Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Jacfun Pty Limited v Sydney Harbour Foreshore Authority [2012] NSWCA 218 Hearing dates: 14 and 15 May 2012 Decision date: 25 July 2012 Before: Allsop P at [1] Macfarlan JA at [71] Barrett JA at [72] Decision: 1. Appeal allowed. 2. Set aside the orders of the Supreme Court made 8 March 2011 and, in lieu thereof, order: a) judgment for the plaintiff for $1.25m; and b) the defendant pay the plaintiff's costs. 3. The respondent pay the appellant's costs of the appeal. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: TRADE PRACTICES - misleading or deceptive conduct - proposed redevelopment of Darling Walk site - negotiations between appellant tenant and respondent landlord over possible surrender of lease - discussions about types of redevelopment to be allowed and possibility of rezoning - landlord's negotiator tasked with lowering expectations - representation by landlord that it did not foresee office development being permitted and that best possible future development would be a low-rise hotel - effect of representation on decision to surrender lease and price of surrender - lowering of expectations and loss of chance to negotiate higher price for surrender of lease Legislation Cited: Evidence Act 1995 (NSW) Fair Trading Act 1987 (NSW) Cases Cited: Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200 Barnes v Hay (1988) 12 NSWLR 337 Chappel v Hart [1998] HCA 55; 195 CLR 232 Environmental Agency v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 Gould v Vaggelas [1985] HCA 85; 157 CLR 215 Henville v Walker [2001] HCA 52; 206 CLR 459 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109 Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 Milner v Delita Pty Ltd (1985) 61 ALR 557 Parramatta City Council v Hale (1982) 47 LGRA 319 Ricochet Pty Ltd v Equity Trustees Executors & Agency Co Ltd (1993) 41 FCR 229 Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332 Tefbao Pty Ltd v Stannic Securities Pty Ltd (1993) 118 ALR 565 Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514 Category: Principal judgment Parties: Jacfun Pty Limited (Appellant) Sydney Harbour Foreshore Authority (Respondent) Representation: Counsel: Mr B Walker SC, Mr M A Jones SC (Appellant) Mr C R C Newlinds SC, Mr J Baird (Respondent) Solicitors: Landerer & Company (Appellant) Clayton Utz (Respondent) File Number(s): 2009/298650 Decision under appeal Citation: Jacfun Pty Limited v Sydney Harbour Foreshore Authority [2011] NSWSC 119 Date of Decision: 2011-03-08 00:00:00 Before: Ball J File Number(s): 2009/298650 Judgment 1ALLSOP P: This is an appeal from the dismissal by a judge of the Equity Division of proceedings brought by Jacfun Pty Ltd ("Jacfun") against the Sydney Harbour Foreshore Authority ("SHFA") in which Jacfun complained of misleading or deceptive conduct by SHFA in contravention of the Fair Trading Act 1987 (NSW), s 42, in connection with Jacfun's surrender of a long term lease from SHFA of land at Darling Harbour. 2Subject to questions of relief, the appeal principally concerns factual matters. For the reasons that follow, I respectfully disagree with the conclusions of the primary judge about liability for misleading or deceptive conduct. The result flowing therefrom is that the measure of the statutory remedy for the loss or damage by the conduct is the lost opportunity to negotiate a higher price for surrender of the lease to SHFA unaffected by the misleading conduct. In my view the value of that lost opportunity is $1.25m. 3The background and context of the dispute can be seen in [2]-[9] of the primary judge's reasons, as follows: "[2]SHFA is a statutory corporation established by the Sydney Harbour Foreshore Authority Act 1998 (SHFAA). It was created to manage the harbour foreshore area, including Darling Harbour. The management of its day-to-day activities are the responsibility of a chief executive officer (see SHFAA, s 30) who, during the relevant time, was Mr Greg Robinson. It also has a board which is responsible for overseeing the activities of the Authority. The Board consists of the CEO, the Director-General of the Department of Urban Affairs and Planning, who at the time was Ms Sue Holliday, and up to 5 other persons, including a chairperson, who were appointed by the relevant Minister: SHFAA s 29. One of the members appointed by the Minister was Mr Frank Sartor, who at the time was Lord Mayor. The chairperson of the board was Mr Gerry Gleeson, a well known and respected public servant. SHFA was and remains subject to the 'control and direction' of the relevant Minister: SHFAA s 28. Section 17(1) of the SHFAA permits SHFA to acquire land by agreement or by compulsory process in accordance with the Land Acquisition (Just Terms Compensation) Act 1991. [3]The Darling Harbour Development Plan No 1 1985, which was made under the (now repealed) Darling Harbour Authority Act 1984, required development approval for commercial development at the Darling Walk site. Under the 2002 version of the Environmental Planning and Assessment Act 1979 (EPAA), the Minister for Planning was the consent authority for development approval for the Darling Harbour area: EPAA, Sch 6, cl 22(1). Only SHFA, or a person with its written consent, could apply for development approval in relation to land under its control: Environmental Planning and Assessment Regulations 2000 (NSW), reg 49(1) (historical version as at 6/9/02). [4]The lease of the Darling Walk site to Jacfun commenced on 22 March 1997. It was for an initial term of 41 years, with two options to renew of 26 years each. Clause 4.3 of the lease provided: 4.3 Permitted Use (a) During the Term the Demised Premises shall be used as an Entertainment Complex and for any other purposes referred to in the Lessee's Proposal. (b) The Lessee will not, during the Term, permit any noxious, immoral, offensive or illegal act, trade, business occupation or calling at any time during the Term to be exercised, carried on, permitted or suffered in or upon the Demised Premises. [5]The document referred to as the 'Lessee's Proposal' was not in evidence. The case proceeded on the basis that that document did not permit use of the Darling Walk site for commercial office space or for use as a hotel. [6]The lease required Jacfun to pay rent calculated by reference to the income it received from the premises. It also set a minimum rent which was payable each year. Jacfun was entitled to assign the lease but, in that event, cl 6.7 gave SHFA a first right of refusal. [7]Jacfun subleased the premises. Initially, the principal subtenant was SEGA Enterprises (Australia) Pty Limited (SEA) which operated an entertainment complex known as 'SEGA World'. The balance of the subtenancies were for a mixture of retail and entertainment uses. [8]In 1999, SEGA Enterprises of Japan, SEA's parent, transferred its shares in SEA to interests associated with Jacfun in return for $36,810,769. A proportion of that amount was used to pay Jacfun's external debt, with the result that Jacfun was from that time funded entirely by its shareholders. [9]The SEGA World concept was not a success and, after the end of the Sydney Olympics, it was closed. Following the closure of SEGA World, Jacfun began exploring how it might derive value from its lease. It regarded the issue as pressing, since by then the leased premises were approximately 75 percent vacant and Jacfun was incurring significant losses." 4The sum referred to in [8] of the reasons was a payment by the Japanese parent to Jacfun as the price of the surrender of the lease. 5The consideration of, and work by, both Jacfun and SHFA on redevelopment of Darling Walk from October 2000 to June 2002 was described by the primary judge at [10]-[16] of his reasons as follows: "[10]In October 2000, Jacfun commenced work on concept plans for the redevelopment of Darling Walk. It engaged the Hayson Group of Companies and, in particular, Mr Ian Hayson to assist it in that task. At about the same time, SHFA decided that it would prepare a Master Plan for Darling Harbour. That plan became known as the Darling Harbour 2010 Master Plan. Both parties recognised that the original concept for Darling Walk was flawed. Part of the problem was that the site could not attract people during the week. In addition, as Mr Ronald Dyne, Jacfun's general manager, was to record a year later following a meeting with representatives of SHFA on 19 November 2001: [I]t has been proven through the demise of Sega World, Luna Park and Fox Studios that Sydney cannot support any major destination entertainment businesses. [11]Mr Hayson recommended that the solution to these difficulties was to redevelop the Darling Walk site for use as commercial offices as well as for entertainment and retail and, during the period from October 2000 to August 2001, Jacfun put forward to SHFA a number of proposals which involved redeveloping the site in that way. Each of those proposals was rejected by SHFA. [12]On 27 July 2001, SHFA wrote to Jacfun saying that Jacfun should not do any further work on a proposed redevelopment until the Darling Harbour 2010 Master Plan was complete, which was expected to take 6 to 9 months and, at a board meeting of SHFA on 13 September 2001, the board delegated to Mr Robinson authority 'to negotiate the purchase of the site from Jacfun at an acceptable value'. It appears that the board thought at that time that that would enable SHFA to redevelop the site to include residential accommodation. Although the timing is not clear from the evidence, it appears that, shortly after the SHFA board meeting, Mr Robinson met with Mr Hayson and raised the possibility of SHFA buying out Jacfun's lease for an amount of $15 million. Mr Robinson also told Mr Hayson that SHFA proposed to appoint Mr Max Bowen, who had extensive experience in the property development industry, to conduct negotiations with Jacfun concerning the surrender of its lease. [13]Mr Hayson had several discussions with Mr Bowen concerning a buyout during which he indicated that a price in the order of $20 million would be acceptable to Jacfun. However, negotiations to buy out the lease soon stalled and, on 5 November 2001, Mr Bowen told Mr Dyne that SHFA was no longer interested in a buyout. Instead, Mr Bowen proposed that SHFA and Jacfun enter into some form of cooperative arrangement under which SHFA would seek to change the use that could be made of the site and would share in the resulting increase in value. A few days later, on 8 November 2001, Mr Robinson confirmed in a letter to Mr John Leece, one of Jacfun's directors, that SHFA was no longer interested in a buyout. In that letter Mr Robinson said: It appears that your view of the value of your leasehold stake is significantly greater than that which we could justify, particularly from a Government process point of view, and as such we are not in a position to negotiate further. [14]During the first half of 2002, the parties discussed proposals to redevelop the Darling Walk site. During that time, SHFA took active steps to progress that part of the Darling Harbour 2010 Master Plan concerned with the Darling Walk site. It appointed Cox Richardson, architects, and other consultants to progress those plans. Representatives of SHFA and Jacfun met regularly together and with Cox Richardson to discuss various options. The option preferred by both the management of SHFA and by Jacfun was one that involved three towers, one of which would accommodate a hotel and the remaining two of which would accommodate commercial office space. During one of the meetings, it was also suggested that the then proposed cross city tunnel ventilation shaft could be included in one of the office towers and that that may make the proposal more attractive to government. [15]During this period, Jacfun largely put on hold attempts to sublease space in Darling Walk in the expectation that a redevelopment plan would be agreed. [16]On 19 June 2002, there was a board meeting of SHFA. At that meeting, both Mr Sartor and Ms Holliday expressed concern about the preferred option and, in particular, the height of the proposed office buildings. The board resolved: As the majority of Members considered that a higher stack for the Cross City Tunnel is preferable, a number of options should be considered and referred to the Minister for consideration. These options are to include the Darling Walk re-development ... If a tower building is to be constructed as part of the Darling Walk re-development, consideration should be given to locating the building out of the Darling Harbour precinct and across the envelope separating Darling Harbour from the city. Shortly afterwards, SHFA terminated the consultants it had engaged to work on the proposed redevelopment." 6The above minutes of the SHFA should be understood against the background that the Chairman of the Board, Mr Gerry Gleeson, and senior management were in favour of the proposed development of three nine-storey towers. Considerable time and effort had been invested by SHFA, and Jacfun, in the proposal. The opposition at the board meeting was principally from Ms Sue Holliday from the Department and the then Lord Mayor, the Hon Frank Sartor. The minutes contained the following record of discussion (Blue appeal book, vol 3, 1161-2): "An option for the re-development of Darling Walk, which involves the construction of three buildings with the inclusion of the Cross City Tunnel emission stack into the tallest building, was presented to the Board by Mr John Ballantyne, Ms Di Talty and the CEO. Comments following the presentation were: At the request of Planning NSW a sub-precinct Master Plan is being developed for the Darling Walk area and the Government Architect will be involved in the development of this plan. Ms Holliday indicated that Bovis/Lend Lease would be willing to consider having the emission stack included in Tower 3 at Darling Park. It may be necessary to approve a slight increase in the height of the building to accommodate the stack. Ms Holliday advised that there are planning concerns about constructing tall buildings at the edge of the city. It was agreed that the difficulties being experienced by Sega World and the situation with Jacfun must be addressed. The Lord Mayor expressed concern that there could be considerable opposition to the option presented to the Board and that all alternatives to address the situation with Jacfun should be considered. It was suggested that the alternatives of including the emission stack in tallest building in the option presented to the Board or including the stack in the Bovis/Lend Lease building, should be more closely examined. In the meantime a temporary stack could be constructed." 7The events following June 2002 are crucial to the assessment of whether SHFA misled Jacfun. Before turning to them, it is appropriate to say something of Jacfun's commercial position and attitude as at mid-2002. These matters are not only relevant to the consideration of the context of the impugned conduct, but also to the question of the appropriate relief to grant. The central problem facing Jacfun was encapsulated in a letter written by one of Jacfun's directors, Mr Leece, to Mr Robinson, the CEO of SHFA, on 22 March 2001 (Blue appeal book, vol 2, 852-853): "Seven years of experience and approximately $70 million of expenditure (excluding Sega's substantial operating losses) have proven to Jacfun that entertainment-related uses of the type envisaged under the current land lease will not deliver a sustained economic return on the first floor of this property. It is therefore the intention of Jacfun to lodge a Development Application with DUAP to convert the space vacated by Sega to approximately 11,000 square metres of A-grade office space and to enlarge the existing carpark to a multi-deck 150-car carpark to service the project. Except for the carpark, the proposed works would be generally within the existing building envelope." 8The site was not commercially economic without changes to permitted use. The budget deficit for Jacfun for 2003 for the premises was $1.6m as estimated in July 2002. 9A summary of the negotiations in 2001 was contained in a report to the board of Jacfun for a meeting in July 2002, as follows (Blue appeal book, vol 3, 1173-1174): "In October 2001, SHFA advised that they had an interest in acquiring the site from Jacfun and in response we submitted a letter to Greg Robinson on 30th October 2001. As a result of these discussions SHFA appointed Max Bowen, an independent consultant, to review the matter. A negative response was received from SHFA on 8th November 2001 stating that they consider the value Jacfun places on its leasehold interest to be greater than what they could justify. Copies of correspondence are enclosed in Annexure A2 and A3. We met with Max Bowen in November and he advised that, contrary to previous indications, SHFA do not have an interest in acquiring Darling Walk as they see too many problems for a government authority such as negative income and sitting tenants. Their current position is that they have an asset generating ground rent to them of approx $1.7 million a year. If they bought the site this would convert to a negative cash flow, which would be hard for them to justify. They also believe that if our offer of $10 million for a revised lease with new zoning and bulk was submitted to their board it would be rejected as it gives nothing to the Authority for the increased rights. It merely puts them back into the same position. Bowen's solution was then the 'joint co-operative effort' to convert the rights and increase bulk on the site and share the increased value." 10The views of the SHFA board meeting were given to Jacfun in discussions in July. The primary judge dealt with this at [17]-[18] of his reasons, as follows: "[17]On 4 July 2002, Mr Bowen and Ms Di Talty, Director Major Projects with SHFA, met with Mr Dyne to inform him of the board's position. Mr Dyne's file note of that meeting records in part: They advised that the proposed plan for the Darling Walk development had met with some resistance at the SHFA board meeting. Most vocal opponents were Frank Sartor and Sue Holliday, Director of Planning NSW. Sartor, supported by Holliday, objected to the height and scale of the development and as a result the board adopted the conservative approach that they should wait to see the results of the Master Plan 2010 before proceeding with any development at Darling Walk. It was stated that consideration should be given to a low-rise development and uses should be determined after completion of Master Plan 2010. Master Plan 2010 is the new plan that SHFA is developing for the entire Darling Harbour precinct. It is a detailed study of what is needed in Darling Harbour for the future. The problem that this presents is that this master plan is expected to be completed in September 2003 and SHFA is no longer able to fast track the Darling Walk development as originally stated. The delay is at least 12 months. They also cannot be sure that they can deliver the minimum area of 55,000 square metres as set out in the proposed deed with Jacfun. The SHFA executives expressed regret for their board's position. ... Jacfun asked for a rent reduction, but that was refused. Mr Dyne reported what he was told by Mr Bowen and Ms Talty to the directors of Jacfun in an email he sent to them on the day of the meeting. [18]According to a file note prepared by Mr Dyne, Mr Robinson also met with Mr Hayson on 18 July 2002 to explain SHFA's position. That note records Mr Robinson as saying: 1There was strong opposition by the external board members to a large-scale development. 2 Expressed bitter regrets that the board had not approved the plan. 3 If it was up to him and Gerry Gleeson, the plan would have been approved. 4 Goodwill exists between SHFA executives and Jacfun. 5 SHFA should buy the site from Jacfun but they could not meet the price expectations put forward by Jacfun in 2001. 6 Wants Max Bowen to negotiate a deal with us in the range of $9 to $10 million." 11The balance of the note of the meeting between Mr Bowen, Ms Talty and Mr Dyne on 4 July 2002 was as follows (Blue appeal book, vol 3, 1173): "The SHFA executives expressed regret for their board's position and confirmed that the commercial terms of the deal has [sic] been agreed in January by the board. However, due to the above the deed cannot be signed. They have terminated the services of architects and other consultants who had been engaged on the planning. As a result of the difficult situation that Jacfun is now placed in, I asked if the SHFA board would consider a temporary rent reduction. The response was that they had tried this for us in the past but the policy of the board is no rent reductions for anyone as they do not wish to set any precedent. I then stated that we may need some relaxation of the use clause to allow us to enter into lease agreements for the vacant space to enable us to minimise the deficit. The response to this was positive. I discussed the nightclub and the factory outlet store and they agreed to consider these uses when I put forward a proposal. Consideration needs to be given to a formal response to SHFA. Please refer to draft letter marked Annexure A1." 12The draft letter being annexure A1 that was provided to the board was in strong terms - and that reflected Jacfun's frustration with the position, as follows (Blue appeal book, vol 3, 1183-1184): "Jacfun has acted in good faith throughout its dealing with the Darling Harbour Authority and the Sydney Harbour Foreshore Authority. It is therefore with deep regret that we write this letter, but we believe that we have made almost every effort possible to communicate with the management of the Authority at all times in an effort to address the issues of the Darling Walk site since the demise of Sega World. We now find ourselves with yet another rejection from the board of directors of SHFA despite management's indication that the board had approved the commercial terms which were then encapsulated in the Site Proposal Deed. We had also been advised by SHFA executives that a Development Application for Darling Walk could be submitted prior to completion of the Darling Harbour 2010 Master Plan. During the time we have been involved with the Authority we have continued to be disappointed and dismayed at the various decisions, or lack thereof, that have been made by the Authority that have been nothing short of disconcerting and sometimes damaging to the business of Jacfun. Following the recent refusal by the board of the Authority to progress applications or even discussions we still find ourselves in this position. Following approval of the terms of the joint cooperation, SHFA executives engaged architects to develop plans and Jacfun participated in a consultative role. We purposely did not actively seek to relet the vacant Sega World space and encouraged other tenants to vacate the site or reduce the term of their tenure so that a development could proceed in the future. We are now of the conclusion, having been extremely patient, that the Authority may in fact be operating in bad faith in an effort to curtail the efforts of Jacfun with the intention of damaging Jacfun's interests further. We believe we have sufficient evidence of this activity to support a challenge to the latest decision by the board rejecting the joint venture development proposal without making adequate recommendations as to changes or modifications to this endeavour. ... We believe that the Authority has acted irresponsibly and without appropriate consideration as to the losses being incurred by Jacfun and it continues to do so. We have made numerous requests to rectify this fundamental valuation problem with all efforts being made in vain. The Authority has consistently rejected our attempts to address this issue by delaying decisions and not facing the hard facts related to the problems associated with Darling Walk. Jacfun has operated its business in good faith at all times and continues to do so despite the difficulties associated with this property. We are making this one final request of the board of the SHFA to seriously consider Jacfun's historical requests and to provide immediate attention to the issue by providing a clear and reasonable direction, timetable and suitable financial relief such that Darling Walk can become a performance property in accordance with the original vision making it an asset and no longer a liability for Darling Harbour." 13The submissions by the appellant stressed that what was rejected by the Board of SHFA was a particular development of three nine-storey office buildings. 14The primary judge at [19] of his reasons describes further meetings in late July 2002 as follows: "[19]Subsequently, discussions took place between Messrs Hayson and Bowen. Mr Hayson reported back to Mr Dyne the results of those discussions. Mr Dyne set out what he was told in an email dated 1 August 2002 to members of the Jacfun board. The email relevantly says: The SHFA board decided that they [sic: there] would be no large scale development on the Darling Walk site in the foreseeable future and the status quo would remain until the Darling Harbour Master Plan 2010 is completed. However the CEO, Greg Robinson, believes that because of the current situation at this end of Darling Harbour and the additional disruptions that will be caused by the construction of the Cross City Tunnel he can convince the board to buy the site. They cannot justify a valuation for the site and the purchase would result in a negative cash flow to SHFA but he believes they should purchase to be able to control their own destiny. ... They are not trying to con us into selling out and at best they see a hotel development with retail but no offices. They acknowledge that Greg Robinson mentioned a figure of $15 million last year but thereafter they were not able to justify that price. That is why they then put forward the joint venture proposal. Max believes that $8 million is 'appropriate and generous' ... Mr Hayson's only recollection of the conversation is that he was told that the SHFA board was against large scale development." 15No complaint was made about what was said to Mr Dyne as reported by him to the Jacfun board on 1 August. Two matters should be noted about what Mr Bowen had said: first, that the decision of the board was that there would be "no large scale development on the ... site in the foreseeable future" (emphasis added); and, secondly, that the status quo would remain up to the completion of the Master Plan. Thus, the position was "on hold" for at least 13-14 months until the Master Plan came out, if it was ready by earlier estimates of September 2003. 16The recommendations of Mr Dyne at this time, 1 August 2002, were contained in the balance of that email to the Jacfun board, as follows (Blue appeal book, vol 3, 1191): "My recommendations: We should not meet with Max Bowen at this time. I have progressed negotiations with three parties for leasing the vacant Sega World space and if successful could generate additional annual income of $3 million. We are also working on proposals for vacant space on the ground floor. I hope to present these opportunities to the board in the next two weeks. If we are successful in reletting the space it would eliminate the cash burn and substantiate a meaningful valuation for the site. I would then consider meeting Max. I will be meeting with real estate agents to initiate a marketing campaign for expressions of interest for lease and/or purchase. If a purchaser is found it would put pressure back onto SHFA as they have a right of first refusal." 17One can infer from these recommendations that sale to SHFA, with an improved bargaining position, was Mr Dyne's preferred option. 18The primary judge at [20]-[22] of his reasons described what then occurred up to the time of the meeting in question on 11 October 2002, as follows: "[20]Following these meetings, Jacfun received a number of enquiries about selling the site. It appointed Laing & Simmons and Colliers International to develop a marketing strategy. Laing & Simmons expressed the view in a marketing report that the current market sales potential of the lease was in the range of $13 million to $16 million. It also advised Jacfun that the 'investment value' of the lease was $12,100,000 'fully leased'. Colliers International expressed the view in a similar report that the 'realistic sale price range for Darling Walk is $14 million to $20 million'. Its estimate of the investment value fully leased was $13,500,000. The reason for the difference between market value and investment value was not explained in the evidence; and the reports themselves were not admitted as evidence of value. SHFA also obtained a confidential valuation report from Handley Paris & Partners. That report estimated that the commercial value of the lease was $0 and that the estimated compulsory acquisition value was $12,000,000 to $16,000,000 (on the basis that the lease was worth $2,000,000 to $4,000,000 and the buildings were worth $10,000,000 to $12,000,000). The report recommended an 'acquisition range' of $7,750,000 to $12,000,000. [21]At the same time that Jacfun was investigating the sale of its lease it also once again started actively to seek tenants. [22]On 10 October 2002, Mr Dyne and Mr Hayson met with Mr Bowen. Mr Dyne made a handwritten file note of that meeting which records: $10m to emotionally control the site. Compulsory acqu. In his affidavit, Mr Dyne says that he recalls Mr Bowen saying words to the effect of: SHFA is prepared to pay $10 million to emotionally control the site. If you do not agree to sell then it will consider compulsory acquisition. Neither Mr Hayson nor Mr Bowen had a practice of keeping file notes and neither gave evidence about the meeting. No explanation was given of what precisely was meant by the expression 'emotionally control the site'." The various reports referred to in [20] were not admitted as evidence of the value of the site. 19The evidence reveals that Jacfun received a number of enquiries regarding a possible sale of the site. 20On or about 19 September 2002, Mr Dyne prepared a document entitled "Darling Walk Update on Affairs". The document recorded that Jacfun had decided to seek advice as to a marketing strategy and then meet Mr Bowen to discuss SHFA's purchase of Darling Walk. It set out the results of the Lang & Simmons and Colliers International reports. Reference was also made to dealing with Grocon as an apparently interested purchaser. The document included the following paragraph (Blue appeal book, vol 3, 1311): "Max Bowen has requested a meeting to discuss their proposal. We should meet with him and show him the valuations from the agents with a view to indicating to him that we would accept an offer from him within the range of values, failing which the property will be put on the market for sale. SHFA may decide to not commit to an offer but wait to see the results of the public tender and then exercise their right of first refusal." From the document as a whole, and this paragraph in particular, it can be inferred either that the view of Mr Dyne was that the lease should be sold, or that he assumed that a sale was desired by the board. 21A meeting then took place between Mr Dyne and Mr Bowen. What Mr Bowen said is impugned as the misleading or deceptive conduct. The primary judge dealt with the matter in [23] of his reasons, as follows: "There was a further meeting between Mr Dyne and Mr Bowen on 11 October 2002. Mr Dyne made a typewritten file note of that meeting. It is not clear when that file note was prepared. However, it was prepared no later than 16 October 2002. The file note records the following: Met with Max Bowen on Friday 11th October 2002 for an 'off the record' discussion. I advised that Jacfun was extremely dissatisfied at the way SHFA had dealt with us over the years. Bowen advised that SHFA wish to gain full control of the Darling Walk site to be in a position to control its destiny. But this would not be at the expense of Jacfun. They do not foresee an office development ever being permitted and at best the only additional rights could be a low-rise hotel. They may consider some negotiation with RTA on the smoke stack for the Cross City Tunnel. Bowen stated that he had consulted a valuer who had determined that Jacfun's interest in the site was worthless. However, to get control SHFA is willing to pay $10,000,000 to Jacfun. This would be the maximum. SHFA is also considering a Compulsory Purchase of the site which Bowen maintains they are entitled to do. In this event the value would be determined by the Valuer General. Bowen believes there is a 'window of opportunity' for Jacfun to do a deal with SHFA. I stated that I would not submit any proposal to the Jacfun board unless it contained a clause allowing for additional payments to Jacfun in the event that additional value was created post sale by changing zoning. Bowen agreed to this. It is the conversation recorded in this note that is said to amount to misleading and deceptive conduct on the part of SHFA." 22What occurred thereafter was succinctly stated by the primary judge at [24]-[26] of his reasons, as follows: "[24]There was a further conversation between Mr Dyne and Mr Bowen on 15 October 2002. Mr Dyne's note of that conversation records that Mr Bowen indicated that the price of $10 million was acceptable subject to due diligence in relation to any tenants' claims and that SHFA would negotiate an additional payment to Jacfun in the event of changes to zoning of the site in the future - described in the note as a 'kicker'. [25]Mr Dyne repeated the contents of his file note of the 11 October 2002 meeting in his report to the Jacfun board in a note he circulated on 16 October 2002. The board met on 17 October 2002. The meeting was attended by Mr John Landerer, Mr John Leece, Mr Kevin Bermeister and Mr Bruce Fink. The board agreed in principle to accept Mr Dyne's recommendation that Jacfun should accept SHFA's proposal to buy out Jacfun's lease. However, it was agreed that Jacfun should try to get a higher price. Each of Mr Landerer, Mr Leece and Mr Bermeister gave evidence. Each said they relied on Mr Dyne's report of his conversation with Mr Bowen on 11 October 2002 and, in particular, the statement that SHFA did not foresee an office development ever being permitted in reaching that conclusion. Each also said he took other matters into account, including the threat of compulsory acquisition and the fact that SHFA may have been able to frustrate a sale through the first right of refusal. Each of the directors and Mr Dyne was cross-examined on what he understood was the effect of what Mr Bowen had said at the meeting on 11 October 2002. Mr Dyne said that he understood Mr Bowen to be saying that 'there would be no office development in the foreseeable future', which he took to mean the next 10 to 20 years. Mr Landerer thought that he was being told that no office development would ever be permitted. Mr Leece thought that he was being told that SHFA did not foresee an office development ever being permitted until such time as the Darling Harbour 2010 Master Plan was available. Mr Bermeister thought that he was being told that SHFA did not foresee an office development being permitted until the expiry of the initial term of the lease - that is, for 35 years. [26]Following Jacfun's board meeting, there were extensive negotiations concerning the terms of the buyout. Jacfun was unsuccessful in negotiating an increase in the price. It originally sought a 'kicker' that extended for a period of 10 years. That, however, was resisted by SHFA. The surrender of lease was finally signed on 3 March 2003. Under the terms of the deed of surrender SHFA paid Jacfun approximately $10 million. Clause 7.1 of the deed relevantly provided: If, at any time up to and including 1 July 2008, the Landlord Disposes of the Premises to realise a Net Disposal Price in excess of $40,000,000 (excluding GST) then any excess above $40,000,000 (excluding GST) is to be shared equally by the Landlord and the Tenant. Jacfun regarded this term as the best it could negotiate in the circumstances." Consideration of the primary judge's approach to whether the conduct was misleading or deceptive 23In order to assess whether what Mr Bowen said to Mr Dyne was misleading or deceptive, the primary judge commenced with an assessment of what the true position was, since, he said, "...it is by reference to that that the question whether the statements said to have been made by Mr Bowen were misleading or deceptive is to be determined": [29] of his Honour's reasons. In [30] of his reasons the primary judge put the matter thus: "As at 11 October 2002, the true position was itself open to some interpretation. The management of SHFA, including its CEO, and indeed its chairperson, Mr Gleeson, were in favour of a high rise commercial office development. They appeared to recognise that the original concept for the site was flawed and that the use to which it was put would have to change in order to make the site successful and, perhaps, even viable. Moreover, SHFA was having discussions with the Roads & Traffic Authority about the location of a ventilation stack for the cross city tunnel and one of the possibilities that was being discussed at the time - although it was ultimately rejected by the government - was to locate the stack within a high rise building. Despite these considerations, it was clear that two members of the board were opposed to a high rise office development and they wanted to wait for the 2010 Master Plan, which was expected to take some time to complete. Their views prevailed at the meeting on 19 June 2002. As a result, SHFA terminated the consultants it had engaged to work on the proposed redevelopment. What did all this mean for the prospects of a commercial development as at 11 October 2002? Mr Bowen in his affidavit said: My state of mind at the time was that I thought there may well be an office development on the site, but probably not in the next few years. I knew that [SHFA] was working on developing a master plan for the site (but I was not aware what that final plan was), but I had no reason to think that it would not include office developments. SHFA called no other evidence concerning its intentions as at 11 October 2002. In those circumstances, Mr Bowen's views should be taken as an accurate statement of the position." 24No attack was made on these findings. I interpolate that their importance is that Mr Bowen apparently thought that there may be office development on the site, but not in the next few years, and that the Master Plan that was being worked on could well contain office development. The primary judge concluded in the final paragraph of the above that Mr Bowen's views represented SHFA's intention. 25After referring to legal principles in an uncontroversial way, the primary judge noted that normally it is necessary to determine in an enquiry of this character what words were spoken and then to ask whether those words were, having regard to all the relevant circumstances, misleading or deceptive: see [31] of his Honour's reasons and the authorities there cited. His Honour found artificiality in that approach here, saying at [31]: "... Mr Bowen has no recollection of the conversation on 11 October 2002. Although Mr Dyne, on occasions, said that he could recall the conversations about which he gave evidence, he conceded, when pressed, that he could not recall the words used and that his evidence of what was said was a reconstruction from his file notes. In particular, in relation to the conversation on 11 October 2002, Mr Dyne conceded that his note of the meeting did not set out the precise words used and that it was just as likely that Mr Bowen said that there was no likelihood of an office development in the foreseeable future rather than (as his note records) 'ever'. There is nothing surprising in this given that the relevant conversations occurred over 8 years ago. The best evidence of what was said, then, is what is set out in Mr Dyne's file note construed against the context in which it was written and taking into account the fact that the file note itself does not set out the actual words used. The techniques used to identify the words spoken, then, are the same as the techniques used to identify the meaning they conveyed. In those circumstances, there seems little point in this case in trying to separate the two tasks." 26Some criticism was made of the judicial technique employed in this paragraph. With respect, that criticism exhibited a degree of formalism concerning the process of fact finding. His Honour's conclusions as to what was said and its effect are tolerably clear; and, with respect to the word "ever", made more so in succeeding paragraphs. 27At [32] of his reasons, the primary judge noted how the matter had been pleaded - that the representations conveyed by Mr Bowen were as follows: "(a)It was not reasonably foreseeable that any office development would ever be permitted by the defendant on the Darling Walk site; (b) At best, the only foreseeable additional development on the Darling Walk site that the defendant would permit would be a low-rise hotel." 28His Honour indicated at [33] of his reasons that there was no real dispute about the second of the representations. He did not, however, express any view whether that had an effect on the first. Some emphasis was placed on this in submissions by the appellant. Its submissions in that regard have some force, to which I will return. It is sufficient to note that if Mr Bowen said that the only foreseeable additional development on the site that SHFA would permit was a low rise hotel, that appeared to have the corollary that no other foreseeable development (including any office development) would be permitted by SHFA. 29The case put by Jacfun was described by the primary judge at [33] of his reasons, as follows: "... Jacfun says that that representation is supported by Mr Dyne's file note and the evidence given by Mr Dyne. On the other hand, it says Mr Bowen could not deny that he made the representation, although he gave reasons in his affidavit for thinking that he did not make it. Moreover, Jacfun submits that the representation is consistent with the position taken by SHFA that the lease was worthless. Mr Bowen accepted in cross-examination that the lease was only worthless if there was no reasonable possibility of redevelopment being permitted. Consequently, when he told Jacfun that the lease was worthless, he was impliedly asserting that no redevelopment would be permitted. It is not surprising that he made express what was already implied in what he said. According to Jacfun, it is not necessary to identify the precise meaning conveyed by what Mr Bowen said. The important point is that it conveyed that there was no reasonable possibility of an office tower being permitted in the foreseeable future (the use of the word 'ever', if it was used, adding emphasis to this proposition) whereas the fact was that there was a reasonable possibility of that happening." (emphasis added) 30Thus, Jacfun's submissions did not seek to use the word "ever" literally; rather they sought to employ it by way of emphasis as to meaning "in the foreseeable future". In this way it dove-tailed with the second representation ((b) at [27] above). There was some debate on appeal whether Jacfun was seeking to propound a case different to that expressed at [33] of the primary judge's reasons. Any such suggestion was abjured by Jacfun. 31The primary judge rejected these submissions. His view was expressed at [34] of his reasons, the correctness of which (and of his Honour's substantiating reasoning) lay at the heart of the appeal: "I do not accept Jacfun's submission. In my opinion, Mr Dyne's file note of the 11 October 2002 meeting accurately records the substance of what was conveyed by Mr Bowen subject to one qualification. The qualification is that, whatever words were actually used by Mr Bowen, in the context, they conveyed an impression that, as things stood, there was no reasonable possibility of a large scale office development. They did not convey an impression that the position could not change in the future if circumstances changed. I say that for several reasons." 32Before turning to his Honour's reasoning it is useful to encapsulate Jacfun's submissions on appeal. If I may say so, not intending disrespect to counsel, the written submissions had a degree of over-refinement, almost complexity, that was unnecessary for the clear encapsulation of the complaint. The essence of the complaint was that the primary judge failed to find in accordance with a substantially contemporaneous note (which his Honour found in [31] was the best evidence of what was said) that Mr Bowen had not restricted himself to large scale office development of the kind that had been opposed by the Lord Mayor and Ms Holliday, but had said that it was not reasonably foreseeable that any office development would be permitted by SHFA in the foreseeable future and that the only foreseeable development that SHFA would permit was a low-rise hotel. Implicit in that was a representation of the present state of view of the SHFA board, not confined in subject matter to large scale office development, and not confined in time only to the period up to the publication of the 2010 Master Plan. The degree of firmness (brought to the communication by the word "ever") reflected a more categorical and less qualified statement (even if still with a degree of generality) than that summarised in the 1 August email to the Jacfun board. 33The lack of accuracy (and hence the misleading or deceptive character) can be assessed by reference to Mr Bowen's understanding of the true position that was described by the primary judge in [30] of his reasons (see [23] above): that there may be office development on the site, though not in the next few years, and that the Master Plan was being worked on, and there was no reason to think that it would not include office development. 34Before turning to and analysing the seven considerations of the primary judge in support of his conclusion at [34], some additional matters to which the primary judge did not refer should be noted. First, Mr Bowen accepted in cross-examination that he had been "given the job of lowering Jacfun's price expectation below $15m" (Black appeal book, 137). That $15m expectation had arisen from what Mr Bowen knew Mr Robinson (the SHFA CEO) had said in 2001. He also accepted in cross-examination (Black appeal book, 173) that "the prospect of development approval, particularly for a lucrative commercial office exercise, was the stand-out factor in influencing price." Mr Bowen also accepted that he was prepared to bluff in a negotiation in the context of being asked about saying the lease was worthless (which he accepted he did say) and offering $10m. 35Secondly, Mr Bowen accepted that he said to Mr Dyne that the difficulty in getting approvals was such as to make the lease worthless (Black appeal book, 154). Mr Bowen also accepted that the lease was only worthless "if there was no real prospect in any future that commercially mattered of such a kind that anyone would put money on it, pay money for it, of lucrative commercial office redevelopment on this site" (Black appeal book, 157). After some cross-examination, he was prepared to accept that reasonable people hearing his statement that the lease was worthless and knowing of the rent return would understand that he was saying that there was no real prospect of an approval for commercial offices (Black appeal book, 160). 36Thirdly, without dealing too much further with Mr Bowen's cross-examination, he accepted that he "might have said something like" (Black appeal book, 164) or "may well have" (Black appeal book, 165 and 166) said something or that it was "quite likely" (Black appeal book, 166, 169, 170) that he said something such as that recalled by Mr Dyne, namely that "the Authority 'does not foresee an office development ever being permitted on the site and, at best, the additional rights could be a low-rise hotel'." 37All these considerations provide a context that is consistent with the proposition that Mr Bowen stated that the present view of the SHFA board was such that they did not foresee any office development being permitted in the foreseeable future, that is for at least such time as warranted a commercial person placing value on the lease. 38I now turn to the seven reasons of the primary judge for his findings at [34] of his reasons (see [31] above). The first reason given was said to be the inherent unlikelihood of Mr Bowen seeking to convey the impression about commercial development whatever the circumstances, when it was obvious that those circumstances could change. The difficulty with that reason is that the essence of what was conveyed was linked to the asserted view of the SHFA Board: as the file note of Mr Dyne records, "They do not foresee ...". The lack of reasonable foreseeability was grounded in what Mr Dyne said the board foresaw. This was contrary to what he knew and understood as referred to in [30] of the primary judge's reasons (see [23] above). 39Secondly, the context of the statement was said to be important. There had been co-operation and then a change of approach from SHFA, evidenced by the refusal of the three nine-storey blocks. The statement should thus only be taken as saying, in answer to an enquiry by Mr Dyne as to the state of the earlier proposal, that there was no point in pursuing the proposals that had been the subject of earlier effort. But the note is not so limited. The best record of the conversation, even qualifying the meaning of "ever", was not directed to large scale high rise development. Representation (b) makes that proposition good. Further, there was no evidence that Mr Dyne was seeking confirmation of what he already knew about the earlier proposals. Prior to this meeting a proposal about three nine-storey buildings was rejected. On this occasion Mr Bowen was saying (by reference to what he knew of the board's view) that no office development was foreseeable. If one accepts the note as an accurate record of the conversation as his Honour did, it is not directed to large scale office development but any office development. This was a change. It did not reflect the board's view or Mr Bowen's understanding. 40Thirdly, Mr Bowen had frankly disclosed on past occasions what the board's position was. It was unlikely, it was said, that he would now try to mislead Jacfun. Further, if there was a change, Mr Dyne would have asked about it. Whether or not this was an impermissible use of tendency evidence, contrary to the Evidence Act 1995 (NSW), s 95, what Mr Bowen previously said can be accepted. His task, however, was to reduce expectations. There is nothing inherently improbable in his exaggerating the position to that effect. As to how Mr Dyne could be expected to respond, he was not questioned in cross-examination about whether, if he thought there was a change, he would have asked for an explanation. Nevertheless, the absence of Mr Dyne's taxing of Mr Bowen is not determinative. 41Fourthly, the claim was said to be inconsistent with cl 7.1, which contemplated development within a period of five years. The primary judge said at [38] of his reasons: "... A disposal which triggered the operation of cl 7.1 was only likely to occur in connection with an office development on the site. Jacfun attached some importance to cl 7.1 (or at least the principle behind it) in the negotiations for the surrender of the lease. However, it is difficult to see why it would have done so if it really was told that there was no prospect of a redevelopment in the foreseeable future." 42With respect, there is no necessary logical denial of the representation by the "kicker". What is not foreseeable (by reference to a present view of the board) does not guarantee the position. Further, it is far from clear on the evidence that $40m could only be reached by a development with offices. The earlier high rise development gave rise to an expectation in SHFA of $200m. None of the witnesses cross-examined accepted a direct inconsistency. 43Fifthly, the lack of immediate complaint by Jacfun when the news of the development became public was said to tend against any sense of grievance at being misled. This appears to refer to findings made by the primary judge at [27], as follows: "... Jacfun became aware of those reports and, on 15 May 2008, Landerer & Company, its solicitors, wrote to SHFA expressing concern that there had been a disposal of the site within the meaning of cl 7.1 of the deed of surrender and seeking information relevant to that question. There was no suggestion in that letter that Jacfun had been induced to surrender its lease by misleading conduct. That allegation was first made in an affidavit sworn by Mr Dyne on 29 August 2009 in support of an application for preliminary discovery." In fact, the dates 15 May 2008 and 29 August 2009 were wrong; they should have been 15 July 2008 and 29 August 2008. The factual premises for the point disappear to that extent, though it can be accepted that there was no immediate complaint. The force of the point is minor. 44Sixthly, the primary judge at [40] identified a number of factors that were explanations of, or considerations conformable with, Jacfun's desire to sell the lease. The paragraph bears setting out for considerations to which I will later refer: "Lastly, in my opinion, Jacfun's conduct is explicable on the basis of the representation that I have found Mr Bowen did make. Jacfun had incurred or was projected to incur significant losses in 2001 to 2003. As at October 2002, the losses from January 2002 to June 2002 were $1,158,199, and the budgeted losses for July 2002 to June 2003 were $1,606,557. Although Jacfun was taking steps to find new tenants and although the evidence suggests that, if the premises were fully tenanted, it would make a modest profit, there was no certainty that it would find suitable tenants and there was a substantial risk that, without a redevelopment, it would continue to incur losses in the future. There was no certainty if and when that redevelopment would be permitted. There was a risk, in the meantime, that its lease would be the subject of compulsory acquisition which was likely to result in protracted negotiations and possible court proceedings about price, which would themselves give rise to uncertainties. The threat of compulsory acquisition, the first right of refusal and the uncertainty about whether redevelopment would be permitted were matters that were likely to cause uncertainty about whether and for what price Jacfun would be able to sell its interest in the site to a third party, and may have made such a sale difficult. In those circumstances, in my opinion, it was reasonable for Jacfun to agree to the terms that it did, even assuming that there was a reasonable possibility that redevelopment including an office tower would be permitted some time in the future. This is not a case where it is difficult to explain the plaintiff's conduct absent the representation on which it relies. That, of course, does not prove that the representation was not made. But it does remove one of the reasons for thinking that it was made." 45None of these factors made more or less likely the making of the statement by Mr Bowen. They would help to explain why Jacfun would have sold the lease even if the statement had not been made, a conclusion which I would draw. Jacfun complains that there was a failure to cross-examine on the causative effect of the representation. For reasons to which I will come when dealing with reliance, I do not think that there is any unfairness in the findings. They are a body of facts which bear on the likely consequences of what would have occurred if there had been no misleading or deceptive conduct: that is, if there had been no indication as to future development options (not, if there had been a positive statement along the lines of Mr Bowen's understanding set out at [27] above). 46Seventhly, the primary judge discussed why Mr Bowen's description of the lease as worthless did not undermine his Honour's conclusion that there was effectively no change to that which had previously been conveyed in what Mr Bowen said. Mr Bowen had the view that the lease in its current form was worthless because the likely rent extractable was unlikely to exceed the rent paid to SHFA. So much can be accepted, as far as it goes. It does not, however, contradict the making of a statement as to the unlikelihood of office development based on the board's view. If that was said, as the note indicates, the statement about the lease being worthless can be viewed from a broader perspective (and one well-understood by Mr Bowen) about the value of the lease taking into account development opportunities (and any necessary change of planning permission involved therewith). 47The primary judge's conclusions on misleading or deceptive conduct were expressed at [42] of his reasons, as follows: "It follows from what I have said that SHFA did not engage in misleading or deceptive conduct, or conduct that was likely to mislead or deceive. There was a clear basis for believing that, as things stood, there was no real prospect that the board of SHFA would change its mind. Mr Bowen's statement that he thought that there may well be an office development on the site but probably not in the next few years is not inconsistent with that proposition. In part, no doubt, that belief was based on the view that an office development was necessary to make the site viable or at least successful. But Mr Bowen's statement does not carry with it the implication that the board would change its mind in the foreseeable future. Rather, all it carries with it is the implication that the problems with the existing use meant that an office development was likely to be permitted some time in the future. That may have happened when the composition of the board changed, which it inevitably would, or as a result of recommendations made in the 2010 Master Plan or for some other reason. However, that fact did not make what Mr Bowen said about the existing board's attitude misleading." (emphasis added) 48There is an ambiguity in the fifth (emboldened) sentence of this paragraph. The appellant suggested that the word "not" was accidently omitted between "would" and "change". It is not clear to me that this is so; certainly if the statement to which reference is being made is that in Mr Bowen's affidavit that the primary judge referred to in [30] of his reasons (see [23] above), as I think it should be, no correction is necessary. 49With respect, I cannot agree with the primary judge's conclusion as to the misleading or deceptive nature of the conduct. The note is to be taken as a substantially accurate record of what was said, with the qualification about the word "ever". The statement was made about what the board foresaw, about their intentions as to the future: that there would be no office development in the foreseeable future. Yet the intentions of SHFA were the same as Mr Bowen's: there may well be an office development, probably not in the next few years, and there was no reason to think that the development proposals in the 2010 Master Plan would not include office development. The note does not record a mere reiteration of the failure of the earlier high rise office development. It had a broader, clearer and more emphatic content than the email of 1 August that was consistent with a desire of Mr Bowen to "lower expectations"; it was more negative and categorical than his understanding of the position, than SHFA's understanding of the position and than SHFA's understanding of the position as found by the primary judge at [30]. The statement was made as to the board of SHFA, "what it foresaw" and what it "considered". These statements and the pleaded representation were inaccurate and exaggerated. They were intended to bring about lowering of expectations. They were inherently capable of doing so if accepted as honest and accurate statements. They were taken as such. They were misleading or deceptive. Reliance, loss or damage and remedy 50The primary judge dealt with reliance shortly and contingently at [43] of his reasons, as follows: "Having regard to the findings I have made, it is not necessary to deal with the question of reliance. It is implicit in what I have said that, even if Mr Bowen did make an unqualified statement about the prospects of redevelopment, it would have been unreasonable for Jacfun to rely on it. It must have been obvious to anyone that things could change and that explains why cl 7.1 of the surrender deed was of some importance to Jacfun. I should, however, say something about Jacfun's damages case." 51The factual circumstances bearing on reliance had been described by the primary judge at [25] of his reasons (see [22] above). 52Jacfun accepts the primary judge's summaries of the evidence of Messrs Dyne, Landerer and Bermeister, but not that of Mr Leece. I will not review in detail the cross-examination and re-examination of Mr Leece. There is some force in the proposition that his evidence can be seen to be in part influenced by the fact that he was cross-examined about both the 1 August 2002 email (see [14] above) which referred in terms to the Master Plan 2010 and the board note of October 2002 based on the impugned communication. But for one question and answer, Mr Leece's evidence was to the effect that the foreseeable future was a long period of time, exceeding the property cycle. When asked, however, about August and October, Mr Leece said the following (Black appeal book, 20): "Q.That drives us back to what do you mean by 'foreseeable future'? A.Yes. Q.I have suggested to you that you would have understood, in August, that to mean up to the Master Plan being available? A.Yes. Q.You have disagreed with that, as at August. May I take it your position, as at October, is the same; that you thought 'foreseeable future' was something longer than the time that the Master Plan might take? A.No, I don't think I expressed it that way. I talked about 'never' being a long - putting a time period on the foreseeable future, I thought I expressed, was the Master Plan period. Q.Do we take it, then, that you accept, then, as at 16 October 2002, when you read this report, you understood that what you were being told was that SHFA did not foresee an office development ever being permitted until such time as the Darling Harbour Master Plan 2010 was available? A.Correct." This passage can be seen to be the foundation of the primary judge's conclusion in [25]. The answer, however, is to be understood by reference to Mr Leece's understanding given in re-examination only minutes later (if that). The re-examiner took Mr Leece to a part of the email of 1 August to which he had not been taken by the cross-examiner about SHFA not trying to "con" Jacfun (see [14] above). Mr Leece said the following (Black appeal book, 21): "Q.Can you tell his Honour please what, if anything, that led you to understand as to the timeframe during which the authority thought there would be no offices? A.Well, I anticipated that there would be no offices in the Master Plan. Q.That means that there would be no offices in the development proposed by and regulated by the Master Plan; is that right? A.That's correct." 53Although not entirely textually coherent by reference to the answer at Black appeal book, page 20, Mr Leece should not be understood as believing that office development would be in the Master Plan. Thus, he should not be understood as limiting his belief consequent upon Mr Dyne's note that the foreseeability of lack of office development was in respect only of a period ending with the publication of the Master Plan. 54Although there were differences of nuance and interpretation, the matters stated by Mr Bowen and recorded in the minute placed before the Jacfun board can be seen from the evidence of the directors to have made an impression on all members of the board beyond any effect of the 1 August email that was directed to "large scale development". It was said to Mr Dyne to lower expectations. It was passed on as such. It was inherently capable of such. The evidence was that it had such an effect. Mr Fink was not called. It can be inferred that his evidence would not have assisted Jacfun. 55It can be accepted that upon cross-examination each director had a different view on foreseeable future. Each was an experienced businessman. The differences are not critical. It was the degree of negative emphasis for the future that was the essence of the misleading character of the words, linked implicitly to the asserted view of the SHFA board. Essential to each was a residual meaning of meaningfully foreseeable in a commercial sense. If a misleading statement is couched in general terms, the maker may not escape responsibility for it because its generality is understood in different ways by its recipients. The general and the ephemeral, if misleading, are often effective, notwithstanding a lack of precision. It is often an unrewarding task to attempt to be overly precise about the influence on one person's mind and decision-making by misleading conduct when there are other influencing factors; it is likewise the case in unravelling the influence of such conduct upon the thinking of a group charged with decision-making. Depending of course on the particular facts at hand, it is generally not necessary for the misleading or deceptive conduct to have the same effect upon each member of a decision-making group. It is necessary for there to be an available conclusion that in some fashion the impugned conduct affected the group's decision in some way by reference to the loss or damage suffered. That is not to say that it must be proved that the decision would or would not have been made with or without the conduct, on a but-for analysis: cf Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200 at [43]-[45]. The relationship between the conduct and the loss or damage is to be understood as a causal link related to the rule of responsibility embodied in the statute: the public policy of protection of those in trade or commerce from being misled. How one approaches the analysis of that causal element in the ascription or not of responsibility is conditioned or framed by the relevant rule of responsibility and attendant statutory policy: Barnes v Hay (1988) 12 NSWLR 337 at 353; Henville v Walker [2001] HCA 52; 206 CLR 459 at 491 [99]; Environmental Agency v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22; Chappel v Hart [1998] HCA 55; 195 CLR 232 at 255 [62]; Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494 at 528-529 [99]-[103]. It may be sufficient for the misleading or deceptive conduct to have deprived the other party of an opportunity to negotiate a business arrangement without the influence of the inaccuracies or misleading element of the conduct. If value can be sensibly ascribed to such a commercial opportunity lost, the court must value it: Sellars v Adelaide Petroleum NL [1994] HCA 4; 179 CLR 332. 56I cannot agree with the primary judge that any reliance on the statement of Mr Bowen was unreasonable. As Mr Landerer said in cross-examination, he assumed that he was being dealt with by a State instrumentality that behaved honestly. There was no suggestion that Mr Bowen was dishonest. But the point is that the Jacfun board was entitled to rely on what it was told by Mr Bowen if it was not on its face puffery. His statement, based on the asserted view of the SHFA board, was that office development was not foreseeable. It was a misleading statement of the position of the future based on what he knew. 57In these circumstances it can be inferred that the representation operated as an inducement: Gould v Vaggelas [1985] HCA 85; 157 CLR 215 at 238 (per Wilson J, Gibbs CJ and Dawson J agreeing; see also Brennan J at 250-1). 58The analysis of the effect of the misleading or deceptive conduct on the board, through Mr Dyne and his note, takes its place in the analysis of the relationship between that conduct and the loss or damage "by" it. This can be described as a question of causal relationship, involving, in a case such as this, inducement of behaviour or attitude by intended reliance upon what is communicated, in the context in which it takes place. It is plain that such a communication need not be the only inducing factor of the conduct in question: Ricochet Pty Ltd v Equity Trustees Executors and Agency Company Ltd (1993) 41 FCR 229 at 235 (Lockhart, Gummow and French JJ); Milner v Delita Pty Ltd (1985) 61 ALR 557 at 572 (Lockhart J); Tefbao Pty Ltd v Stannic Securities Pty Ltd (1993) 118 ALR 565 at 575 (Hodgson J); I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; 210 CLR 109 at 120 [29] (Gleeson CJ), 127-128 [55]-[58] (Gaudron, Gummow and Hayne JJ). That the contravention of a relevant provision need only be a (as opposed to the) cause can be taken from Gould v Vaggelas [1985] HCA 85; 157 CLR 215; Wardley Australia Ltd v Western Australia [1992] HCA 55; 175 CLR 514; Marks v GIO Australia Holdings Ltd [1998] HCA 69; 196 CLR 494; Henville v Walker [2001] HCA 52; 206 CLR 459; and I & L Securities. 59In the assessment of the causal effect or impact of the contravening conduct, the questions of inducement and reliance cannot be separated from the loss or damage suffered, or likely to be suffered. It is the link central to the determination of legal responsibility for the contravention. 60Here, the evidence to which I have already referred made it clear that there was a strong body of evidence that Jacfun, through its board, clearly wanted to rid itself of the lease. It was a significant drain upon Jacfun's finances, projected to be $1.6m in 2003. The degree of reliance of and inducement upon the board is to be assessed against the commercial reality that Jacfun faced. One does not approach the question by asking, in a mechanical fashion: Was there reliance upon the conduct as a material inducement into the sale of the lease? If so, was the lease surrendered for a value less than it was worth? 61The evidence was sufficient to draw the comfortable conclusion that in October 2002 Jacfun would have surrendered the lease whether or not the misleading or deceptive conduct had occurred. Jacfun had received some expressions of interest from third parties. SHFA wanted the lease surrendered in order for it to control the wider Darling Harbour site. The tenanting of the premises could be described as problematic at best and there can be little doubt that without rezoning (which was in the control of SHFA) there was little perceived value in the site. The holding of the site was causing a steady drain of funds from Jacfun's balance sheet. It was known by Jacfun that SHFA wanted to acquire the lease. Any significant delay in negotiating the surrender, beyond the time of actual surrender in April 2003, would have cost Jacfun approximately a further $135,000 per month on the basis of the budget in mid-2002. 62Given the character of the misleading statement as one of emphasis of a negative factor on a subject that was to some degree appreciated already (see the 1 August email), I am comfortably persuaded that its only effect was to make more negative Jacfun's expectations in the negotiation for the surrender. The loss or damage that can be seen as caused by the conduct is that disadvantage. The lease would have been surrendered without the impugned conduct. 63The remedy was put in two ways on appeal. The first was an asserted difference between the $10m received and the true value of the lease. The second was the loss of chance of negotiating for this surrender without the effect of the misleading and deceptive conduct. 64The first (valuation based) method was supported by evidence of Mr Price from CB Richard Ellis. At [45]-[52] of his reasons the primary judge rejected that evidence. 65For the reasons already given, it is not correct to say on the facts here that the misleading or deceptive conduct caused the surrender of the lease or that it induced the surrender. It is tolerably clear that the lease would have been surrendered on what Jacfun knew up to October. On that basis, it would be unrealistic, and wrong, to conclude that the loss or damage (caused) by the conduct was the surrender of the lease and the loss of the value of the lease (less the price). Rather, given the tolerably plain (and entirely understandable) preference of Jacfun and those advising it to surrender the lease, the real operative effect of the misleading conduct was on price and negotiating stance. Thus, it is unnecessary to descend to the detailed arguments over Mr Price's valuations. Nevertheless, there is much force in the respondent's submissions, which I would otherwise accept, that Mr Price's approach had many errors and unwarranted assumptions. In particular, the assumption that the site would be fully tenanted within nine months and the five year projections given to him by Mr Dyne lacked a basis in historical reality. The cross-examination of Mr Price demonstrated a lack of reliability to his assumptions and to his views. Further, the lack of any reliance on like contemporaneous valuations in the negotiating process was persuasive evidence of the recognition by the experienced businessmen at Jacfun of the lack of reliability of the methodology and values in those reports (and, thus, in similar views in Mr Price's report). 66In dealing with the argument of loss of a chance, the primary judge said that Jacfun did not make a claim for the lost chance of negotiating a better price or going to compulsory acquisition. It did; and it did so on appeal. It is this chance that is to be assessed. 67The exercise is necessarily hypothetical and one of assessment and estimation. The following considerations lead me to conclude that there was a reasonable prospect that based on what was known up to October 2002, but without Mr Bowen lowering expectations by misleadingly overemphasising the lack of prospects of development in the future, Jacfun would have been able to negotiate a modest, but material increase to the $10m offered by SHFA. These matters are: the expectation raised by Mr Robinson by his statement of $15m; the desire of SHFA to acquire the lease to control the site and a consequent degree of special value to SHFA; the lack of evidence as to what SHFA was prepared to offer beyond Mr Bowen's instruction of up to $10m; the advice received by SHFA that the resumption value of the lease was $12 to $16m and the perception of that risk if agreement could not be reached; the significant financial drain on Jacfun of holding the lease; the apparent lack of weight placed by the board of Jacfun on marketing values of $13m to $16m; the inference from the resumption value that there was, rationally, some leeway in Mr Bowen's instructions; the modest but real influence on the board of a general, but emphasised negative forecast within the misleading conduct; and the desire of SHFA to keep sole future commercial control of the site if development were to take place. 68It is impossible to be precise in this assessment. Jacfun had advice and material that spoke of values of $13m and more. Its highly experienced board can be seen to have placed no weight on them in negotiations. The most realistic way of looking at the matter is that there was a reasonable prospect of extracting a reasonable proportion of the additional sum that SHFA would expect to pay on a resumption, being $2m. Rational decision making would see some part of that made available to ensure an agreement. Any delay in negotiating a higher sum, however, would have come at the cost of the losses that Jacfun was incurring. 69Taking all these considerations into account, I would assess the value of the lost chance at $1.25m, being a reasonable prospect of a reasonable proportion of the "downside" to SHFA of a resumption, above the $10m, that is of $2m. 70The orders that I would make are: 1.Appeal allowed. 2.Set aside the orders of the Supreme Court made 8 March 2011 and, in lieu thereof, order: (a)judgment for the plaintiff for $1.25m; and (b)the defendant pay the plaintiff's costs. 3.Respondent pay the appellant's costs of the appeal. 71MACFARLAN JA: I agree with Allsop P. 72BARRETT JA: When I began considering this matter, I had a concern about the differing assessments made and opinions formed by the several directors of Jacfun on the basis of SHFA's representation. The decision of the company that proved to be detrimental to it was made for it by its board of directors, not by a single officer or agent acting within the scope of authority. The question of the company's reliance is to be decided in the collegiate context of a decision by a board. Does it follow that there must be an inquiry into the content of a single "collegiate mind" of the kind referred to by Moffitt P in Parramatta City Council v Hale (1982) 47 LGRA 319 at 345? 73On reflection, I am persuaded that that is not the correct approach in this case. The question is whether Jacfun suffered loss or damage "by" the conduct of SHFA. A positive answer will be given if the conduct operated as an inducing factor upon Jacfun. It is sufficient, therefore, that the conduct contributed in a material way to the decision that the board of directors made, even though its precise implications and significance may have been appreciated in different ways by individual board members who joined in the collective decision. 74In the result, therefore, I agree that the orders Allsop P proposes should be made for the reasons his Honour gives. ********** 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. Decision last updated: 25 July 2012