered. His accountant advised him against the investment, for commercial reasons, but he chose in the end to reject that advice. 99 Mr Bliss arranged for the payment of a "first payment" of $5,000, and on 24 April 1996 for the "second payment", $80,489. At about that time Cancarra started doing some construction work on the site, and Coastline did some preliminary plumbing work for Cancarra. The Development Deed (which had not yet been executed) provided that the money paid by the syndicate members by way of "second payment" might be used for the payment to Cancarra for work of this general nature. 100 Mr Bliss attended the meeting of 3 April. In chief, he did not attribute to either Mr Sneddon or Mr Blakemore any statement, made on that occasion, about the professionals all being in the project together, or giving guarantees. On or shortly after 27 May Mr Bliss spoke to Mr Sneddon by telephone, and during the course of that conversation Mr Sneddon faxed to Mr Bliss a copy of the letter of 27 May. Mr Bliss read it, and was not surprised that he and his wife were being asked to give guarantees, since they were directors of Stenoak. He believed that Mr Harkin had earlier told him that the professionals were buying their unit through Cloudgard, and he knew the persons named in paragraphs 9 to 12 of the letter, although he did not know of GJL Developments Pty Limited. He noted that the guarantees mentioned in paragraphs 8 to 12 were for limited amounts only, assumed that this represented proportions of the interests of the persons involved in one unit, and did not question it at the time, since "what was important was that they were giving a guarantee". He went on to say that he did not know until late 1998 that the persons named in paragraphs 8 to 12 did not in fact give guarantees, and he would not have signed the mortgage or the Development Deed, had he known this; and at the trial a good deal of time was taken up challenging this last proposition. 101 Mr Bliss said in chief: "I knew that my wife and I were personally liable for the whole of the monies being advanced by the bank." In cross-examination, he said that this should be read as meaning that they were personally liable, not for the whole of the $3.5 million advanced to the syndicate, but for the whole of so much of that sum as represented the value of the unit that Stenoak purchased. I do not accept this part of his evidence, particularly given the effort he put into investigating the proposal before committing himself to it, and the questions raised on his behalf by Mr Wylie as to the joint and several liability of the syndicate members. Nor do I accept that Mr Bliss would not have proceeded with the project, had he been told after 27 May and before he signed the mortgage or the Development Deed, on or about 24 June, of the plaintiff's changed security requirements. The advantages to him and his companies of proceeding, and the disadvantages of not proceeding, were by then quite significant; and after some cross-examination, he said no more than that he "could not 100% say I would have pulled the plug", he would have sought legal advice and talked to the other parties, and he could not guarantee what he would have done. At best from the perspective of the general defendants, this evidence means that the relevant onus of proof had not been discharged so far as concerned Mr Bliss or Stenoak; but independently of this, so far as I can judge, the reality is that Mr Bliss would have been content to proceed with the project: the advantages to him and his companies were significant; he had been keen to proceed earlier; and at that stage it might have been that there would have been difficulties encountered in recovering the whole of the deposit paid, or the "first payment" made; and his explanations about what he thought concerning the various guarantees were unconvincing. He, like others, did not actually consider the position at the time, or indeed until 1998 or later, so that what he says on this topic is hypothetical. As sometimes happens, and as often happened in this case, a witness asked to say what he or she would have thought, if told of some circumstance not considered at the time, is in difficulties justifying the conclusion contended for. It seems that Mr Bliss did not actually give the question of guarantees any greater thought at the time than that he regarded their existence as a comfort, without considering the detail of them, and I consider it more likely than not that he would have proceeded with the transaction, content with the changed securities sought and obtained by the plaintiff. 102 There is another part of Mr Bliss' evidence that I reject. When in cross-examination he described what Mr Sneddon said at the meeting in February 1996, he said that this alleviated his concerns: "I felt comfortable that the guarantees were in place with each other". This did not appear in his statement, tendered in chief, and it seems that the question of guarantees was not raised with Mr Bliss at this meeting, or before it: he might well have expected to be asked to give a guarantee, but that was all. 103 I note that, in chief, he said: "… the only reason why I entered into the arrangements in the first place was that there were ten to twelve other unit holders who were all liable with me." In cross-examination he agreed that the word "only" should be withdrawn. Given the topic, and given that the evidence in chief was a carefully crafted written statement, this is not insignificant. 104 Although I do not accept significant parts of what Mr Bliss said, and although he admitted a course of dishonest conduct, I record that he appeared to be trying to give honest evidence, and where I reject his evidence I do so on the basis that it is unreliable, rather than deliberately untruthful. 105 Mrs Bliss presented in a different light. The plaintiff submitted, and I accept, that she came to court determined not to give anything away, and that she gave her evidence in such a way as to demonstrate that she was constructing answers to suit her case. She agreed that she had gone through her husband's witness statement, before formulating her own, in order to ensure that the two were consistent, and on critical questions she hesitated a long time before answering, and then sometimes evading the questions. 106 She did not read the letter of 27 May 1996 until 1999, when the litigation was on foot, and in 1995 and 1996, generally, she left all the matters that are now relevant to her husband, and obtained what understanding she had of the matter from what he told her. She said that she attended some meetings of potential syndicate members, and spoke at them, but was unable to recall any real detail of them, or perhaps she was unwilling to try. I do not accept her when she spoke of how she believed she would have acted, had her attention been drawn in 1996 to the difference between what the plaintiff said in its letter of 27 May as to the persons to give guarantees, and the guarantees actually taken. I think it likely that she would have continued to leave things to her husband, and to act as he thought best. Nor am I persuaded that her evidence ought to be accepted, when she said that she did not know the basis upon which the professionals acquired their unit. 107 Mr Graham McCloy did not see the letter of 27 May for some years after it was written. In chief, he spoke of his understanding of how the transaction was to be structured, but it is plain that whatever understanding he had did not come from that letter. He also spoke of a meeting, probably that of early February 1996, at which, he said, he asked why it was that he and his wife were being asked to give guarantees; and someone, he thought Mr Blakemore, replied saying that "all the individuals who are involved will have to give personal guarantees." I do not accept that Mr Blakemore said these words, then or ever. On that basis, Mr Graham McCloy's evidence can effectively be discarded from consideration, in that his understanding or belief were not founded on any statement or representation made or adopted by either the plaintiff or by Mr Blakemore, but his case is even weaker than that. 108 It was clear that he had a very poor recollection of events. He seemed to have confused the dates of the various meetings, and the sequence of events generally. He said that he signed the guarantee at a June meeting in the presence of Mr Blakemore (and others), when Mr Blakemore did not point out to him that the names of the guarantors had changed. It is plain, however, first, that he signed no (relevant) documents at that meeting, and secondly, that he signed the guarantee when in Queensland, on an occasion when Mr Blakemore was not present. He acknowledged other inaccuracies, of lesser significance, and he contradicted some of his own statements. Overall, I do not think that any reliance at all can be placed upon the accuracy of his recollection, or upon his reconstruction, years after the relevant events, as to what he would or would not have thought or done at the time. 109 Mrs McCloy said, and I accept, that her prior business experience led her to expect that she and her husband would have to give guarantees, but otherwise what knowledge of the matter she had came from what her husband told her; and she relied upon his advice as to what she should do. 110 Mr Stephen McCloy, who lives in Queensland, entered into the transaction upon the suggestion of his brother Graham. He said in chief that he relied entirely upon what his brother told him in relation to the project, although he, like others, also said that he expected from prior experience that he would be asked to give a guarantee. In fact, he was a syndicate member, and therefore a principal debtor of the plaintiff. 111 He chanced to be in Nelson Bay, visiting his brother, and on a fishing holiday, when told of the project. His brother recommended it, he made some inquiries about the value of home units, decided to invest, and thereafter seems to have simply left everything to his brother. He had virtually no recollection of any event of any significance in the litigation. 112 Mr Graham McCloy also introduced Mr Allibon to the project. The two men and their wives were apparently friends. In a written statement tendered as part of his evidence in chief, Mr Allibon described three meetings: the first in November 1995, the second, evidently in either February or April 1996, and the third on 24 June 1996. He said that at the second meeting Mr Blakemore said: "The [Development] Deed has been properly prepared. Anyone who is a director of a company will be required to give a personal guarantee." The deed was then presented, and he signed it, without having time to read it. In oral evidence in chief, he said that the deed was signed, not at the second meeting, but at the third meeting. He also withdrew a statement that Mr Handley was present at the second meeting, saying that he was present at the third meeting, when the deed and perhaps some other papers were signed: Mr Allibon was anything but clear about what was signed, and when, and I doubt that he had any real recollection of any of this detail. 113 Mr Graham McCloy plainly was not present at the meeting held on 24 June. Mr Allibon apparently knew of this error on his part by the time he gave evidence (Mr Graham McCloy had already completed his evidence), and the cross-examination made it abundantly clear that Mr Allibon was discomforted by what had happened, and the longer the cross-examination lasted, the less impressive he became. If there is one thing that is clear, it is that the plaintiff posted the guarantee forms to the guarantors for signature and return, and that, contrary to the evidence of Mr Allibon, they were not signed either by Mr or Mrs Allibon, or by Mr Graham McCloy in the presence of Mr Blakemore. 114 It is also plain that Mr Allibon did not rely on Mr Blakemore for advice about the form of the deed: he and the McCloys had, between them, retained a firm of solicitors, Bale Boshev, to do that, and that firm, like Mr Wylie's firm, corresponded with McDonald Johnson about the form of the deed. 115 I do not accept that Mr Blakemore said that anyone who was a director of a company investor had to give a guarantee, but Mr Allibon, starting from the position that Mr Blakemore used the words quoted above, asserted that, because of what Mr Blakemore had said, he believed that any individual investing through a company had to give a guarantee. Pressed about this belief, he gave unpersuasive answers, before saying that he made an assumption, based upon what Mr Blakemore said about directors giving guarantees, to the effect that everyone involved, whether as principal, shareholder or director, had to give a guarantee. Even if Mr Allibon believed this, it is difficult to see how either he or his company can rely on that belief, either against the plaintiff or against McDonald Johnson. 116 He also said, in his written witness statement, that he knew that he and his wife were making themselves liable to the plaintiff "for the whole of the amount borrowed from the bank", but later sought to change this, saying that he believed that he and his wife were only liable for his company's proportion of the amount borrowed. 117 Counsel criticised him for other reasons, but it does not seem necessary or appropriate to say more than that I found Mr Allibon's evidence quite unconvincing. 118 Mrs Allibon said that, whilst she opened the mail directed to herself, her husband or their company, she would have handed any presently relevant correspondence to him to deal with, since she did not understand it. Generally, she left this affair to him. Although she fared relatively better in the witness box than he did, she was unpersuasive. She really said very little even in chief that helped her or her company, either against the plaintiff or against McDonald Johnson: she made assumptions based upon statements made by others. 119 Mr George Holliday was the remaining syndicate member. He bought the shops on Level 1, after becoming aware of the project through Mr Bruce Sanders. When he gave evidence, he was ill, and he had been "worked up" about the litigation; and he said that he had memory problems. Whether or not these were factors, he presented as having a poor memory of relevant events, difficulties both in reading and in abstract thinking, a poor understanding of how the transaction was structured overall, and little understanding of the technicalities involved. 120 Initially he was unsure whether he ought to buy the property in his own name, or through a company. He therefore went to the meeting of November 1995, accompanied by his son William, who also gave evidence. He described himself as not well educated, and self conscious; and he said he was flattered when Mr Handley sat next to him, apparently at the meeting of November 1995. He raised with Mr Handley the question exercising his mind, whether to invest in his own name, or through a company, and Mr Handley told him that if he invested through a company, he would be required to give a guarantee, so that "it would not matter". It seems that thereafter he gave the whole topic of the structure of the investment little or no further detailed consideration. 121 I quite accept what he and his son say, about his investment being made in his own name by reason of this conversation, but I do not accept that they actually recall any other event of significance, and it seems plain that they discussed the matter between themselves on several, perhaps many occasions, and he had read "a book" of the statements of other witnesses, so that, it might be, they have now persuaded themselves of the account they gave in chief. 122 Mr George Holliday said that at the April 1996 meeting, Mr Blakemore said: "We are all in this together equally. I myself am buying one of the units"; and Mr Sneddon said: "Look, we are all in this together". I do not accept that either of these men said those words, but in any event, it is clear that Mr Holliday committed himself to the purchase of the shops before the occasion of that meeting: he mad a "first payment" of $5,000 on 18 January 1996, having earlier expressed an interest in the project, then withdrawn when an intended lessee of a shop had a "nervous breakdown", and then changed his mind again. 123 At another point Mr Holliday said that Mr Blakemore said these words at three different meetings, and "many times". This seems to me to be even more unlikely. 124 Further, it seems clear that it was Mr Harkin who persuaded Mr Holliday to proceed, and that Mr Harkin told him that "everybody" concerned would be giving guarantees, including Mr Harkin himself, as one of the professionals; and he agreed that Mr Harkin had told him: "We are all in this together equally". 125 Next, Mr Holliday evidently did not see the letter of 27 May 1996, until well after the litigation was on foot. (The copy eventually produced on his behalf was apparently copied to him by his solicitors in 1998.) 126 Mr William Holliday was also quite unimpressive, as a witness. It is not without significance that, notwithstanding his father's evidence as to what Mr Blakemore said at the meeting of April 1996, and notwithstanding their several discussions, he said nothing about this, in his evidence in chief. In cross-examination, he attributed a similar statement on that occasion to Mr Handley, although he could not really reconcile his account of this with the fact that the plaintiff had not then committed itself to advancing money to the syndicate. 127 So far as I can tell Mr William Holliday has little recollection of anything much except the one matter to which he directed his attention, that is, whether his father should have entered into the project through a company, or in his own name. 128 Whilst it is understandable that a group of litigants like the general defendants should wish to know what they and their various witnesses said, and how strong their case is, it really is regrettable that the course (apparently) adopted in this case, of their examining each other's statements, was followed: it detracted from the appearance, and perhaps the reality that each witness gave his or her own independent unprompted recollection of events. 129 Mr Handley described his dealings with the syndicate. Most of his (relevant) communications were with Mr Harkin or Mr Sneddon. On behalf of the syndicate those two men negotiated with him, on behalf of the plaintiff. The only meeting of potential syndicate members that he attended was that of 3 April 1996, and he regarded the project then as still being "only in the embryo stage", so that, he said, anything he said that day about guarantees would only have been expressed in generalities, or by reference to the plaintiff's policies: he had not thought through the detail of what he would recommend to his superiors, as being actually sought. He had authority to refuse a credit application of the kind in question, but not to accept it. The plaintiff's policy was such that a credit application by a corporation would ordinarily need to be supported by some guarantee or guarantees. 130 He did not recall Mr Blakemore making a statement of the kind attributed to him by the general defendants at this meeting. This does not, of itself, seem particularly significant, in that Mr Handley does not appear to have been focussing upon matters not of direct concern to himself and the plaintiff; but, when taken together with the evidence of Mr Blakemore, it is of some significance: the statement, if made, might well have caught the attention of Mr Handley, as impacting upon the plaintiff's possible security position, and the chance that the plaintiff would secure the business. 131 On 13 May 1996 he wrote to his superiors in Sydney, recommending that the plaintiff advance funds to the syndicate. That letter recommended taking the guarantees mentioned (later) in his letter in his letter of 27 May. His explanation as to how he came to ask for the limited guarantees mentioned in paragraphs 8 to 12 of that letter left the matter uncertain, but it seems that he thought that some at least of the five "professionals" were or might have been directors of Cloudgard, or if not directors, people associated with Cloudgard who were financially sound. He understood by at least May 1996, if not earlier, that the involvement of the professionals was on the limited basis outlined above; and that understanding in turn tends to throw a little (dim) light on what might or might not have been said at the meeting of 3 April: on the case of the general defendants, things were said at that meeting that were inconsistent with Mr Handley's understanding some weeks later. 132 Upon receipt of his superiors' approval, he wrote to Mr Sneddon on 27 May. Later, at a time not fixed with any precision, he had a conversation with Mr Blakemore, in which the latter said he would not give a guarantee. Mr Handley said that he faxed a letter to his Sydney superiors, seeking approval for the change in guarantors reflected (later) in his letter of 12 June, received faxed approval, and then wrote to Mr Blakemore on 12 June. 133 The general defendants asserted that Mr Handley did not ask for, or receive that approval. It is clear that if Mr Handley sent the fax he mentioned, and received a written reply, such as he described there ought to have been two copies of each fax in the plaintiff's records; but the plaintiff discovered no such documents, nor did it produce them when called for; and the plaintiff gave no explanation for this absence. This is quite troublesome, and it certainly adds casts of doubt on the reliability of Mr Handley's evidence, but in the end the point does not seem to me to matter very much, except as to credit. In the main, I accept Mr Handley's evidence, but am left quite unsatisfied about his actually having obtained approval from his superiors to vary the offer contained in the letter of 27 May. 134 The general defendants' primary point here was that Mr Handley lacked authority on behalf of the plaintiff to vary the offer made by the letter of 27 May; and they said that they accepted that offer, so as to thereby create a legally binding contract, embodying the terms of that letter. They say that the letter of 12 June ought to be put out of consideration, as not having emanated in law from the plaintiff. For the reasons set out below, I do not accept that this is correct. 135 Assuming however that Mr Handley lacked the plaintiff's authority to vary the terms of the offer of 27 May, the plaintiff submits that it ratified the conduct of Mr Handley in varying this offer. This seems to me to be correct: the issue of the summons in this case amounts to ratification, even if there was nothing else at all. 136 It seems quite clear that Mr Blakemore dealt with the plaintiff, as the solicitor for the syndicate, so far as concerns conveyancing issues. However, the general defendants assert, at one part of their case, that he also dealt with the plaintiff on their behalf, in negotiating the terms of the facility agreement. He denies that, and I see no persuasive evidence to the contrary. Indeed, it seems clear that Messrs Harkin and Sneddon were authorised to negotiate, and that they did negotiate those issues on behalf of the syndicate, to the exclusion of Mr Blakemore. Rhetorically, why would he act in such a way, when the others were doing it, and why would the syndicate employ him to do so, when they employed the others to do so? 137 However, McDonald Johnson did act as the solicitors for the syndicate, in relation to the conveyancing issues. Mr Blakemore said, and I accept that it was in this capacity that he wrote to the plaintiff on 27 May 1996 in these terms:- "Please Confirm the Bank's approval to the syndicate. Please advise us of any outstanding requirements of the Bank. Does the Bank propose to take a Mortgage at the time the syndicate members acquire Lot 28 SP 35231 [that is, the proposed building site] even though the syndicate members will be funding the acquisition cost?" 138 I think it is plain that Mr Handley received this letter on 28 May, after he had formally written to Mr Sneddon the day before, advising of the plaintiff's conditional approval of the loan facility. He made a manuscript endorsement on Mr Blakemore's letter, in these terms:- "No – Members are fully aware CBA's approval is still conditional upon certain matters which include [some illegible words]. We will not seek [mortgage] until such time as all questions of our approval have been notified." 139 This note was not dated. He also made another note dated 28 May, reading:- "Formal approval letter was delivered to Chris Sneddon on 27/5/96. Chris will liaise with Brian Blakemore. No response required." 140 However, Mr Blakemore made a note of a telephone conversation with Mr Handley, on 28 May, to the effect that the plaintiff would not "take a mortgage until all of its conditions had been finalised". It seems likely that there was some conversation, and probably a telephone conversation between Mr Handley and Mr Blakemore on 28 May, as recorded by the latter. 141 Mr Handley said that at about this time he was busy, and short staffed; and that it was in this context that instead of having typed out a new letter, replacing the letter of 27 May, he made manuscript alterations on a copy of that letter, dated it 12 June, and faxed it to Mr Blakemore, expecting the latter to send it on to Mr Sneddon. I accept this, and regard the fact that that the letter was sent to Mr Blakemore as of little moment, in considering the issue of the capacity in which Mr Blakemore acted. The circumstance seems neutral: it was almost an accident that in a time of some stress, Mr Handley happened to send the letter to one person rather than the other; and it falls well short of demonstrating that Mr Blakemore represented the syndicate members, in negotiating with the plaintiff the terms of the facility agreement. 142 Mr Blakemore said that McDonald Johnson acted for the syndicate, but only so far as concerned what I will describe, for brevity, as conveyancing work, and that he played no part in negotiating with the plaintiff concerning the facility agreement, or its terms, or so far as concerned the construction of the building. His communications with the plaintiff, except for his refusal to give a guarantee, constituted part of his conveyancing work. The fees of $8,000 that McDonald Johnson were owed by about February 1996 also included work done for Cancarra preparing the Development Deed, and negotiating its terms. I accept him as a truthful witness, whose evidence was reliable, subject only to the limits of his recollection; and I prefer his evidence to that of the various defendants and their other witnesses, whenever there is a conflict. I will return to his evidence, when considering the issues between the general defendants and McDonald Johnson, but for the moment, I accept his evidence that he did not say the various things attributed to him by the general defendants, discussed above. 143 As a generalisation, the general defendants failed to distinguish between the situation where the persons named in paragraphs 8 to 12 of the letter of 27 May did not give a guarantee at all, and the situation where their proposed guarantees were to be replaced by the guarantee of Cloudgard. If five guarantees from people about whose financial circumstances little was known, aggregating $216,000, were acceptable, then a guarantee by Cloudgard, which they knew was about to take a unit worth that sum or more, was not obviously inferior. No doubt it goes without saying that the plaintiff might have called upon Cloudgard under its guarantee before Cloudgard took that unit, or after Cloudgard had disposed of that unit, and of course there were other considerations. But what the general defendants did not do, generally speaking, was confront this issue, as distinct from saying in vague and unsatisfactory terms what they would or would not have done, if they had been told of the change, in circumstances where most of them could not describe with any pretence at accuracy, what, if anything, they had actually considered at the time. 144 I return to the various lines of defence taken by the general defendants, summarised at [48]. 145 There is no doubt that someone sued on a contract may raise as a defence the proposition that the contract was entered into subject to some condition, which had not been fulfilled. The case often cited is Pym v Campbell (1856) 6 E & B 370, 119 ER 903, and the principle has been discussed by the Court of Appeal in Bleyer v Neville Jeffress Advertising Pty Limited, 15 December 1987, not reported, at 7 - 8 and in Macedone v Collins (1996) 7 BPR 97,628 at 15,137-15,139. The question to be decided is whether the undoubted principle applies in the circumstances of this case. 146 The general defendants point to some of the expressions used in the letter of 27 May: at page 1 "the facility is subject to the usual incidents of the banker/customer contract and to the following...", followed by provisions about the term of the loan, repayments, and securities to be provided, including at page 2 the words "security will comprise the following", followed by 13 numbered paragraphs; at page 3: "Guarantees pledged as security are to remain in place until the debt is repaid in full"; at page 4 a requirement for the payment of a non-refundable loan establishment fee of $18,000; and at page 5: "We emphasise that funds will not be released until security documentation has been completed. In this regard, we will contact you when the [relevant] documents are ready for signing." 147 However, to summarise what happened after that letter was sent, Mr Blakemore and, it seems, the other "professionals" refused to give guarantees; the plaintiff agreed (so it is said) to take in substitution a guarantee from Cloudgard for $216,000; the plaintiff posted the guarantees out to the various guarantors who in due course signed and returned them; the Development Deed, together with the mortgage and other documents were also executed; and then the plaintiff advanced money to the syndicate. Neither the mortgage nor any of the other documents executed at about the same time contained any express reference to the letter of 27 May. That letter did not, by its terms, invite the persons comprising the syndicate to do any particular thing, so as to constitute the acceptance of an offer contained in the letter, thereby leading as a matter of law to the immediate formation of a concluded contract. 148 I do not think that the so called rule in Pym v Campbell applies. Bleyer and Macedone were treated as if they were the cases most favourable to the general defendants on this point, and it is convenient to contrast the facts in those cases with the facts in this case. In Bleyer, a financier provided to a prospective debtor a printed form of application for finance which expressly required a corporate debtor to provide guarantees by each of its directors, when lodging the completed form of application for finance with the financier, and the appellant, one of the directors of the principal debtor, completed a form of guarantee on the reverse side of the application for finance; at the time of doing that, he changed some printed words providing that the financier "shall be entitled to recover from the guarantor without first" pursuing the principal debtor, so that the form provided instead that the financier "shall not be entitled to recover from the guarantor without first" pursuing the principal debtor; and when completing and delivering this form of guarantee, together with the application for finance, he said that he was signing the guarantee form conditionally upon the other directors of the debtor company giving similar guarantees. A more starkly different set of facts is difficult to imagine. 149 In Macedone, Cole JA, with whom the other members of the Court agreed, analysed the facts and concluded that each of the parties to the transaction under consideration had the intention that the several members of each of two different groups of proposed guarantors would only give guarantees if the members of the other group did the same. I refrain from going into further detail, because the judgment, at this point, is one of fact; and in this case neither the plaintiff nor the persons to whom (through Mr Sneddon) the letter of 27 May was addressed had the intention for which the general defendants now contend. 150 The general defendants submitted that the letter of 27 May was capable of being accepted, without more, if the persons to whom it was addressed gave the mortgage, and gave or procured the giving of the guarantees mentioned; and they say that this was done. In my judgment, this is not so. First, one of the persons to whom the "offer" was made was Ms Statham: see page 2; on any view of the facts she did not accept the "offer"; and it would be wholly artificial to imagine that the "offer", addressed to the syndicate members named, might have been accepted by some only of them. Secondly, I do not think one can properly read the letter as containing an "offer", that is, an offer, which might be accepted, so as to lead without more to the conclusion of law that a binding contract was thereby formed. If one had to categorise the letter in language of this kind, the letter was an offer to treat, or a representation that the plaintiff was willing to negotiate along the lines mentioned, but I do not think one can read it as being an unconditional offer to the syndicate members, capable of acceptance without more. A conclusion that this was so seems to me to be inconsistent with the language used in the letter. In short, even if one assumes, contrary to the plaintiff's case, that the "offer" was not withdrawn before it was "accepted", this line of defence fails. 151 The next way in which the general defendants put their case was that the letter of 27 May became a term of the contract embodied in the mortgage, and that the failure of the plaintiff to obtain each of the securities mentioned in the letter constituted the non-fulfilment of a condition precedent to the mortgagors being liable to repay the money advanced. This contention was buttressed by a further submission that, in the events that happened, the general defendants had not been unduly enriched by the plaintiff advancing money to the syndicate members, because the general defendants had repaid to the plaintiff so much of the money advanced as in justice they should have repaid: only the Holliers remain liable to the plaintiff on the basis of unjust enrichment. 152 I do not accept the starting point for this contention: In my view the letter did not become an express term, since it was not mentioned, directly or indirectly, in the mortgage, nor were the terms of the letter adopted in any way by the parties to the mortgage, as containing provisions which the parties adopted, as part of the terms of the mortgage. 153 The contention that the contents of the letter were implied terms in the mortgage seems to me to be without merit. The term contended for cannot be said to be necessary to give the mortgage efficacy, for the mortgage is perfectly efficacious without it. Nor is the term so obvious that it goes without saying, and it is very difficult, if not impossible to reconcile the supposed term with some express terms in the mortgage: see clauses 9.6 and 9.7. 154 Similar considerations apply to the arguments advanced by so many of the general defendants who are guarantors rather than principal debtors, in respect of whom it was said that the letter of 27 May constituted a condition precedent to the coming into existence of the various guarantees, or express or implied terms of the guarantees, containing conditions precedent to the guarantors becoming liable, which conditions were not fulfilled. 155 Next, some of the general defendants who were guarantors rather than principal debtors advanced an argument, based upon the rules of equity. This group of defendants - Mr George Sanders, Mr Bruce Sanders, Mr and Mrs Anderson and Mr Bliss - say that the letter of 27 May constituted a representation by the plaintiff that the funds in question would not be advanced until it had obtained the securities listed in the letter. Since Mr George Sanders is liable as a principal debtor, there is no occasion for equity to come to his aid as a guarantor, and this defence on his part should be put out of consideration immediately. 156 For the reasons already stated, I do not accept that the letter contained the representation relied upon, and I do not accept that any of the five persons in question relied upon the representation, in such a way as to enliven the relevant rules. 157 Another strand to the case of the general defendants was the proposition that when Mr Blakemore refused to give a guarantee, he did so in his personal capacity, rather than as solicitor for the syndicate members; and the subsequent negotiations with the plaintiff carried out by Mr Blakemore and/or Mr Sneddon were carried out in their personal rather than their representative capacities. Therefore, it was said, the negotiations and the resultant variation in the identities of the guarantors did not bind the general defendants. 158 I think it is clear that when Mr Blakemore refused to give a guarantee, he did so primarily in a personal sense: he had an interest, through McDonald Johnson, and thence through Huntlaw, in the project, and he was asked personally to give a guarantee, and he refused to do so. That refusal was a personal refusal. It is true that he was at the time simultaneously representing the syndicate in its conveyancing transactions, including those transactions so far as they concerned the plaintiff, but his refusal to give a guarantee had no direct relationship to that conveyancing work. 159 But assuming that much in favour of the general defendants, it cannot be said that Mr Blakemore's refusal to give a guarantee, coupled with the subsequent letter of 12 June, should therefore be put out of consideration, as if it was somehow tainted for ever by Mr Blakemore's having refused, personally, to give a guarantee. However one categorises that refusal, the plaintiff accepted that the guarantee it sought from Mr Blakemore would not be given, and it amended (or should now be taken to have amended, it having ratified Mr Handley's conduct) its proposal accordingly; and the syndicate members acted on the amended proposal. Other considerations of course arise, but looking at the question as one of contract law, the fact that Mr Blakemore refused to give the guarantee, in his personal capacity, is of historical interest, but does not mean that the "offer" of 27 May ought to be taken to have been accepted, on the basis that the plaintiff did not thereafter amend its "offer". 160 All of the defences taken by the general defendants to the plaintiff's claim fail; and the plaintiff also succeeds as against Mr Stephen McCloy. The issues between the general defendants and McDonald Johnson 161 As mentioned earlier, the general defendants make claims against the firm of McDonald Johnson, for breach of fiduciary duty, and in negligence. I will deal first with the claim for breach of fiduciary duty. 162 It is well established law that a solicitor owes fiduciary duties to his or her client, but that where the client alleges a breach of fiduciary duty, one must start by identifying the particular function or functions which the particular solicitor undertook to the particular client, or which the solicitor should be regarded as having undertaken: see for example Maguire v Makarounis (1997) 188 CLR 449 at 463-464, Macedone at 15, 152; Fitzpatrick v Waterstreet, Court of Appeal, 17 December, 1998, unreported, at 31-32 and Beach Petroleum N L v Kennedy (1999) 48 NSWLR 1 at [188]. In this case, the general defendants pleaded that McDonald Johnson acted as their solicitors "in regard to the borrowing of monies from the Commonwealth Bank and the terms and conditions of such borrowing". 163 McDonald Johnson agreed that they acted as solicitors for so many of the general defendants as were syndicate members, as distinct from guarantors, but denied that they were retained to act or that they did act pursuant to a retainer in the terms pleaded. In short, the say that the role in which they acted was as solicitors for the syndicate members in relation to the conveyancing aspects of the project, and that it was not McDonald Johnson, but Messrs Harkin and Sneddon who acted for the syndicate in relation to the matters pleaded. 164 In my judgment, it is plain that the case of McDonald Johnson should be accepted, as to the terms of the retainer. No witness deposed to the making of an agreement creating a retainer such as was pleaded, and Mr Blakemore deposed to the contrary; and I accept him as a truthful witness, whose evidence is reliable, subject only to the limits of his recollection. Additionally, the general defendants, between them, retained no less than three other firms of solicitors to advise them about the transaction, and in some cases to negotiate with McDonald Johnson the terms of the Development Deed. Thus, Messrs George and Bruce Sanders and Ninot retained one firm of solicitors; Mr and Mrs Bliss and Stenoak retained a second firm; and the Allibons and the McCloys retained a third firm. 165 However the general defendants fell back upon a variety of matters, contending in effect that these matters constituted circumstantial evidence supporting their claim that there was a retainer in the terms pleaded. In paragraphs 29 to 92 of their written submissions, McDonald Johnson collected and summarised the points relied upon by the general defendants, and the evidence in relation to each point. In all the circumstances it seems sufficient to say only that I accept the general thrust of this part of these submissions, and that I regard this issue as being comfortably resolved in favour of the McDonald Johnson, even if the evidence of Mr Blakemore is not taken into account. When McDonald Johnson acted as solicitors for the syndicate, they did so only in relation to the conveyancing aspects of the project. 166 However, even if McDonald Johnson did owe the general defendants, or some of them, a fiduciary duty arising out of the retainer pleaded, the general defendants had not proved a breach of that duty. 167 The general defendants pleaded that Mr Blakemore received a benefit or advantage in that he was able, with others and through Cloudgard, to purchase a unit without complying with the plaintiff's requirement that he provide a guarantee, limited to $24,000. Technically, it was Huntlaw that acquired the relevant interest in the unit and not Mr Blakemore, but the significant point taken by McDonald Johnson which I accept is that what McDonald Johnson took, through Huntlaw, was the payment of its outstanding fees; and in terms of a dispute between a solicitor fiduciary and a client beneficiary, taking the solicitor's fees does not of itself constitute the taking of an unauthorised or other wise improper profit: Farrington v McBride [1985] 1 NZLR 83 at 89-90. Adding 15% by way of interest, for the deferred payment of the fees over a period of about fifteen months, at least at the time in question (interest rates vary markedly at different times) does not seem to me to be different in any significant way, and the general defendants made no submission that it was. 168 Yet another hurdle to the success of the general defendants in respect of this claim is the difficulty of saying that the supposed benefit or advantage was at their expense. In about the early part of 1996, the then proposed investors were in difficulties in that they had been unable to find an investor who would buy the last of the unsold units, so that the project was in danger of failing; and then the professionals agreed between them to take up the last unit, as a mechanism for allowing the project to proceed, and by way of securing the payment, later on, of their fees. The plaintiff asked Mr Blakemore and the other professionals to give guarantees, and he (and, it seems, they) refused to do so. In those circumstances it is it is difficult to say that Mr Blakemore's refusal to give a guarantee, or the refusal of the professionals generally to give guarantees, left the general defendants in the position of having suffered any relevant loss of benefit or advantage. In truth, Mr Blakemore never agreed to give a guarantee, so that no guarantee on his part was lost. Further, what happened had the practical result of enabling the project to proceed, and the general defendants, by and large, thereby acquired an advantage which they otherwise would not have acquired. 169 Again, it is necessary to consider separately the positions of so many of the general defendants who are principal debtors of the plaintiff, and those who are guarantors. Any guarantor who might be called upon to make a payment, and who makes a payment, is entitled to be indemnified by the principal debtors. On the evidence, the principal debtors have, or at least formerly had, ample assets out of which to pay any shortfall; and the value of the finished building exceeded the amount payable to the plaintiff. 170 McDonald Johnson then submitted that a breach of fiduciary duty must be intentional, in order to ground the granting of a remedy. I need not decide this question. 171 Finally, on this issue, McDonald Johnson submitted that there was no loss, in the relevant sense. I accept the submission that I should proceed on the basis of the decisions of the Court of Appeal in O'Halloran v R T Thomas & Family Pty Limited (1998) 45 NSWLR 262 at 272-273, and in Beach Petroleum at [431] to [444], and not in accordance with the earlier authorities (or an earlier perception of what those authorities established); and for the reasons stated earlier, I conclude that the general defendants have not established any relevant loss. Further, if this view is incorrect, I accept the submission that the appropriate calculation as to the measure of any theoretical loss on the part of the general defendants (from which appropriate allowances would have to be made) is about $55 for every $100,000 payable to the plaintiff: see the written submissions of McDonald Johnson, paragraph 8; the general defendants did not grapple with this submission in any meaningful way. 172 I turn then to the claim made by the general defendants against McDonald Johnson in negligence. The starting point is, once again, the retainer pleaded by the general defendants, that McDonald Johnson acted as their solicitors "in regard to the borrowing of monies from the Commonwealth Bank and the terms and conditions thereof". I do not accept that that was the retainer given or accepted; and once again, the case of the general defendants is deficient in other respects. 173 They have not proved that, in the relevant sense, they relied upon McDonald Johnson in relation to these matters. To the contrary, it is clear that they relied upon Messrs Harkin and Sneddon, except where they dealt directly with the plaintiff themselves, in providing detailed information about their financial affairs. Further, the general defendants have not established that Mr Blakemore knew that Mr Sneddon had advised the general defendants of the terms of the plaintiff's letter of 27 May, or that the general defendants did not know that Mr Sneddon had not told them of the change in the plaintiff's attitude, manifested by the plaintiff's letter of 12 June. There is no basis for a finding that McDonald Johnson assumed any responsibility to the general defendants, in terms akin to the retainer pleaded. 174 There are also great difficulties in the way of a finding that there was a breach of the duty of care pleaded. Mr Blakemore never agreed to give a guarantee, so that it is not proper to categorise his refusal to give one as the "removal" of a guarantee, or of the five guarantees of the professionals. (There is, for that matter, no evidence that any of the other professionals agreed to give a guarantee.) The only basis relied upon for concluding that McDonald Johnson were in breach of duty of care in failing to warn the general defendants of some economic hazard, is that McDonald Johnson failed to warn them of the removal of the guarantee or guarantees. For the reasons already stated, I am not satisfied that, if such a warning had been given, any of the general defendants would have acted differently. 175 Next, the general defendants have not established that any of them sustained a loss, resulting for the supposed breach of duty. As they (eventually) accepted, their damages, if any, must be assessed on the basis that, but for the supposed breach, they would not have entered into the transaction at all. In the current jargon, it is "no-transaction case". The evidence presented simply did not address this issue. 176 Both claims made by the general defendants against McDonald Johnson therefore fail. The issues between the Holliers and the Maddens 177 The Holliers sue the Maddens on three bases: in negligence, for misleading and deceptive conduct, and as against Madden Associates, in contract. In the main, it is not necessary to distinguish between Mr Madden and Madden Associates. 178 As between the Holliers and the Maddens it was agreed that, at the meeting of potential syndicate members held on 3 April 1996, the syndicate would employ Madden Associates as the syndicate's quantity surveyor. As already mentioned, the syndicate was not actually formed until later on, but no party contended that this was significant. It was also agreed that each of Madden Associates and Mr Madden held themselves out as a quantity surveyor with expertise in that field, that Mr Madden actually did the work, carried out on behalf of Madden Associates, that is relevant to this litigation, and that for the purposes of the claim for misleading and deceptive conduct, his conduct should be taken to be the conduct of Madden Associates. 179 There is an issue between the Holliers and the Maddens as to the terms of the engagement of Madden Associates. The Holliers say that Madden Associates was engaged to "independently assess and value the builder's progress claims", and to "make recommendations to the syndicate for the payment to the builder". The Maddens say that Madden Associates was retained only for the purpose of checking progress claims. Since the contract in question was, it is agreed, made orally on the occasion of the meeting of 3 April 1996, the position is unclear. In the end, however, there are two factors which lead me to conclude that the Holliers' version of the terms of the retainer should be accepted. 180 First, clause 35 of the Building Contract provides in part:- "Sums payable under this Contract shall be paid to the Contractor by payments made progressively during the execution of the Project... Subject to Condition 36, the Contractor shall be entitled to request, as a progress payment, the value of work actually performed…" 181 Secondly, the Maddens made a series of recommendations to the Sneddon interests, following a standard format which provided:- "I have visited the site of Nelson Towers Stage 2 and valued the work in connection with and as executed by Flannery Constructions P/L. I enclose my valuation of the works as agreed with Flannery's. I recommend a net payment of…be made for Progress Claim No…in accordance with the attached schedule…" In this context I attach significance to the words "value" , "v alued" and "valuation" . 182 One question debated related to how one should approach the question of assessing the obligations of the Maddens. It seems to me to be clear that one must have regard, not only to the terms of the retainer of Madden Associates, but also to the terms of both the Building Contract and the Development Deed. The Building Contract must be relevant, if only because it prescribes the circumstances in which Cancarra was entitled to receive progress payments, and the obligation of Madden Associates was to make recommendations as to what progress payments should be made. The Development Deed is also relevant because the obligations of the Maddens arose from the retainer of Madden Associates by the syndicate, and the syndicate was formed, and its constitution fixed by the Deed; and the Deed provided, amongst other things, for the possible variation of the building work, and how the sums payable by the syndicate as a whole were to be apportioned as between the syndicate members. The Maddens point to some of the terms of the Deed as going to issues relating to the foreseeability of loss by the Holliers, to the question whether the loss, or any part of the loss of the Holliers, resulted from a breach of obligation by the Maddens, and to the question of remoteness of damage; but even if the Maddens fail on all three of these points, the Deed is relevant as going to the question of the measure of the Holliers' damages. 183 Clause 2.2 of the Deed provided:- "The Purchasers agree to engage the Builder and to enter into the Building Contract in accordance with this Deed." 184 There was annexed to the Deed, a form of Building Contract. On the evidence, the parties to that Building Contract did not actually execute a separate copy of that document, but no party made any submission otherwise than to the general effect that the syndicate and Cancarra were bound, as if they had executed a contract in those terms. Clause 5.3 of the Deed provided:- "The Builder will consider any request by the Purchasers in relation to the construction of the Strata Unit to which those Purchasers will be entitled on completion of the Development (and as noted in Schedules One and Two) and will as far as practicable arrange for those requests to be incorporated in the Development provided that any extra expense in doing so is paid by that Purchaser or the Purchaser is given a credit for any reduced expense and that the request will not result in a delay of completion of the Development." 185 Schedule Two of the Deed identified each of the 15 proposed Units, both by reference to a Unit number, and a lot number. These lot numbers come from the Strata Plan mentioned in [3] above. Clause 5.4 of the Deed is quoted at [12] above. The effect of clause 6.1 is summarised at [4] above: each Purchaser (Mr and Mrs Hollier, together, were a "Purchaser") was to pay a "first payment", followed by a "second payment", and later a "final payment". I should, however, set out the terms of clause 6.1(c) of the Deed:- "Each purchaser agrees to provide towards the Acquisition Costs…the amount referred to as the final payment in Schedule One in relation to the Lot to which the Purchasers are entitled on completion [together with such additional amounts payable pursuant to Clause 6.6 as may be required (and provided that such additional amount is certified as correct by the Purchasers' Accountant) as the Purchasers' share of additional costs to complete the Development] within 14 days after the Builder certifies to the Purchasers that the Strata Plan for the Development has been registered at Land Titles Office." 186 The Deed contained the following further provisions:- "6.6 In addition to any amounts payable pursuant to Condition 6.1 a Purchaser will also pay and be liable for any additional costs arising out of a variation requested by that Purchaser in respect of the lot being purchased by that Purchaser. Such costs will be determined by the Builder and the Purchaser and agreed to in writing prior to the Purchaser authorising the Builder to make such variations. The additional costs will be payable to the Builder at the time of the Agreement for variation unless otherwise agreed upon by the Builder. 7.3 The Builder consents to the appointment by the Purchasers of a suitably qualified Project Supervisor (to be approved by both the Purchasers and the Builder) to supervise the Building Works. As the Builder's budget included an allowance of $3,000.00 to engage a Quantity Surveyor to represent the Purchasers, the Builder agrees that in the event that the Purchasers appoint a Project Supervisor, then the Quantity Surveyor will not be engaged and the budget allowance of $3,000.00 will be paid to the Project Supervisor. Any fees in excess of the $3,000.00 will be payable by the Purchasers in the proportion that the price of the Lot they are acquiring bears to the total price of all Lots in the Development. 8.1 Each Purchaser covenants and agrees with each other Purchaser referred to in Schedule One to indemnify each other Purchaser and to keep each other Purchaser indemnified for payment of their share of any monies due under this Deed or to the Lending Institution or in any other manner arising out of the Development and to each cause immediate reimbursement to the extent of their share to any Purchaser who has paid more than that Purchaser's respective share." 187 The plaintiff was the Lending Institution mentioned. 188 The Building Contract contained a number of provisions that are relevant. It was a standard form contract known as "DECON 1" requiring the Contractor (that is, Cancarra) to design and construct the "Works" for "the Principal" (that is, the syndicate). The Articles of Agreement constituting the Building Contract commenced with a series of recitals:- "Whereas: A. The Principal desires to have building works designed and constructed by the Contractor, a short description of the building works being set forth in Schedule 1 (hereinafter called "the Works"). B. The Principal has submitted to the Contractor a proposal brief in sufficient detail to enable the Contractor to establish the Principal's requirements (hereinafter called the Principal's Proposal). C. The particulars of the Principal's Proposal are set out in Schedule 2. D. The Contractor has provided design as necessary in sufficient detail to enable the Contractor to provide a price. E. The Design Documents have been listed in Schedule 3. F. The Principal has thoroughly examined the Design Documents and is satisfied that they appear to meet his requirements as set out in the Principal's Proposal as amended (if at all) by agreement in the Design Documents. G. That price is as set out in Clause 2 of the Articles of Agreement. H. The particulars of the land are set forth in Schedule 4. I. The Contractor agrees to undertake further design work in sufficient detail so as to apply for and to use his best endeavours to obtain consents from Authorities necessary to carry out the Works in accordance with this Contract. J. The Contractor and the Principal are satisfied that the carrying out of the Works (in accordance with the Contract) shall reasonably meet the requirements of the Principal as notified tot he Contractor in the Principal's Proposal and, (if applicable) as revised by agreement in the Design Documents." 189 The Works were defined, in part, by reference to various schedules. Schedules 1 and 2 described the proposed building, as accommodating nine three-bedroom apartments and six two-bedroom apartments, with car parking, and a shop on the ground floor. Schedule 3 specified "the Design Documents" in part by reference to various drawings, identified by symbols and numbers. The Schedule continued:- "Drg 94-83-2F only has significance to this contract document in that it shows the future intent of the purchaser of units 2 and 3 to convert their units to a shop. Otherwise drawing 94-83-2E takes precedence." Drawing 94-83-2F was not otherwise mentioned in the Schedule. 190 There was then a brief agreement, requiring the Contractor to carry out the Works for the Contract Sum, $4,345,000, subject to the attached Conditions. There followed lengthy Conditions and a series of schedules. 191 Clause 27 provided that there might be variations to the contract work, in fairly conventional terms. Sub-clauses (f) and (g) of clause 27 provided:- "(f) The cost of all omissions from the Works shall be deducted from the Contract Sum. In determining the cost of omissions the Contractor shall be entitled to retain a reasonable allowance for overhead and profit. (g) The price payable by the Principal for all extra work shall be added to the Contract Sum and where a price shall not have been previously agreed the Contractor may proceed with any extra work and the price to be paid for the extra work shall be the actual cost to the Contractor together with a reasonable allowance for overheads and profit." 192 So far as relevant, clause 35 provided:- "(a) Sums payable under this Contract shall be paid to the Contractor by payments made progressively during the execution of the Project. The Contractor shall be entitled to the payments upon request which shall be made once each month by the date as stated in Schedule 19. (b) Subject to Condition 36, the Contractor shall be entitled to request, as a progress payment, the value of work actually performed (including Variations and design work) together with the value of any unfixed materials and goods intended for and delivered on or adjacent to the Works at the date of requesting the progress payment, less the amount of previous progress payments. Should any request be made however for a sum greater than that to which the Contractor is entitled then it will oblige the Principal to pay only the amount to which the Contractor is entitled… (d) (i) When the value of any unfixed materials and goods is included in a request for a progress payment, those materials and goods shall become the property of the Principal upon payment by him to the Contractor of the progress payment and thereafter the Contractor shall not remove them except for use in the Works (unless the Principal shall have authorised removal in writing). (ii) The Contractor shall remain responsible for loss or damage to the materials and goods paid for by the Principal unless such loss or damage is due to any act or neglect of the Principal or of other persons for who the Principal is responsible. (e) The making of any progress payment to the Contractor shall not be taken as proof or admission of any particular work or that any works have been executed in accordance with the Drawings and Specification but shall only be taken as payment on account…" 193 Clause 36 of the printed form contained these provisions:- (a) "As security that the Contractor will carry out his obligations under this Contract, the Principal shall be entitled to retain five (5) percentum of each progress payment until the sum retained is equal to five percentum of the Contract Sum. The sums retained in accordance with this Condition shall be known as the Retention Fund. (b) The Contractor may provide a bank guarantee, guarantee bond or other form of security reasonably acceptable to the principal equal to five (5) percentum of the Contract Sum (unless otherwise agreed) and in that event it shall be effective as security in lieu of the Retention Fund and the provisions of Condition 36(a) shall not apply… (d) Within five (5) days after the Works are practically completed, the Principal and the Contractor shall jointly arrange for the payment to the Contractor of one half of the amount held in the Retention Fund together with all interest accrued on the amount held in the Retention Fund. (e) The amount held in the Retention Fund, following the operation of Condition 36(d), shall be dealt with in accordance with Condition 41(a)…" 194 Clause 36(a) was altered by hand, so as to change the amount retained from 5 percent of the Contract Sum to 2.5 percent, but no such alteration was made to sub-clause (b). 195 Clause 40 provided that, during a Defects Liability Period of 13 weeks, commencing from the date of practical completion, the Contractor was to rectify at its own cost, any defects which appeared; and clause 41 provided for the payment to the Contractor of any money in the Retention Fund, upon the expiration of the Defects Liability Period. 196 For its own purposes, including apparently estimating the price it quoted, which became the Contract Sum, Cancarra prepared a bill of quantities. This document did not become part of either the Development Deed or the Building Contract, but it was referred to often in the course of the hearing, during attempts to work out what sums became properly payable to Cancarra, either by way of progress claim pursuant to clause 35, or by way of Variation under clause 27, or what damages might be recovered by the Holliers. 197 The evidence establishes that, prior to the date of the Building Contract, Cancarra had expected that the design of the then proposed building, fixed as it was at that time by reference, particularly, to the Design Documents, would be changed: see the references, set out at [12], [188] and [189] above. In anticipation of such a variation, Cancarra had costed some, but not all of the work which it would have to do, if the design was changed in the manner then expected, and the bill of quantities, in the form in which it stood when printed out on 19 April 1996 showed a total estimated cost of $3,453,513. The parties in fact adopted this estimated price, rounded off, as the Contract Sum. 198 By way of preliminary observation, it seems clear enough that Cancarra did not disclose to the syndicate any of the detail of this bill of quantities. Cancarra appears to have simply quoted a lump sum price, which became the Contract Sum. It appears that Cancarra did not disclose to the syndicate that the price it quoted was based upon its estimate, at least in part, of the cost of constructing, not the building described in the Building Contract, but that building as Cancarra expected it to be, when the design had been varied in the way then anticipated, at the request of the Holliers. Presumably, Cancarra expected or hoped to make some additional profit out of the proposed design changes over and above a "margin" of $175,000 recorded in the bill of quantities. At an early stage Cancarra expected that the Holliers would take up Units 2 and 3, and would convert those Units from residential Units to commercial premises, but what happened later was that the Holliers took up Units 1, 2 and 3, and converted all three of those Units from residential Units to commercial premises. 199 The changes made to level two resulted in some increases in the Contract Sum, and some decreases. It is extraordinarily difficult now to assess with accuracy the measure of some of these increases and decreases. Three quantity surveyors were called as expert witness: Mr Zakos for the Holliers, Mr Meredith for the Sneddon interests, and Mr Radcliffe for the Maddens. (The claims against the Sneddon interests were withdrawn during the hearing, but before that withdrawal, Mr Meredith gave evidence. In final address, each of the Holliers and the Maddens relied in part upon some parts of the evidence which Mr Meredith had given.) Each of Messrs Zakos, Meredith and Radcliffe seemed to me to be a well qualified, experienced witness. Each was impressive. I cannot choose between the three on any matter relating to demeanour or the like. 200 Amongst the difficulties encountered, because of the liquidation of Cancarra, many of its records could no longer be found. Additionally, many of the council's records could not be found, and because many of the Units have changed hands since 1997, access to the building, for the purpose of inspecting it, was difficult. Mr Zakos said that he spent more than 20 days working on the case, generally qualifying himself to give evidence. The three witnesses spent some four days in conclave, reaching agreement about many questions, but remaining in very substantial disagreement about other questions. 201 The Maddens formally admitted that they "failed to assess the value of the changes to the Holliers' units, from residential to commercial", and that that failure "was conduct below the standard of a reasonably competent quantity surveyor". The Holliers contended that the first of these admissions did not go far enough, in that the categorisation "from residential to commercial" did not accurately describe the nature of the changes. Putting this question aside, the admissions effectively narrowed the issues to be decided. In a practical sense, there is now an admission of breach of contractual obligation by Madden Associates, what amounts to an admission by the Maddens of a breach of a duty of care, and what amounts to an admission that the recommendations made by the Maddens to the Sneddon interests, concerning the value of the Variations, amounted to misleading conduct. The real issues, about which there is very substantial dispute, concern the extent of the breach of obligation, and questions relating to foreseeability, causation and remoteness of damage. The Holliers say that part of what the Maddens wish to assert constitutes the raising of a defence of failure to mitigate loss, but that the Maddens have not pleaded a defence to that effect. For their part, the Maddens categorise this group of issues under the rubrics of foreseeability, causation and remoteness, rather than failure to mitigate loss. 202 The Holliers submitted that the primary obligation of Cancarra was to construct a building, in accordance with the Development Consent, given by the local council, in effect at the date of the Development Deed (and therefore the date of the Building Contract, 24 June 1996). There are many cases where that submission would be correct, but I do not think that it is correct in this case. 203 Clauses 14, 21 and 25 of the Conditions of the Building Contract provided, in brief, that the building design should comply with the requirements of the local council, and that the Contractor would carry out and complete the Works shown on the Contract Drawings, and clause 25 required the Contractor to construct the building in a way which complied with the requirements of the council. However, these printed provisions in the standard form contract need to be read in their context. Recitals A and C are quoted above at [188]. Additionally, Schedule 2 described the Principal's Proposal. It was completed in manuscript and read as follows:- "The proposed building is Stage 2 of Nelson Bay Towers. It is to accommodate nine 3 bedroom and six 2 bedroom apartments with car parking. A shop is on the ground floor. Conceptual drawings and descriptions as per the sales brochure are itemised in Schedule 3." 204 Schedule 3, which was also completed in manuscript specified the Design Documents in these terms:- "DA 39/93 and as amended 2 November 1995. Drawings by Ron Laing Pty Ltd (Architectural Consultant) Drg 94-83-1D, 94-83-2E, 94-83-3E, 94-83-4D, Drg 94-83-2F only has significance to this contract document in that it shows the future intent of the purchaser of units 2 and 3 to convert their units to a shop. Otherwise drawing 94-83-2E takes precedence. Specification as per Schedule of Finishes and Fittings - 3 pages" 205 All the architectural drawings relevant to this case start with the symbols "94-83-". For brevity, I will omit these symbols in future. 206 Exhibit B31 consists of a number of drawings. The Maddens and the Holliers agreed that the drawings in that exhibit are arranged into three categories: "Pre-contract/architectural drawings", "as built drawings", and "architectural/contract drawings". Within the part of the exhibit containing the contract drawings, there are copies of drawings 2E and 2F. Drawing 2E shows three residential units (1, 2 and 3) on the "first floor" of the building (more commonly referred to as level 2). Drawing 2F shows that Units 2 and 3 were to be replaced by a shop. It is rather ambiguous as to what was to replace the former Unit 1: the space is largely vacant; and on the face of the drawing that area might have been used either as a residence or for commercial purposes. 207 The copy of drawing 2E, within exhibit B31, bears a council stamp recording the date of receipt as 6 December 1995. Drawing 2F bears a different council stamp recording an application number B417/96. A comparison between drawings 2E and 2F and the evidence of Mr Douglass (an officer of the council) shows that the council originally gave a development consent in 1993. However, the drawings regarding what it was that the council then consented to have been mislaid. On 2 November 1995 the council gave a first modified development consent, in respect of drawings said to have been stamped "revised 8 September 1995". Those drawings are not in evidence either, but they apparently showed a development containing 15 residential units and one shop. On 20 May 1996 the council gave a second modified consent, in respect of plans stamped "amended" and dated March 1996. It is not clear which plans these were, but a note by an officer of the council records that the plans showed a building containing 13 bedrooms. By itself, this is not inconsistent with the position that, as at March 1996, and perhaps up until 24 June 1996, the council had given development consent to a building generally as shown in drawing 2F, but with Unit 1 to be used for residential purposes. 208 Whilst clauses 14, 21 and 25 of the Building Contract required Cancarra, generally speaking, to comply with the requirements of the council, these provisions were recorded in the printed form of contract, and the manuscript part, Schedules 2 and 3, specifically required the builder to construct a building containing 15 residential units, answering the description of drawing 2E; and Schedule 3 to the Contract expressly refers to the "DA…as amended 2 November 1995." On ordinary principles, the manuscript parts of the contract prevail over the printed parts; and the specific provisions of the Schedules prevail over the general provisions. 209 I therefore reject the submission, advanced by the Holliers, that the primary obligation of Cancarra was to construct a building which complied with the development consent, in its form as it stood on 24 June 1996. As I see the position, at that time, the parties to the Building Contract had negotiated a lump sum contract, requiring a building to be constructed, answering the description contained in Schedules 2 and 3, subject of course to doing this lawfully, and in such a way as to comply with the council requirements; and that meant either that the Building Contract be carried into execution, with Variations, as provided for in clause 27, or that the parties procure a different development consent; and the terms of clause 5.4 of the Development Deed, read together with Schedule 3 of the Building Contact, made it obvious that the parties intended the former. A mass of other evidence, either oral or in the form of written statements, points in the same direction. 210 The Maddens submitted that the effect of clause 5.4 of the Development Deed was that the Holliers were required either to reach agreement with Cancarra about an adjusted price in respect of Units 2 and 3, or to take effective steps to resolve the dispute between themselves and Cancarra about that price; they contended that, in the absence of either an agreement or a resolution of that dispute, the Sneddon interests had no authority to draw down the relevant funds from the plaintiff, or to pay them to Cancarra; and this chain of reasoning underpinned, to some extent, some of the submissions put forward as to foreseeability, causation and remoteness. Before coming to the first step in this chain of reasoning - that the Holliers were in breach of their contractual obligations - I need to set out the context. 211 By the fifth cross-claim, made by the Holliers as against both the plaintiff and the Maddens, the Holliers formulated their claim in this way:- Paid by the plaintiff to Cancarra $671,458 Paid by the Holliers to Cancarra $204,792 $876,250 But the reasonable worth of the Works carried out was only $423,279 Balance, representing overpayment to Cancarra $452,971 212 In fact, both the plaintiff and the Holliers paid the first two of the sums just mentioned to the syndicate, and the syndicate paid Cancarra, but nothing significant turns on this. 213 On the 31st day of the hearing, the Holliers filed a further amended fifth cross-claim. In that document, they pleaded their cross-claim against the plaintiff in the same way, but as against the Maddens, they abandoned this formulation of their claim, and instead made a claim containing three components: first, the value of the Variations made to the Works; secondly, the cost of rectifying defects in the Works; and thirdly, the interest and charges levied by the plaintiff as against the syndicate, arising from the non-payment by the Holliers of the sum they were asked to pay at about the time of the completion of the building. 214 Since I have concluded that the Holliers' claim against the plaintiff fails, and since the Holliers have now withdrawn the claim they originally made against the Maddens, based upon the difference between the sums paid and the "reasonable worth" of the work carried out, I do not need to examine the detail of this claim, but it may be as well to record some of the difficulties that were thrown up. 215 The claim was based upon an unexpressed assumption that the cost of the Works, properly attributable to Units 1, 2 and 3, should be taken to bear the same proportion to the cost of the Works as a whole, as the prices agreed to be paid for Units 1, 2 and 3 bore to the aggregate of the prices agreed to be paid for the remaining 12 units and the shop taken by Mr Holliday. This assumption seemed to me to involve substantial difficulties, including the following: (a) It can be seen that the units on the upper floors were priced at greater sums that the units on the lower floors, but the evidence does not establish whether this increase arose from the fact that it cost more to carry out work at a greater height, or whether the prices merely reflected such factors as better views. It may be that both considerations arose. (b) On the evidence it is not clear how one apportions the prices agreed to be paid for the various units and the shop, allowing for the cost of constructing the common areas in the building. (c) Assuming that there was originally a reasonable correlation between the price of each unit and the shop, and the building costs expected to be incurred in relation to that unit and the shop, on the evidence, it is not clear how one should allow for the effects of the negotiations leading to Cancarra "selling" the various units, for example in relation to the Bliss "contra" , or the offering of discounted prices. (d) Similarly, there is a difficulty working out what needs to be done in relation to the "swap" of unit 1. The Ninot interest agreed to relinquish that unit in favour of the Holliers, but took a $70,000 price adjustment in consideration for agreeing to this. (e) Similar difficulties arise in relation to Ninot affectively agreeing to sell the land at a discounted price, in consideration of their receiving their units at a discounted price. (f) There are also difficulties arising in relation to the calculation of some profit on the part of Cancarra, in constructing the building. On the totality of the evidence, it does not seem proper to assume that Cancarra expected to make a profit, evenly spread over the whole building and its component parts. 216 Up to a point, these complexities can now be put aside, but clause 5.4 of the Development Deed, quoted at [12] above, remains. It is drafted on the assumption that there is a relationship between the price which the Holliers agreed to pay for lot 31 (that is, Units 2 and 3) and the cost which Cancarra was to incur in relation to those units, but neither the Deed nor any other evidence in the case, has spelt out any detail of that assumed relationship. 217 Clause 5.4(ii) required, or purported to require the Holliers and Cancarra to agree on an adjusted price, once the relevant designs and costings were available. In a sense it was "an agreement to agree", and there was no mechanism in clause 5.4 for resolving any difficulty that might arise in this regard. However, the Deed also contained clauses 5.3 and 6.6 quoted at [184] and [186] above, so that if as was the fact no such agreement was reached, then clauses 5.3 and 6.6 operated, and the contention that there was no agreement or no enforceable agreement must be rejected: to the contrary, and if all else fails, I must decide what sum was properly payable by the Holliers, consequent upon the operation of clauses 5.3 and 6.6; and since the Deed required its parties to enter into the Building Contract, it is relevant to note that clause 27 of that Contract provided for Variations, to be costed in a conventional way, and clause 8 provided for the arbitration of disputes which might arise under that Contract. 218 Of course, as between Cancarra and the syndicate (including the Holliers), Cancarra carried out the relevant work, and the Holliers took possession of Units 1, 2 and 3, so that if neither the syndicate nor the Holliers had paid Cancarra for the relevant work, Cancarra would have had a restitutionary remedy. However, the syndicate did pay Cancarra out of money borrowed from the plaintiff, and the Holliers incurred a liability to the plaintiff; and the incurring of that liability is the basis of the claim now litigated. It arose out of the web of contracts and the purported performance of those contracts. 219 Further, it is not practicable to look at Units 2 and 3 alone. Rather, the parties debated questions relating to the sum properly payable to the Holliers in respect of Units 1, 2 and 3, once the design of the building, reflected in the drawings referred to in the Development Deed and Building Contract, had been changed, as it was. It seems to me to be artificial to say that there is one contractual regime to be applied in respect of Unit 1, and a different contractual regime to be applied in respect of Units 2 and 3; and what is more, the evidence does not provide any basis for deciding the case along these lines. 220 The Deed needs to be construed as a whole. It provided that the syndicate was to acquire certain land, and ultimately to construct a building on that land, and it contained elaborate provisions relating to various possibilities; and clause 5.4(iii) needs to be given proper weight. If the price for lot 31 (Units 2 and 3) was to be changed, but the prices of the other units remained unchanged, it follows that the total sum, expressed in Schedule 2 to the Deed, calculating the total of the prices of the units, would be changed, but that the prices for the other units (and the shop) would be unchanged. No party made any submissions as to the effect that this might have upon the contributions payable by the various investors in respect of Units 9 and 10, and the Deed did not provide for this. Nor is it really clear whether the Contract Sum, fixed by the Building Contract, was to be amended. I am inclined to think that it would have been amended, by the same dollar amount as the price of lot 31 was taken to be adjusted, but no party made submissions about this particular point. 221 How then is one to deal with the supposed value of the Works, concerning Units 1, 2 and 3? I do not think the evidence permits a sensible answer to be given, and the implicit concession of the Holliers, at the end of the hearing, that damages cannot be assessed in the way that they originally contended for, is correct. 222 The claims of the Holliers for damages need to be assessed on three separate bases: in contract, in negligence, and under section 82 of the Trade Practices Act. However, in a practical sense, the Holliers and the Maddens appear to agree that the revised approach to the Holliers' claim, set out in the further amended fifth cross-claim, and the unstated but implicit common assumption that in a practical sense there is no dispute but that the Variations in question, and the defects in question, all relate to Units 1, 2 and 3, and not to the rest of the building, serve to make irrelevant what would otherwise be some difficult questions. I turn then to the components of the claim now made by the Holliers against the Maddens: in brief, Variations, defects and interest and other charges raised by the plaintiff; and I will deal with the first and second of these components on the basis that they relate to Units 1, 2 and 3, and not the rest of the building. The First Component: Variations 223 Messrs Zakos, Radcliffe and Meredith produced a conclave Report, Exhibit D6, in which they recorded their respective views. The Report is divided up into "boxes", or ruled off box-shaped areas, dealing with different topics. In box 1, they record their agreement about a series of topics: there was an over certification of $118,446 in respect of the various topics listed there. In the remaining 12 boxes, the three witnesses set out summaries of their respective views about other topics, upon which they did not agree. 224 Boxes 2 and 3 relate to structural changes at levels 2 and 3 respectively. In the original design of the building, there was to be a shop and some garages on level 1, and residential units on levels 2 to 5 inclusive. Before the date of the Development Deed, 24 June 1996, there was a general expectation that the Holliers wished, instead, to take level 2 as "an empty shell", which they themselves would fit-out as a retail shop, and an acceptance by Cancarra that if this is what the Holliers wanted, Cancarra would provide it. Later, it was provided. 225 If the building had been constructed in accordance with the original design then, as a generality, a series of load bearing walls would have been constructed on top of the level 2 floor slab, and those walls would have borne part of the load of the level 3 floor slab, and therefore all that the level 3 floor slab supported. However, the change to "an empty shell" produced the result that part of the intended support for the level 3 floor slab, provided by the load bearing walls, had to be replaced by a series of columns and beams. There were other, relatively minor changes, and the clarity of the picture is clouded by a number of other factors, including ongoing refinement of the design, so as to produce a more "proper" design, independently of the amendments relating to the wishes of the Holliers. 226 When the three expert witnesses attempted to work out how the Variations in question should be costed, they were confronted with the difficulty of finding a reliable starting point. They could find no documents which they regarded as reliable in the sense that they provided a reliable base from which to calculate "the actual cost" to Cancarra of the Variations, and therefore of using the formula set out in clause 27 of the Building Contract, quoted at [191] above. 227 At the conclusion of their conclave in March 2001, Messrs Zakos and Meredith thought that the more reliable starting point could be deduced from the terms of a letter from Port Stephens Design Service dated 27 May 1996 (some times wrongly recorded as 25 May), whilst Mr Radcliffe thought that the more reliable starting point could be deduced from the bill of quantities, and a set of measurements taking from the "as built" drawings. On this basis, Messrs Zakos and Meredith thought that there should be a deduction from the Contract Sum of $11,243 in respect of the changes at level 2, whilst Mr Radcliffe thought that the deduction should be only $10,676. This difference was, in the circumstances, almost insignificant, but the position concerning the change at level 3 was more significant, and the two sets of changes need to be considered together. 228 As to level 3, Mr Zakos considered that the Contract Sum should be increased by $13,291; and he based his opinion substantially on the letter from Port Stephens Design Services of 27 May 1996. However, Mr Meredith thought that it should be $36,150, and he based this view on a set of measurements taken by comparing the "as built" drawings with what he took to have been the original design intention; and for this purpose he treated level 4 as a "typical level". Mr Radcliffe was of the same view as Mr Meredith. 229 The letter of 27 May 1996 from Port Stephens Design Services is not easy to understand. It commences: "With respect to elimination of the Shops from level 2 of Nelson Towers Stage 2 the appropriate comparison would be based on the major [longitudinal] reinforcement and concrete volumes…". 230 So far as I can tell, none of the parties to this litigation had the opportunity to speak, or at least to speak meaningfully, either to the author of this letter, a Mr Wilson, who I take to be an engineer, or to anyone from Cancarra. Certainly no person from either Port Stephens Design Services or Cancarra gave evidence. The letter of 27 May 1996 was difficult to reconcile with other correspondence from Mr Wilson. 231 In any event, after the conclave, Mr Meredith gave evidence. Some time later, Mr Zakos gave evidence. By then, perhaps in consequence of his considering the evidence of Mr Meredith, he had changed his opinion about the reliability of the letter of 27 May 1996, as constituting the more reliable starting point. 232 The question is not an easy one, but I accept that Mr Zakos was correct in his ultimate view, shared as it was by Messrs Meredith and Radcliffe. It seems to me that a possible explanation for the letter of 27 May 1996 is that, at the request of Cancarra, Mr Wilson was then providing Cancarra with information from which Cancarra would have been able to work backwards for the purpose of adjusting the Contract Sum. 233 The relevant provisions of clause 5.4 of the Development Deed, and clauses 6.1 and 6.6 of the Building Contract are set out at [12], [185] and [186] above. As already mentioned, Cancarra had, for its own purposes, prepared a bill of quantities. Apparently, that document existed in electronic form in some computer, but the only "hard copy" that has been found is a print-out dated 19 April 1996. 234 It seems likely that, by about 27 May 1996, Cancarra had worked out, for its own purposes, including quoting a lump sum price for the Contract, a lot of the detail of what it would cost it to construct the proposed building, with the design changed in the manner foreshadowed by the Holliers, but that it also wanted to know what it would cost, if that change was not effected. On the evidence, it did not pass on any of this information, and the Contract Sum represents an uncritical acceptance of the price that Cancarra quoted. In arriving at that quotation price, Cancarra took into account the costs which it anticipated incurring constructing the building, according to the proposed revised design. However, the Building Contract provided for the construction of a building, as shown in drawing 2E. The fact that Cancarra had priced the job, and quoted a price on the assumption that it would have to construct a building in accordance with drawing 2F is another demonstration of how sadly the transaction was structured, from the perspective of the Holliers. 235 Returning then to the differences between the three expert witnesses, Mr Radcliffe considered that the bill of quantities was a more reliable starting point, although he recognised various difficulties: the architectural drawings listed in Schedule 3 to the Building Contract lacked various details, and there were no structural drawings available, so as to make it difficult to tell how the bill of quantities had been priced. However, he thought that the bill of quantities was more reliable than the letter of 27 May 1996; and given the change in view of Mr Zakos, I accept this as correct, and conclude that, in respect of the structural changes at level 2, there should have been a deduction of $10,676. 236 As to the changes at level 3, Mr Zakos' final opinion was that there should be no change, treating levels 2 and 3 together for this purpose, because there was no relevant change in design: Cancarra had anticipated the changed design, as depicted in drawing F3, and it had priced the job accordingly. 237 On this issue I prefer the views of Messrs Meredith and Radcliffe. The issue is a legal one, rather than one upon which expert opinion prevails: for the reasons set out above, I think that the terms of the Contract must prevail over what might be described as the moral obligation of Cancarra. Cancarra was entitled to charge as it did in this respect. The Contract Sum has therefore to be varied by increasing it by $36,150. 238 I have passed over the detail of a lot of the evidence about the structural changes at level 3 because I do not think that anything turns upon that evidence in the end. However, I record my view that the cross-examination of Mr Radcliffe about this detail did not seem to me to effectively undermine any significant part of his evidence, and on this point his evidence was supported by that of Mr Meredith. 239 Boxes 4 and 5 of the conclave report relate to "external walls" and "external finishes". To state matters briefly, the change in use at level 2 resulted in a change to the external walls, in that there was less brickwork, and more aluminium and glass. The three expert witnesses agreed that there should be a deduction in the cost of constructing the external walls, but disagreed as to the measure of the deduction. Mr Zakos thought it should have been $17,211, but Messrs Meredith and Radcliffe thought it should have been $9,000. 240 There were two matters upon which they disagreed, in this regard. First, there was a difference of opinion as to whether there was involved, relevantly, 164 or 135 square metres of brick work. This difference turned upon whether, at one point, a wall should be treated as being single skinned or double skinned. As to this, Mr Zakos, when challenged in cross-examination, said that he would reconsider the position overnight, and tell counsel for the Holliers what view he came to; and the Holliers did not take the issue any further. Given this circumstance, the earlier evidence of Mr Madden, and the fact that when Mr Radcliffe was called later, he was not cross-examined on the topic, I conclude that this question should be resolved in favour of the Maddens. 241 The second difference concerning this issue related to the substitution of Avanti bricks for common bricks. On the evidence this might have produced some small deduction, but if so, it was insignificant, in the context of the whole case. 242 As to box 5, external finishes, the position is that Messrs Meredith and Radcliffe thought that there should be a reduction of $3,286 but Mr Zakos thought it should be $4,578. The three men agreed upon some aspects of the matter, but as Mr Zakos put it, they then agreed to differ, considering that it was not worth spending perhaps another $10,000 trying to resolve a difference of opinion about $1,292. Regrettable as this may be, it seems to reflect common sense, and I adopt the majority view of Messrs Meredith and Radcliffe. 243 In summary, I conclude that the Holliers have proved an entitlement to a deduction of $9,000 in respect of the external walls, and $3,286 in respect of the external finishes. 244 Box 6 relates to aluminium windows. If level 2 had been fitted out for generally residential use, there would have been aluminium windows of a type commonly found in residential premises. However, it was adapted for use as a retail shop, so that there was built an aluminium and glass shopfront, with automatic doors. The exercise to be carried out involves a balancing of credits, in respect of the aluminium windows not installed, and debits, in respect of the shopfront that was installed. Mr Zakos thought that the credits and debits balanced each other out, or that, at worst from the point of view of the Holliers, there should be a net addition to the price that they had to pay, of $6,712. Mr Meredith thought that there should be a deduction from the Contract price of $6,950, and an addition of $37,230. Mr Radcliffe thought that the deduction should be $8,444 and the addition $37,232. 245 Messrs Meredith and Radcliffe agreed upon most of the relevant detail, but differed as to the measure of pricing the change: whereas Mr Radcliffe relied substantially upon the bill of quantities, Mr Meredith applied rates taken from Cordell (a standard reference work in the building industry). 246 As was the case in relation to the structural changes at level 3, it is clear that Cancarra, before contract, anticipated that the Holliers would wish to vary the design specified in Schedule 2 and 3 of the Building Contract. In particular, Cancarra had obtained from a body called Tim's Glass a quotation for the shopfront aluminium and glass. It had built the sum quoted into its bill of quantities, and therefore into the price it quoted the syndicate, which quoted price became the Contract Sum. (The bill of quantities did not wholly adopt the idea that the contemplated Variation would be implemented, but it clearly did take into account some of the increased costs that would be incurred). 247 However, again as in the case relating to the structural change at level 3, in my view the Contract required Cancarra to construct the building in accordance with drawing 2E, and containing nine three-bedroom and six two-bedroom apartments. The Contract also provided for possible Variations, and for any Variations to be priced in the manner provided for in clause 27; and that is what Cancarra charged. Whilst the Holliers no doubt believe that this is unfair, I conclude that it is what the Contract provided. 248 Having said that, I do not think there is any profit in examining the wealth of disputed detail that was explored in evidence. Needing to decide between Messrs Meredith and Radcliffe on this question, as best I can tell, Cordell is likely to be more reliable than the bill of quantities. Perhaps this view is a product of a sense that Cancarra acted with less than conspicuous probity, but independently of that, all concerned recognise that the bill of quantities might not be reliable, and nobody suggested that Cordell is anything but generally reliable. I therefore adopt the views of Mr Meredith, and hold that the Holliers were entitled to a price deduction of $6,950, but that they also had to pay an additional $37,230, leading to a net price increase of $30,280. 249 Box 7 relates to "hydraulics", and box 8 to "mechanical". It is convenient to deal with these together. The change in design related to the deletion, for example, of the bathrooms which were to have been installed in the three residential units on level 2; and that led to a reduction in the hydraulic and mechanical (exhaust) services associated with those bathrooms. On the other hand, there was a small amount of additional work to be carried out, relating to the plumbing needs of the shop. 250 In large measure, this dispute turns upon the acceptance of Mr Bliss, and of documents emanating from him on the letterhead of Coastline. Quite understandably, the Holliers and Mr Zakos treated all information coming from Mr Bliss with cynicism. However, in my judgment, despite his disregard for his taxation obligations, he tried to give honest evidence, and I accept the general trust of what he says, relevant to the dispute between the Holliers and the Maddens. In particular, I accept his evidence that the letters that Coastline wrote to Cancarra dated 8 July 1996, 15 October 1996, 18 June 1997 and 3 June 1998 should be taken at face value, although it is necessary to correct some mathematical errors and to reconcile some inconsistencies. 251 Mr Radcliffe accepted these documents, and proceeded on the basis that clause 27 of the Building Contract entitled Coastline to be paid for the actual cost to it of the Variations. On that basis he considered that the Holliers were entitled to a deduction of $14,589, but that they also had to pay for additions totalling $3,907, giving them a net entitlement of $10,682. In substance, this represents money paid by Cancarra to Coastline. Mr Radcliffe checked the measurements, and satisfied himself from his experience that the rates charged by Coastline were reasonable. 252 Mr Zakos accepted Mr Radcliffe's measurements, but applied the rates he took from Rawlinson (another standard reference work in the building industry), resulting in his reaching the conclusion that the deduction to which the Holliers were entitled was $27,363. That led to a debate about details, primarily about the details of the rates quoted by Rawlinson, which I would have found difficult to resolve, were it not for the fact that Mr Meredith, applying his experience to the question, concluded that the appropriate deduction should be only $14,461. That is, speaking generally, Messrs Meredith and Radcliffe thought that the deduction should be about fifty percent of the deduction that Mr Zakos thought proper. 253 I accept that all three men approached the matter in a proper spirit, and that the difference is one of professional opinion. I regard the combined opinions of Messrs Radcliffe and Meredith on this point as being persuasive, and then, having to choose between them, I think that the approach of Mr Radcliffe, taking the actual cost to Coastline rather than the estimated proper cost, is the preferable course. 254 The position as to "mechanical" or exhaust fans is generally similar: Messrs Meredith and Radcliffe considered that the appropriate deduction was $4,275, whereas Mr Zakos considered it should be $7,500. Each of the three approached the matter in a broadly similar way. Having to decide between these three experts in an unfamiliar field, I find the majority view persuasive. 255 Box 9 relates to changes concerning the electrical installation, consequent upon the change in the proposed use of level 2. There are two connected questions: the measure of a deduction in the price payable by the Holliers, and the justification for a set-off. 256 As to the deduction, Mr Radcliffe, basing himself upon a quotation from a sub-contractor, thought that the deduction should be $7,061, whereas Mr Zakos, basing himself on Rawlinsons' figures, thought it should be $12,962, and Mr Meredith, basing himself upon his own experience, thought it should be $12,360. As to the addition to the price, Mr Radcliffe, basing himself upon the sub-contractor's quotation, considered that the increase should be $4,000, whilst Mr Meredith, basing himself on his experience, thought it should be $4,000. Mr Zakos thought there should be no increase, because he was not satisfied that the work in question had actually been carried out. 257 Again, the evidence is permeated by a distrust in the accuracy or the reliability of the Cancarra records, and in this instance that distrust is reinforced by the evidence of Mr Hollier, which I accept, that he paid his own sub-contractor for the work, the subject of the supposed increase in price. That acceptance of this evidence disposes of the question of the price increase, but it also reinforces my view that the quotation obtained by Cancarra, for $7,061 is so divergent from the views of Messrs Zakos and Meredith as to what was a proper sum ($12,962 and $12,360) that it is not safe to proceed on the basis of the quotation, particularly as it was apparently not accepted by Cancarra. Then, having to chose between Messrs Zakos and Meredith as to the last two mentioned sums, I think it is probably safer to accept the view of Mr Zakos, adopting the Rawlinson rates. 258 The net result is that, in respect of this item, I find that the Holliers were entitled to a price reduction of $12,962. 259 Box 10 relates to the provision of fire services. Messrs Radcliffe and Meredith thought that the appropriate deduction was $995, but Mr Zakos put the figure at $3,450. The evidence of the three men on this point is so short and terse that I doubt that I have a proper appreciation of the detail of the dispute between them, and in the circumstances I propose to follow the majority view and allow the sum of $995. 260 Box 11 relates to "preliminaries": a more significant dispute. Mr Zakos considered that the Holliers were entitled to a price decrease of $25,630, whereas Mr Meredith thought that Cancarra was entitled to a price increase of $41,000. Mr Radcliffe thought that there should be no change. 261 I initially thought that Mr Meredith's analysis was correct, and that it was likely that the general costs to Cancarra of carrying out the work, as varied, would be increased fairly extensively. He put the dollar value on the general increase by reference to three elements: additional scaffolding, $18,750, additional labour for materials and handling, $19,500, and additional insurance premiums, $3,250. However, I consider now that this view should be discounted, by reference to his cross-examination, the evidence of Mr Zakos, and the evidence of Mr Hollier, and I do not think it would be right to accept that any of these three elements has been established. (It might have been different, had the Sneddon interests still been represented towards the end of the trial; but as it was, no party defended Mr Meredith's position on this topic, when Messrs Zakos and Radcliffe gave evidence, and when Mr Hollier gave evidence at the end of the trial). 262 Mr Zakos' final position was essentially this: one can tell from the bill of quantities that Cancarra allowed a figure for preliminaries which represented 12.2% of the "net trade total", a fragment of the Contract Sum; the figure of 12.2% was appropriate, since the ordinary range was 10% to 15%; it was not possible to be precise about the costs incurred by Cancarra under this rubric (supervision, labouring, site cleaning, water and electricity, and scaffolding and hoist hire), but, as a general proposition, 12.2% of whatever sum I arrived at, on a consideration of the elements considered under the heading "the first component: Variations" would be appropriate. 263 Mr Radcliffe disputed this, contending that, viewing the matter overall, the likelihood was that there was no, or no measurable diminution in the sum which should be allowed for "preliminaries". 264 One factor, relevant to this particular job, was that Cancarra actually expected most of the Variations before contract, and planned for them, at least in part. The questions posed seems to me to be fairly evenly balanced, but in the end I think that the likelihood is that, on this job, there was more likely than not some diminution in the costs incurred by Cancarra. I am a little discomforted by the thought that 12.2% may be too high in the circumstances: see the evidence of Mr Meredith at paragraphs 5.24 to 5.29 of Exhibit D4; but the evidence does not seem to permit me to find any other figure - it is a case of 12.2% or nothing, and on the whole, the figure of 12.2% seems to provide the more just solution. 265 Box 12 relates to council contributions, that is the sum which should be taken into account to reflect what the local council would have required to be paid to it by way of contribution for the provision of parking spaces, pursuant to the provisions of sections 91 and 94 of the Environmental Planning and Assessment Act 1979 (as it stood in 1996). The position was, to say the least, confused until the tender of the statement of Mr Douglass, a council officer, who explained what had apparently happened (the council records being incomplete). He described how the council went about requiring contributions to be made for various purposes. The only one of these purposes which is relevant now relates to the provision of parking space. The formula used by the council in this regard was changed in 1994. In general terms, the council sought to achieve the end that there was adequate parking space made available in new developments; and if the parking space was inadequate, then the applicant for development consent was required to contribute to a fund, out of which the council paid for the provision of parking space elsewhere. 266 In relation to the project in question, the council granted a development consent in 1993. At that stage there was a net shortfall of six parking spaces in the proposed building, according to the formula then in use, so that the council would have required a contribution of $54,000, being six spaces at $9,000. The $54,000 was to be paid before the building work commenced. On 2 November 1995 (after the formula had been changed), the council granted a first modified consent. The shortfall in parking spaces provided was then only four spaces, so that the contribution required was only $36,000. There was then a second modified consent given on 20 May 1996. There was then a shortfall of six spaces, resulting in a contribution of $54,000. Subsequently, there were further modified consents given on 5 August and 9 October 1996. On each of these occasions, the council sought a contribution of $99,000, based upon a supposed shortfall of 11 parking spaces, but Cancarra protested to the council, and the council accepted that the shortfall was only eight spaces, so that the contribution it sought came back to $54,000. 267 The statement of Mr Douglass is dated 6 March 2001, the date of the conclave report. The information in the statement apparently only came to the notice of the three experts on or just before that date, and each of the three men had to give the matter further consideration. In the end Messrs Meredith and Radcliffe concluded that the price payable by the Holliers should be increased by $18,000 (the difference between $36,000 and $54,000) on an analysis of the way in which they thought the council would have applied its formula to the changes in the building, brought about by the change in design; and Mr Zakos did not offer an opinion. 268 Looking at the documents, I accept the conclusions of Messrs Meredith and Radcliffe: it is correct to say that, by reason of the changes affected concerning level 2, at the instance of the Holliers, the amount payable to the council was increased by $18,000. However, the Holliers say that, as between themselves and the Maddens, it is not proper to add any sum to the amount that was payable by the Holliers for their units. They say that the development consent runs with the land: Ryde Municipal Council v The Royal Ryde Homes (1970) 19 LGRA 321 at 324, Eaton & Sons Pty Ltd v Warringah Shire Council (1972) 172 CLR 270 at 293 and Pearson v Leichhardt Municipal Council (1993) 93 LGERA 206 at 212; and the Maddens did not dispute this much. Then, the Holliers say, assuming that the increased contribution has not been paid, they are the owners of the land (that is, the strata represented by Units 1, 2 and 3), and therefore they had a personal obligation to pay the sum in question to the council. 269 It is not clear that this is correct. The Development Consent was (apparently) given to Cancarra, and it seems to follow both that it was given to Cancarra on behalf of the syndicate as a whole, and that it related to the whole of the land upon which the building stands, but in any event I think that there is a separate answer to the contention of the Holliers: the Development Deed and the Building Contract provided, in summary, that any Variations that were effected, of the kind under consideration, were to be at the expense of the Holliers. In particular clause 25(b) of the Building Contract provided: "25(b) (i) The Contractor shall pay and indemnify the Principal against any fees or charges legally demandable under any Act of Parliament, regulation or by-law in respect of the Works. (ii) No adjustment shall be made to the Contract Sum in respect of the amount of any such fees or charges unless the fees or charges were imposed or increased after the date of this Contract whereupon the imposed fee or charge or the amount of the increase in the fee or charge shall be added to the Contract Sum." 270 This clause, particularly when read with clause 27 quoted at [191] above, and clauses 5.3 and 6.6 of the Development Deed, quoted at [184] and [186], quoted above, resulted in a Variation of the Contract Sum, at the expense of the Holliers, of $18,000. 271 So far as I am aware, Cancarra did not pay that sum to the council, it is now in liquidation, and the council may not have taken any step to collect the increased contribution. The parties did not address this position, and I invite submissions about it. 272 Box 13 relates to a grease trap. Mr Zakos considered that the Holliers were entitled to a price deduction of $7,000, because Cancarra had used an existing greasetrap, instead of providing a new one, as costed in the bill of quantities. Messrs Meredith and Radcliffe disagreed, saying in substance that the Contract required Cancarra to design and construct the building, and that Cancarra did that, providing a greasetrap that conformed with the contractual requirements and that was fit for its intended purpose. 273 It is entirely understandable that the Holliers feel duped about this, but the position is, in my view, covered by the same considerations as the structural changes at level 3: the building Contract was so structured that Cancarra was entitled to do what it did, at the expense of the Holliers. 274 I summarise my findings as to Variations by saying that the Holliers are entitled to decreases in the Contract Sum, but must pay additional amounts, using the formulations set out in Exhibit D4, as follows: 1 Agreed reductions $118,446 2 Structural changes level 2, reduction $10,676 3 Structural changes level 3, addition $36,150 4 External walls, reduction $9,000 5 External finishes, reduction $3,286 6 Aluminium windows, addition $30,280 7 Hydraulics, reduction $10,682 8 Mechanical, reduction $4,275 9 Electrical, reduction $12,962 10 Fire, reduction $995 11 Preliminaries, reduction to be calculated 12 Council contributions, submissions invited 13 Greasetrap $NIL 275 I should pay tribute to the three expert witnesses. Whether or not as a consequence of the Expert Witness Code of Conduct, they approached some very difficult, complicated problems in the proper spirit, and eventually agreed upon almost all of the issues that had formerly divided them, and that truly fell within their discipline. When they disagreed, it was mostly about questions of law. They cannot be criticised for those disagreements. The Second Component: Defects 276 I do not think there is any question but that some of the work carried out by Cancarra was defective: Mr Bliss negotiated a price reduction of $15,000 to $18,000 on the basis that the work done for Stenoak was defective. 277 In respect of the Holliers' units, Messrs Zakos, Meredith and Radcliffe met in conclave, and prepared a (second) conclave report, setting out in summary form their views about defects: Exhibit B20. I proceed on the assumption that there were some defects, as discussed in that document, because I consider that this claim on the part of the Holliers must fail, for other reasons. 278 First, I do not think that the evidence establishes either that the Maddens were retained to look for, or otherwise to do anything about defects, as distinct to being retained to value progress claims. No witness described a retainer in those terms, or spoke of relying upon the Maddens in this regard. 279 Mr Hollier described how the topic arose, at the meeting of prospective syndicate members. Mr Harkin spoke of the project being co-ordinated by "a builder, accountant, a lawyer, architects and engineers", and Mr Graham McCloy said that the interests of the syndicate should be looked after by an independent person; and then that he thought that the proposition that Cancarra should retain a quantity surveyor, as had been proposed, was unsatisfactory. Mr Harkin then said that Cancarra had budgeted for $3,000 for the fees of a quantity surveyor, and that any fees in excess of that sum would have to be met by the syndicate. 280 By itself, this account seems to me to make it unlikely that the syndicate retained the Maddens to do more than value the progress claims, but other circumstances make it more unlikely that this was so. 281 The proposal of Cancarra, which the syndicate rejected, was that Cancarra retain a quantity surveyor, at an estimated cost to Cancarra and therefore to the syndicate of $3,000. It was unlikely that Cancarra expected its quantity surveyor to check the quality of its work, or to draw to the attention of the syndicate any work of Cancarra which might be defective. When the syndicate decided to appoint the Maddens as quantity surveyor, rather than to accept without checking for themselves Cancarra's progress claims, and nothing was said about the Maddens checking the quality, as distinct from the quantity of the work done, and without agreeing to pay any additional sum to the Maddens, it is difficult to see that the syndicate really expected the Maddens to check the quality of the work. 282 This view is reinforced by a consideration of the fact that the syndicate members included a number of people who were themselves experienced in building work generally. Thus, Mr Bliss spoke of his ability to check the quality of the work of Cancarra as being one of the advantages he perceived in Stenoak participating in the project; Mr Anderson was a former plumber, and himself involved in building work; Mr Graham McCloy said that he had been in the business of developing land and buildings for more than 20 years; Mr Allibon was a plumber; and Mr Laing, one of "the professionals", was an architect, who had done work on this project for the Sanders' interests. It is not immediately apparent why any of these people would expect the Maddens to do what is now contended for. None of them asserted as much. 283 The only real evidence that a quantity surveyor has an obligation, because of a retainer as a quantity surveyor, to do anything about defective work came from Mr Meredith, but he spoke in generalities, divorced from the facts of this case. 284 I do not overlook that Mr Madden, like Mr Anderson, participated in a "defects inspection survey" on 13 June 1997, nor the fact that the Maddens did not call any evidence, except from Mr Meredith or through documents, but I am not persuaded that the Maddens undertook any responsibility in relation to checking the work of Cancarra for defects. 285 Next, there is a question concerning the causal connection between any supposed breach of obligation of the part of the Maddens, and the losses said to have been sustained by the Holliers. As to this, first, no witness spoke of relying on the fact that the Maddens failed to point out defective work; and secondly, assuming that the Maddens had reported to the Sneddon interests in the terms suggested by Mr Meredith, that is, drawing attention to the possibility that there were or might be defects, there is no evidence that the Sneddon interests would have acted in any way differently to the way in which they in fact acted. On the evidence, they seem to have drawn down sums from the plaintiff and paid money to Cancarra with scant attention to any relevant matter, expect what Cancarra sought. 286 The Maddens point to another difficulty: the Building Contract provided, in conventional terms, for a retention fund, in which money was to be kept during a defects liability period, during which period Cancarra was to rectify any defects that emerged. But for the conduct of the Sneddon interests, these provisions might well have effectively protected the Holliers against the matters now complained of, or at least some of them. In the circumstances, I need not explore this claim further. The Third Component: Interest and Bank Charges 287 On a number of occasions in the second half of 1997 Mr Hollier said words to the effect that he and his wife were in a position to pay the plaintiff the amount properly payable by them. It is probably right to accent the word "properly": they thought that the amount properly payable by them was of the order of $450,000, but the Sneddon interests certified that they should pay some $667,000. 288 On 27 August 1997 there was a meeting of syndicate members. The Holliers were represented by Mr Carlin, who read a statement, apparently prepared by Mr Hollier. Mr Hollier adopted that statement in evidence. Mr Carlin said that until the "final contract value" was known, the Holliers regarded it as impossible for them to pay the plaintiff the sum asked of them. 289 So far as I can tell, it was not until the trial that the Holliers first contended that they were unable to procure the money asked of them. Earlier they had said, in substance, that the injustice of the demand made upon them was so great that they would make no payment at all. They sought to have their dispute with Cancarra resolved, before making any payment. In cross-examination Mr Hollier acknowledged that the only reason he had not paid the plaintiff was the existence of his dispute with Cancarra. 290 He had expected that, at about the time the building was complete, he and his wife would be asked to pay some money, he thought about $450,000. Mrs Holliers said words to the same general effect. They had been seeking information from Cancarra for several months, without success. When asked to pay the amount certified by the Sneddon interests, Mr Hollier protested to everyone concerned about the injustice of the demand, and of the apparent absurdity of the claims made against them by Cancarra, and simply refused to pay anything. 291 At this stage, the position was that the Holliers, like every other member of the syndicate, had a contractual obligation to the plaintiff to repay the money advanced to the syndicate by the plaintiff, together with interest and various bank charges. As between members of the syndicate, each member had an obligation, under clause 6.1(c) of the Development Deed, to contribute an amount certified by the Sneddon interests as being payable, and the amount the Sneddon interests certified that the Holliers should pay was $667,320.75. As between the Holliers and Cancarra, there was a substantial dispute but there were dispute resolution mechanisms provided for in the Development Deed and the Building Contract. 292 All the other syndicate members paid the amounts that the Sneddon interest certified to be payable by them, and those amounts were paid to the plaintiff. The Holliers paid nothing. After a time the plaintiff sued the syndicate members for the balance no repaid. The amount now owing by the syndicate members to the plaintiff, with interest, is approximately one million dollars. 293 The Holliers say that if they are liable to the plaintiff for this sum, then, as between themselves and the Maddens, they are entitled to damages, including the additional interest that they are obliged to pay to the plaintiff. They say that, in about August 1997, they were unable to pay the money demanded of them, and that any increase in the amount of their liability to the plaintiff should be at the expense of the Maddens. 294 The Maddens deny that they are liable for any more than damages, assessed in the conventional manner, together with interest under section 94 of the Supreme Court Act. They say that the increased liability was not foreseeable, that there was no causal connection between their breach of obligation and the increased loss, and that the increased loss was too remote. The Holliers deny each of these propositions, and say that what the Maddens are really saying is that the Holliers failed to mitigate their damage, without the Maddens having pleaded this defence or led any evidence about it. They say too that it is a case where there was some new intervening cause of the loss. 295 The Holliers say that as at about August 1997, they did not have the financial capacity to pay the plaintiff $667,000; and it is I think established that the plaintiff would not have agreed to discharge its mortgage over Lots 31 and 32 (Units 1, 2 and 3) unless the whole of that sum was repaid. That proposition led to an issue concerning the capacity of the Holliers to pay about $667,000 in about August 1997. 296 At that time they "owned" Units 1, 2 and 3 as well as another commercial unit in Nelson Towers I, known as lot 27. Those four units between them had a value of about $935,000. Banks were generally willing to lend up to 66% of the valuation of units of this type (subject to their consideration of the capacity of the borrower to service the loan). That meant that, prima facie, about $617,000 might have been borrowed from a bank on the security of these four units. 297 The Holliers had in August contracted to sell their home for $430,000, and settlement took place in September 1997. On that occasion they received a net balance of about $380,000. Had they applied that sum to the discharge of their existing obligations to their bank, Colonial State Bank of New South Wales ("Colonial"), they would have had a surplus of about $21,000. Instead, they invested the money on an interest bearing deposit. 298 The Maddens submitted that if the Holliers had done this, they would have then needed only about $29,000 to repay the plaintiff (in round figures, $667,000 less $617,000 borrowed, and less a further $21,000 - $29,000 to be found). Mr Hollier owned a yacht. In 1997 he told Colonial that it was worth $250,000, and it was insured for that sum. The Holliers did not consider the possibility of selling it in 1997, or 1998. Mr Hollier told Colonial in 1999 that they would sell it, if the present litigation was not settled promptly, but in evidence he said that he and his wife had decided that they would not sell the yacht unless it was absolutely necessary. By 1999, he seems to have thought that selling the yacht at that stage would not have solved his problems - the problems were by then too late. In 2001, in a run-down state, seemingly because of lack of maintenance in recent years, he had the yacht valued at about $155,000. 299 Mr Hollier said, and I accept, that he and his wife needed an overdraft facility in order to conduct their business (a ship chandlery), which was seasonal in nature: sometimes their bank account was in credit, and sometimes in debit. Considering the financial position of the Holliers in about August or September 1997, had they used the net proceeds of sale of their home to pay off their debts to Colonial, they would have needed to find another $29,000 approximately, to pay off the plaintiff, but they would also have needed an overdraft facility, and it seems certain that the bank from they procured that facility would have required some security for it. In this context, the Maddens suggested that Mr Hollier might have sold the yacht. 300 Mr Hollier enquired of Colonial about the possibility of borrowing money against the security of the yacht, but the bank was not prepared to consider it as a suitable form of security. It seems that he made no further enquiries on the subject. However, on the evidence of Mr McLean, a finance broker whose evidence I accept, it would have been possible to borrow up to fifty percent of the value of the yacht. It was not suggested that it was not possible to sell it. The Holliers called as a witness Mr Pfeiffer, another finance broker and a former banker. He said that in August 1997 no financial institution would lend funds on the sole security of the yacht. I assume that this represents the product of his personal background and experience, but I see no reason why I should not accept the evidence of Mr McLean on this subject. Perhaps it would have required a degree of diligence and/or imagination on the part of the Holliers to either sell the yacht, or to borrow money on the security of the yacht, but they did not do anything along these lines. 301 The Holliers, through Mr Pfeiffer, raised another issue, of more significance. Mr Pfeiffer said that a potential financier to the Holliers in about August or September 1997 would have considered as important the capacity of the Holliers to service any loan that was made to them; and he concluded that it was unlikely that they would have been able to procure a loan of greater than $450,000, by reason of what he took to be their capacity to finance such a loan. 302 That proposition led to an examination of the detail of the financial affairs of the Holliers at about that time. They had arranged for their accountants, Priestley and Morris, to provide them with some profit and cash flow projections, dated 9 May 1997, for the period of 18 months ending on 31 December 1997, and for the financial years ending 30 June 1998 to 2001 inclusive. Mr Pfeiffer took those projections, and used them as the basis for his opinion that the maximum amount that the Holliers would have been able to borrow was about $450,000: a hypothetical financier would not have regarded the Holliers as being able to service a loan for a higher sum. 303 In cross-examination he was asked to deal with the capacity of the Holliers to service a loan during the year ending 30 June 1998. In his written statement, he dealt with the hypothetical situation of the Holliers borrowing $450,000, in additional to their then indebtedness to Colonial of $396,400. In summary, he took from the projected net income an allowance for income tax, assumed (because of a convention of which he spoke) to be at the rate of thirty percent, and deducted appropriate sums for the servicing of the loans, assuming a repayment of principal over a period of 15 years. He then performed a checking operation, deducing that the Holliers would then have some $35,600 per annum left to cover their ordinary living and personal commitments. He regarded that as adequate, and thought that his conclusions justified the view that the Holliers might borrow $450,000, but no more. For this purpose, he assumed, as I have said, an income tax rate of thirty percent, but added back into his calculation of the sum of money which the Holliers would have available for ordinary living expenses the amount which he had hypothetically allowed as being an income tax deduction for depreciation. That is, he treated depreciation as being a legitimate deduction for income tax purposes, but as being irrelevant in terms of assessing the likely cashflow of the Holliers. 304 He was asked to assume that the Holliers discharged their existing indebtedness to Colonial of $396,400, and then borrowed $617,000; and he was then taken through a calculation of the likely financial position of the Holliers, following the same general formula. In substance, he agreed with the calculation that appears at page 3B of Exhibit F11, in respect of the year ending 30 June 1998, subject to correcting the estimated tax figure of about $14,000 (on the same conventional approach, assuming an income tax rate of thirty percent of the assumed net income from the business), and showing a net annual figure available for living and personal commitments of about $48,500 (adjusting for the confusion that arose when the taxation figure of $14,000 was misstated as $16,000: see the transcript, page 1923, lines 50 to 58). 305 Challenged with the proposition that the only commercially sensible thing for the Holliers to have done in September 1997 was to act in this way - using the proceeds of the sale of their house to pay off their existing debts to Colonial, and borrowing $617,000 - he said: "It may have been"; and he agreed that if the Holliers had borrowed $617,000 using the proceeds of the sale of their home, they would have had the sum needed to repay the plaintiff, the sum then asked, less $29,000. At that time, the Holliers had no immediate need of an overdraft facility, but they would have needed one fairly soon thereafter; and then Mr Pfeiffer agreed that they may well have been able to borrow up to $10,000 against their business turnover, and perhaps a further $15,000 on the security of the yacht. 306 On this evidence, the Holliers may have been able to borrow $617,000, although it seems fair to say that they might very well have had a lot of trouble doing so, and perhaps found it impossible to borrow at a reasonable rate of interest. I think that the better view is that they would not have been able to borrow, sensibly, the whole of the $617,000 mentioned. On the other hand, these calculations assume that the yacht would not have been sold, and they leave substantially out of account the possibility that, if the Holliers had approached someone such as one of the lenders contemplated by Mr McLean, they might have been able to do business with a financier on a different basis to that outlined by Mr Pfeiffer. 307 In my judgment the claim for the increased interest loss fails, for want of a causal connection with the conduct of the Maddens, relied upon. It is perhaps easiest to consider the question first, in the context of the claim for damages for negligence, and to restate the circumstances in summary form. The circumstances which led to the Sneddon interests certifying that the Holliers should pay some $667,000, rather than about $450,000, to the Holliers deciding not to pay the plaintiff anything, and to the plaintiff now claiming from the syndicate members (including the Holliers) about $667,000 plus interest, producing a present debt of about $1,000,000, include the following:- (a) The negligence of the Maddens. (b) The conduct of the Sneddon interest in drawing down from the plaintiff, and paying to Cancarra, not just the sums certified by the Maddens, but greater sums. In particular, the Sneddon interests caused to be paid to Cancarra, prematurely, the money that should have been kept in the Retention Fund. But for this overpayment to Cancarra, the Holliers would have had an opportunity to deal with Cancarra from a stronger position than was in fact achieved: once Cancarra had been paid what it asked, it effectively fobbed the Holliers off. Had the Retention Fund been preserved, this may well not have happened. The money drawn down from the plaintiff was thereby increased. The extent of the Holliers' liability to the plaintiff was increased, and the opportunity for the Holliers to deal with Cancarra from a stronger bargaining point of view was lost. (c) The manipulation of events and prices by Mr George Sanders and Ninot. It seems likely that these events resulted in the distortion of the proportions payable by the various syndicate members, for example in relation to the contributions payable by the Holliers in relation to Units 9 and 10, thereby helping to deplete the available funds of the Holliers. I note that Unit 10 was sold in August 1997, at a capital loss, and that the Holliers contributed to the making up of this loss. (d) The Bliss "contra" . I accept the submissions of the Holliers that this was at least one of the factors that resulted in Cancarra needing, in and about August 1997, to justify the payments that had been made to it; and the only obvious "targets" at that time were the Holliers. That is, the sequence of events meant that Cancarra unjustifiably claimed from the Holliers a Variation upwards of about $70,000, when a Variation downwards was appropriate. (e) Notwithstanding the provisions of the Development Deed and the Building Contract, the Holliers and Cancarra had not reached agreement about the price to be paid for Units 1, 2 and 3. In this context - a question about causation - the circumstances can be stated quite neutrally, without enqiring why agreement had not been reached. The fact was that there was no agreement, contrary to the expectation of the parties in June 1996. 308 The precise events that led to the Holliers incurring a liability to the plaintiff was the drawing down of funds by the syndicate from time to time, which funds ultimately had to be repaid pursuant to arrangements made earlier. The Holliers refused to repay the monies asked of them. In part, this response was justified, at least in some sense if not legally, by Mr Hollier's emotional response to the misconduct of others. At that stage, he did not know of all the misconduct. He just believed that he had been duped. 309 The loss with which I am concerned for the moment is the increased liability for interest. Proceeding on the basis that the Maddens were negligent in certifying that progress payments were due, when some of them were not, with the result that the syndicate (including the Holliers) drew down from the plaintiff more than was appropriate, the question arises whether the interest debt incurred in consequence of this, and repayable by the Holliers, is recoverable by the Holliers from the Maddens. If it is not, then, upon ordinary principles, interest under section 94 Supreme Court Act is payable, but that is calculated at a lower rate. 310 The principles relating to causation, so far as they are applicable to the circumstances of this claim, are reasonably well settled, but sometimes difficult to apply. For the purposes of considering this claim, I take the relevant law to be that stated by Mason P in Kavanagh v Akhtar (1998) 45 NSWLR 588 at 597 to 598. In my judgment the concatenation of the circumstances just outlined leads to the conclusion that the loss in question was not caused by the negligence of the Maddens; and I consider that the question is properly characterised as one of causation, rather than of foreseeability, or remoteness, or of failure to mitigate loss, or whether there was some intervening cause. 311 Viewing the question in this way, and approaching it by remembering the scope of the duty of care, owed by the Maddens to the Holliers, it seems to me that as a matter of common sense, it would not be right to say that the liability of the syndicate (including the Holliers) to the plaintiff for interest resulted from the negligence. Instead, it resulted from the collective mass of the circumstances just mentioned operating cumulatively. The Holliers would probably have been able to obtain the necessary funds to pay what was needed to be paid to the plaintiff, to avoid the interest debt now in question, if one or more of a number of things had happened: if they had made more determined efforts earlier, to reach agreement with Cancarra about the price to be paid for their Units; if Mr George Sanders and Ninot had not manipulated events and prices as they did, so as to increase the Holliers' liabilities; if Unit 10 had not been sold at a loss; if Mr Bliss had not arranged the "contra" and/or if the Sneddon interests had kept the retention monies, with the consequence that Cancarra had the need and at the same time the opportunity to make an exorbitant claim upon the Holliers, to justify or purportedly justify the overpayments made to it; if Cancarra had not carried out its work badly, so that it felt obliged to give Stenoak a credit in this regard; if the Holliers had sold their yacht, or if they had made more determined efforts to borrow money, using the yacht as security; if the Holliers had had just a little more capital; or if the Holliers had chosen to pay to the plaintiff as much money as they reasonably had available at that time. 312 I should add a few words about the yacht. I regard it as entirely reasonable, from the point of view of the Holliers, that they did not want to sell it. Apart from any other consideration, it had taken Mr Hollier 11 years to build it. To sell it, in the circumstances in which the Holliers found themselves in about August or September 1997, would have been a wholly unattractive proposition. But that is not the correct question. Rather, one must examine what is reasonable as between the Holliers and the Maddens in the context of the negligence under consideration: Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 11 and 13. 313 The syndicate (including the Holliers) would not have incurred the interest liability in question without the negligence of the Maddens, but of course this is not the critical question. 314 As to the claim for damages for misleading or deceptive conduct, I conclude that the interest loss in question was not sustained "by" the conduct in question. The reasoning is relevantly indistinguishable. As to the claim in contract, the loss cannot be said to have arisen naturally, according to the usual course of things, nor can it reasonably be supposed to have been in the contemplation of Madden Associates and the syndicate (including the Holliers) at the time of the making of the contract of retainer, as the probable consequence of the breach of contract, but in addition, the consequences of the breach of Madden Associates were overwhelmed by the other causes of the loss, mentioned above. 315 In summary, the damages recoverable by the Holliers from the Maddens will be limited to the total of the sums collected at [274] above, together with interest under section 94 of the Supreme Court Act. The Issues Between the Holliers and the General Defendants 316 I invite submissions from these two groups of defendants, but as I see matters at the moment, the general defendants paid the amounts certified as being payable by them, and the Maddens did not; the contractual arrangements between these two groups of defendants appear to mean that that is the end of the matter; and that has the consequence that the Holliers must indemnify the general defendants for the whole of the liability of the general defendants to the plaintiff. 317 However, I invite further submissions, consistently with the pleadings, the conduct of the trial, and the above findings. It may be that some adjustment is appropriate. Conclusion 318 I will adjourn the case for a short time to enable the parties to consider these reasons. I direct the plaintiff to provide to each of the other parties three working days before the matter is next listed, a draft set of Short Minutes of Order giving effect to these reasons. I direct the Holliers to complete that draft, so far as concerns the position between the Holliers and the Maddens, and the position as between the Holliers and the general defendants, and to circulate that amended draft to all other parties, at least 24 hours before the matter is next re-listed. 319 I invite submissions as to costs. ********** Last Modified: 09/27/2001 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.