Febray v Equititour[2009] QDC 281

DISTRICT COURT OF QUEENSLAND

1. [1]
   In each of these proceedings the defendants seek summary judgment^[1] on the basis that the plaintiffs’ claims are self-evidently statute barred, having been commenced beyond the relevant limitation period.  It is contended, for that reason, that the plaintiffs have no real prospects of success and there is no need for a trial^[2].

2. [2]
   The plaintiffs are disgruntled purchasers of units in the Radisson Palm Meadows Resort. The units were purchased for investment purposes. The investments have under-performed. They now seek damages, on the basis that they would not have entered into the purchase of those units, or proceeded to settlement, but for certain misrepresentations. In short, each pleads a “no transaction” case in support of a claim for pure economic loss.

3. [3]
   Each of the actions were commenced on 21 July 2006 and were accompanied by statements of claim pleaded in similar terms. The pleaded causes of action are fraudulent or negligent misrepresentation and breach of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1989 (Qld)^[3].  The longest of the relevant limitation periods is 6 years^[4].  Accordingly, the argument centred on whether there was any cause of action which may have accrued only on or after 21 July 2000. 

4. [4]
   The defendants contend that the causes of action accrued once damage was first suffered which, given the nature of the plaintiffs’ “no transaction” cases, was upon the purchase of the units. It was submitted, on behalf of the plaintiffs, that the causes of action did not accrue until December 2002 when, it was submitted, the fact of actual loss was first ascertainable, in the sense discussed in Wardley Australia Ltd v Western Australia^[5].  It was submitted, in the alternative, that the identification of the point at which loss first became ascertainable is a factual issue which should be resolved at trial.

5. [5]
   The relevant causes of action do not arise when there is only a potentiality of loss. The question of when loss or damages arises is a question of fact, to be determined in all of the circumstances of the case. The High Court has cautioned against determining limitation questions in interlocutory proceedings^[6], however a limitation point may provide an adequate basis for summary judgment in an appropriate case.  The question is whether these are appropriate cases.

6. [6]
   The units were the subject of lease agreements which had been entered into between the first and third defendants. Those leases provided the basis upon which payments to the unit owners would be calculated. The lease which applied to Febray’s unit was for a 5 year term, commencing on 18 December 1997 subject to 3 options of 5 years each, exercisable by the lessee (Radisson). During the first year of the first term Febray was to be paid an amount equivalent to 7% of the purchase price (paid in quarterly instalments). Its return for the second and each subsequent year of the first term of the lease, and for any further term (upon the exercise of the lessee’s option), was an amount to be calculated by applying a specified percentage to the revenue generated by the unit.

7. [7]
   The lease which applied to the Hutchinsons’ unit was also for a 5 year term and was subject to the same option periods (at the option of the lessee), but had a different basis for calculating payments to the owner. The owner was to receive an amount equivalent to 7% of the purchase price for each of the first and second years of the initial term. That rose to 8% for the third and fourth years and 9% for the fifth year of the initial term. In the event that any of the options was exercised, the owner was to be paid the higher of $13,500 per annum (which represented about 7.9% of the purchase price) or a percentage of the revenue generated by the unit.

8. [8]
   The resort did not perform to expectations. Nevertheless Febray received an amount equivalent to 7% of the purchase price during the first year, in accordance with the terms of the lease. Thereafter however, its return was calculated by reference to actual revenue. That turned out to be much less than what had been projected in material given to the plaintiffs prior to their purchases. The Hutchinsons received fixed returns throughout the first term of the lease, but it was evident, from statements they regularly received, that the underlying performance of the asset was less than had been anticipated.

9. [9]
   At the expiration of the first term of the leases, the lessee elected not to exercise its option to renew. Instead, it entered into a new agreement, under which the plaintiffs were paid a relatively modest sum for the lease of each of the units. It was submitted, on behalf of the plaintiffs, that it was only then, in 2002, that actual loss was first ascertainable and the causes of action accrued.

10. [10]
    The representations relied upon by the plaintiffs were variously as to existing and future matters and may be summarised as relating to:

1. (a)
   the legal rights conferred by the leases and, in particular, that it was the investors, rather than lessee, which would have options to renew the leases (even though that was obviously not the case on the face of the documents which were annexed to the agreements for sale);
2. (b)
   the quality and likely success of the investment;
3. (c)
   the level of projected returns.

11. [11]
    In particular, reliance was placed upon a promotional brochure, which spruiked the investment and the lessee (Radisson), and a ‘key fact sheet’ which showed projected returns, out to 10 years, based on specified assumed average room rates and occupancy levels. The statements made in the brochure included that the resort was “destined for success” and the investment opportunity was “sure to be an unrepeatable” one.

12. [12]
    The projections in the key fact sheet included those for years 2 to 5 (for those, like Febray, with 1 year fixed returns) and for years 6 to 10 (for those with either type of lease). The projections showed returns (calculated on the basis of a $169,900 purchase price) increasing from 7.26% for the second year to 10.6% for the fifth year of the initial term of the lease. It projected even higher returns for years 6 to 10, based upon a percentage of actual room revenue.

13. [13]
    It is pleaded in each of the proceedings, that the brochure and key fact sheet contained implied representations that:

1. (a)
   the units would be a good investment by reason of their association with Radisson^[7];
2. (b)
   Radisson considered the investment to be a guaranteed success^[8];
3. (c)
   potential investors could rely on Radisson’s opinion about the quality of the investment^[9];
4. (d)
   the investor had an option to renew the lease with Radisson after the initial 5 year term, for 3 additional periods of 5 years each^[10];
5. (e)
   the projected returns were as stated and an investor would receive returns in accordance with the projections^[11];
6. (f)
   the involvement of Radisson would result in a worry free investment for the first 10 years^[12];
7. (g)
   that, by the use of the word ‘guarantee’, the investor could have greater assurance and/or confidence that Radisson’s involvement would actually result in a worry free investment, for 10 years, with returns as projected^[13].

14. [14]
    The plaintiffs pleaded that the representations were false, misleading and deceptive and/or were actionable misstatements in that^[14]:

1. (a)
   the resort was not destined for success;
2. (b)
   an investment in the resort at that time was not an unrepeatable investment opportunity;
3. (c)
   the apartments generated less than the stipulated income;
4. (d)
   the investment was not a worry free investment;
5. (e)
   Radisson’s involvement did not result in:

1. (i)
   a worry free investment; and/or
2. (ii)
   an investment that was worry free for 10 years;
3. (iii)
   an investment that returned at least that which had been projected.

1. (f)
   the plaintiffs did not have the option to renew the leases;
2. (g)
   Radisson had the option to renew the leases;
3. (h)
   Radisson may, at its election, not renew the leases;
4. (i)
   Radisson could negotiate a lease on different terms to those contained in the initial first 5 year term.

15. [15]
    Causes of action are pleaded against the vendor (Equititour), one of its directors (Sullivan)^[15], the lessee (“Radisson” – the third defendant), and the relevant sales person (Dodd).  The case against Dodd is also pleaded on the basis of oral misrepresentations^[16] to a similar effect, and a failure to advise of the risks of the investments^[17].

16. [16]
    The plaintiffs’ claims for loss or damage relate to both capital and income. Each claim, in effect, that upon acquisition of the units they suffered financial detriment by funding the purchase price and acquisition costs of something which was not of commensurate value and which could not then be disposed of without incurring further costs. They also claimed losses, on the income side, in holding the units (whether because of holding costs or loss of investment returns)^[18].

17. [17]
    The Febray investment was positively geared. At the time this application was brought, its loss was particularised in paragraph 55 of its Second Further Amended Statement of Claim as follows:

1. (a)
   the difference in value between the purchase price paid and the true market value of Lot 37 – approximately $100,000;
2. (b)
   interest on that difference at 9% for 8 years: $72,000;
3. (c)
   incidental costs of acquisition - $6,907 – full particulars of which are detailed in Vincents report dated 13 August 2007;
4. (d)
   net holding costs/(benefit) - $46,373 – full particulars of which are detailed in Vincents report dated 13 August 2007;
5. (e)
   loss of investment returns - $112,993 – full particulars of which are detailed on Vincents report dated 13 August 2007;
6. (f)
   incidental costs of disposal - $3,113 – full particulars of which are detailed in Vincents report dated 13 August 2007.

18. [18]
    $112,993.00 was identified, in the Vincents report, as the loss suffered by reason of Febray having unborrowed capital invested in ownership of the unit, rather than in some other way. The amount for “net holding costs/(benefit)” is the benefit received by Febray while holding the unit, which partially offsets the loss of investment returns.

19. [19]
    The Hutchinsons’ investment was negatively geared. The purchase was funded, to some extent, by unborrowed capital, but mainly by debt. At the time this application was brought, the loss was particularised in paragraph 55 of their Further Amended Statement of Claim as follows:

1. (a)
   the difference in value between the purchase price paid and the true market value of Lot 179 – approximately $100,000;
2. (b)
   interest on that difference at 9% for 8 years at $72,000;
3. (c)
   incidental costs of acquisition - $8,367 – full particulars of which are detailed in Vincents report dated 2 April 2007;
4. (d)
   net holding costs - $33,175^[19] – full particulars of which are detailed in Vincents report dated 2 April 2007;
5. (e)
   loss of investment returns - $6,632 – full particulars of which are detailed in Vincents report dated 2 April 2007;
6. (f)
   incidental costs of disposal - $3,113 – full particulars of which are detailed in Vincents report dated 2 April 2007.

20. [20]
    As was pointed out in the supplementary submissions on behalf of the third defendant, it is apparent that the plaintiffs’ cases are founded upon the proportions that:

1. (a)
   the plaintiffs were financially worse off from the moment of acquisition; and
2. (b)
   the plaintiffs’ financial position steadily worsened with every additional day they held the units thereafter.

21. [21]
    On the same day that these proceedings were commenced, other investors commenced two separate proceedings against the same defendants. The claims were pleaded in materially similar terms. Indeed the pleadings in each of the proceedings were described, by the solicitor for the plaintiffs in all four proceedings, as “template” pleadings. One of those proceedings was commenced in the Supreme Court of Queensland by Dustar Pty Ltd. On 24 October 2007 Martin J gave summary judgment in that action, on the basis that it was time barred^[20].  In doing so, he concluded that the causes of action were complete upon the settlement of the contracts, at the latest, although there were consequential losses available to be claimed by Dustar after that. 

22. [22]
    In the Supreme Court it had been contended, on behalf of the plaintiff, that the case involved the acquisition not merely of an asset, but of an ongoing revenue stream, guaranteed by the leasing arrangements with Radisson, such that there was no actual loss until Radisson elected not to renew the leases, thereby causing a significant diminution in the income stream. In short, Dustar categorised its case as being a contingent loss case in which the cause of action did not arise until a particular event (the interruption of the income stream) occurred.

23. [23]
    Dustar placed reliance on the decision of McGill SC DCJ in Bullock v O'Sullivan^[21].  That was another “no transaction” case, where it was alleged that an investor was induced, by misrepresentation, to purchase a unit in a resort which was to be managed under a lease-back arrangement.  McGill SC DCJ declined to grant summary judgment.  He considered it significant that what was purchased was not just a unit, but, in effect, an income stream.  He observed that it is “difficult to see how any actual loss is suffered unless and until the (income) stream falls below what has been represented, indeed falls below it to the point where it can be seen that it was not worth what was paid for it”. 

24. [24]
    Whilst the plaintiff, in that case, had pleaded that the unit was worth less than had been paid for it, McGill SC DCJ said “that allegation may be explained as made with the benefit of hindsight”. In the absence of evidence that, at the time of purchase, the unit’s “market value was less than what was paid for it plus the ancillary costs then incurred by the plaintiff”, his Honour was not prepared to treat the plaintiff’s pleading as conclusive.

25. [25]
    In Dustar, Martin J, observed that, whilst (consistently with HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd^[22]) value may be assessed in hindsight, having regard to events which occurred after purchase, the case was not a “contingent loss case”, of the kind considered by the High Court in Wardley.  Rather, “the events which occurred after purchase, e.g. the non-renewal of the lease by Radisson, go to demonstrate the true value of the property obtained and not the first existence of damage”.  Martin J went on to reject the plaintiff’s argument in the following way^[23]:

“[24] I cannot accept that argument.  The claim made by Dustar, apart from the claim for diminution of the value of the units purchased, was also for the loss of investment returns with such loss being dated from the time of the settlement of the contracts in 1998.

[25] The unchallenged evidence was that Dustar was made aware that the projected income had not been reached at the end of the second year and that the projected income was not reached for any year up to and including 2002.  Dustar argued that the loss only crystallised when Radisson declined to renew its lease.  However, that does not sit with the evidence that the true position that the income stream was made known to Dustar through management reports some 3 years before that.

[26] In paragraph 50 of the Further Amended Statement of Claim it is alleged that, as a result of the negligence etc. of Equititour and Radisson, Dustar suffered loss and damage.  That loss and damage is particularised as being constituted by, among other things:

1. (a)
   the entry into and completion of the contract for sale; and
2. (b)
   the suffering of the loss particularised in paragraph 55 of the Further Amended Statement of Claim.

[27] The loss particularised in paragraph 55 included:

1. (a)
   the difference in value between the purchase price and the true market value of the units;
2. (b)
   the interest on that difference from the time of settlement of the contracts for the purchase of those units;
3. (c)
   the net holding cost for the period from 1998;
4. (d)
   the loss of investment returns calculated from 1998.

[28] The causes of action, as pleaded by Dustar, were complete upon the settlement of the contracts, at the latest.  There were, of course, consequential losses available to be claimed by Dustar after that.  The case for Dustar cannot be supported as being one brought within time.”

It was submitted, for the defendants, that the same conclusion should be reached in each of these proceedings.

26. [26]
    When these applications first came on for hearing, it was submitted, for the plaintiffs, that a different conclusion should be reached because, while the plaintiffs claimed for the difference between the purchase price and the “true market value” of the units:

1. (a)
   there was now valuation evidence, not put before Martin J in Dustar, that there was no difference between the purchase price and the actual market value of the units at the date of purchase;
2. (b)
   the claim was to be understood as relating to the difference between the purchase price and the true value, as discussed in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (supra);
3. (c)
   the difference between the purchase price and the true value of the units first became ascertainable in 2002, when the lessee declined to renew its lease; and
4. (d)
   the plaintiffs’ right to claim for loss otherwise was conditional upon them being able to demonstrate that the actual value of the units was less than the purchase price.

It was submitted, on behalf of the defendants, that the plaintiffs have no evidential basis for the third proposition and that the fourth proposition is wrong.

27. [27]
    Support for the first and third of those propositions was sought to be drawn from valuations by Mr Hamilton. In his opinion, the market value of the units, upon purchase, was the same as the purchase price, but their market value as at 2007 was much less (on the basis of direct comparison with other properties known to have sold). It was, however, pointed out, on behalf of the defendants, that:

1. (a)
   the propositions advanced did not appear to correspond with the pleaded case;
2. (b)
   the valuations dealt with market value, not true value;
3. (c)
   the valuations did not establish that, at no time prior to July 2000, could it have been ascertained that the true value of the units, as at the date of purchase, had been less than the purchase price; and
4. (d)
   there is no suggestion that the units were ever worth (or could have been sold for) the purchase price plus the acquisition costs which had been incurred.

28. [28]
    The plaintiffs were granted an adjournment, in order to formulate proposed amended pleadings and to obtain further evidence. Senior counsel for the plaintiffs did not oppose the imposition of a condition that the plaintiffs also file and serve affidavit material evidencing the basis for the allegations contained in the further amendments^[24].  At a subsequent directions hearing, the plaintiffs’ further material was described by Couper SC as being “as good as it gets”^[25].

29. [29]
    Each of the further amended pleadings contained a new paragraph (55A) which alleged the plaintiff did not suffer loss or, alternatively, that the causes of action did not accrue until, in or about, December 2002, because it was not until that time that it could be ascertained that the units had a value less than their purchase price. The particulars of damage were also amended to claim interest on the difference between the value and the purchase price, for a period commencing from December 2002 or, alternatively, for 8 years (as initially pleaded). The pleading in the Hutchinsons’ proceeding was also amended to delete loss of investment returns, as a pleaded particular of loss.

30. [30]
    Affidavits by the plaintiffs’ valuer, Mr Hamilton, were filed. He deposed that, in his opinion:

1. (a)
   the contract price for the units was reasonably fair in the then marketplace;
2. (b)
   the true value of the units as at the date of purchase, having regard to all subsequent events which, with the benefit of hindsight, would have operated to influence the assessment of the true value at that time, was $70,000, in relation to the Febray unit and $76,000 in relation to the Hutchinson unit (the difference between the two being the additional value by reason of the longer rental guarantee for the Hutchinson);
3. (c)
   the true value was not ascertainable prior to Radisson announcing that it would not be exercising the option to renew the leases.

31. [31]
    Mr Hamilton claims to have addressed true value in light of the High Court’s decision in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (supra).  That case is authority for the proposition that, in determining the true value as at the date of purchase, regard may be had to subsequent events.  That does not mean that the purchaser’s actual loss, as at the date of purchase, is contingent on those subsequent events.  As Martin J observed in Dustar, the events which occurred after purchase go to demonstrate the true value of the property obtained, not the first existence of damage.  It is the assessment of the quantum of the loss which is affected by such events.

32. [32]
    Time may run before the plaintiff discovers or, on reasonable inquiry, would have discovered that damage has been sustained (Commonwealth v Cornwell (2007) 234 ALR 148 at 150; Christie v Purves & Ors [2007] NSWCA 184 at [35], [36]).  Senior counsel for the plaintiffs however, submitted that no actual damage is suffered before the existence of loss is ascertained or ascertainable and he relied upon the following passage from Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd^[26] (my underlining):

“[105] Nevertheless, in HTW Valuers the High Court referred to those observations as part of their explanation of the different points at which the limitation period under s 82(2) begins to run in four different types of cases. As there stated, the first class is the sort considered in HTW Valuers, where misleading and deceptive conduct results in the purchase of an asset at an over value. In such a case, time runs from the date of purchase (subject, perhaps, to the plaintiff being able to ascertain the true or real value). The second class of case is of the sort that was dealt with in Wardley Australia Ltd & Anor v The State of Western Australia, in which misleading and deceptive conduct results in the incurrence of a contingent obligation (in that case, as a guarantor). In that sort of case, it is said that no loss is incurred and therefore time does not begin to run until the liability crystallises (as when payment under the guarantee is first demanded). The third class of case is of the sort considered in Murphy & Anor v Overton Investments Pty Ltd, where a contingency is hidden by the defendant’s conduct and might or might not come to pass (for example, where it is within the power of a landlord to increase tenancy charges but, at the time of entry into agreement, the landlord is yet to decide to increase the charges). Once again, it is said that time does not begin to run until the contingency occurs. The fourth class, of which Henville v Walker was put forward as an example, consists in misleading and deceptive conduct which results in the purchase of an asset for a particular purpose for which it is unsuited. And as to that, although the Court did not state expressly the point at which time begins to run, their Honours appear to have concluded that, since there was no evidence of undervalue at the time of purchase, time did not begin to run until losses on the redevelopment were incurred.”

33. [33]
    That case concerned the purchase of equipment for a particular purpose. The equipment was worth what had been paid for it, but the purchaser, acting in reliance upon misleading and deceptive conduct, spent further sums in attempting to install and commission the equipment. It was held that the existence of loss was not ascertained until the purchaser had incurred the costs of installing and commissioning the equipment for the purpose for which it was falsely represented to be suited. Nettle JA said,^[27]

“In the result, I take the law to be that where a plaintiff is induced by misleading and deceptive conduct to purchase an asset for a particular purpose for which it is unsuitable, and there is no evidence that the asset is worth less than the price agreed to be paid for it, no loss is incurred until and unless the asset is applied to the particular purpose for which it is purchased and is as a result found not to be as the plaintiff was induced to believe it would be”.

34. [34]
    The facts of the subject cases are quite different from those in Environmental Systems.  As was submitted for the third defendants, it is only in the most artificial of senses that it could be said that these units were purchased for a particular purpose for which they were subsequently found to be unsuited.  Senior counsel, for the plaintiffs did not contend that the subject cases fall with the fourth class of cases described in paragraph 105 of Environmental Systems.  Rather, he contended that the plaintiffs’ cases fall within the first class, where time usually runs from the date of purchase, but he relied upon the qualification expressed by Nettle JA “subject, perhaps, to the plaintiff being able to ascertain the true or real value”.

35. [35]
    The High Court’s decisions in Astonland and Wardley do not support the proposition that a cause of action does not arise, in cases such as these, until the occurrence of all subsequent events which, with the benefit of hindsight, might inform an assessment of the true value, as at the date of purchase.  In Astonland itself, the High Court observed that the plaintiff could have started proceedings had it learned the day after entering into the contract to buy the plaza, or the day after concluding that contract, that the defendant’s conduct had been misleading.  That was so because there was unchallenged evidence that, on either of those dates, the plaintiff in Astonland was in fact worse off as a result of the breach, since the market value of what was acquired was less than its price.  It was unnecessary to wait any further in order to ascertain that some loss had been suffered.

36. [36]
    The package of rights acquired by the plaintiffs upon the transactions in these cases was less than they say they bargained for. The purchasers did not have the benefit of the options. That lay in the hands of Radisson. The investment was, from the outset, subject to risks of which the purchasers say they were unaware. Mr Hamilton points to the fact that the majority of units were offered with a 5 year guarantee, as indicative of Radisson’s confidence that expectations would be realised^[28], but by 20 July 2000 it was clear that the units were not performing in accordance with the expectations in generating rental income and had not been performing to expectations for a significant period of time.  That fact was communicated to the owners.  The returns being paid to those owners, like Febray, who had only a 1 year fixed return, were, by then, a fraction of the projections. 

37. [37]
    As Mr Hamilton’s valuations attest, there had been 23 re-sales (excluding multi sales, related sales or sales to the original vendor or related company) between August 1999 and July 2007. The average sale price for those re-sales was $74,283, with the first re-sale at a substantial discount to the original purchase price occurring on 5 October 1999.

38. [38]
    The underlying performance of the units and the resale were matters which were specifically drawn to the attention of the solicitors for the plaintiffs, by a letter from the solicitors for the third defendant dated 18 March 2008. That letter requested that the solicitors for the plaintiffs ensure that their clients’ affidavit material, explaining the basis of the amended pleadings, dealt with those matters, amongst others. It is, in the circumstances, unsatisfactory that the subsequent affidavits by Mr Hamilton do not do so in any specific way.

39. [39]
    Senior counsel for the plaintiffs drew attention to that part of Mr Hamilton’s affidavits in which, after deriving a “real value” of $70,000 and $76,000 for the units respectively, he went on to say that, in his view, the real value only became ascertainable when Radisson did not enter a new lease for the second term and instead, entered into another arrangement. As Senior counsel for the third defendant pointed out however, that fails to address a relevant question for present purposes.

40. [40]
    It might well be that, consistently with Mr Hamilton’s view, it was not until 2002 that it could be said, with the benefit of hindsight, that the real value of the units at the time of purchase was as little as that which he has now derived. That is not to say however, that prior to 21 July 2000 it could not have been ascertained that the plaintiffs had suffered loss upon entering into the transactions by reason of the real value being less than the purchase price, at least to some extent. The evidence of Mr Hamilton does not provide a basis for asserting that no loss was ascertainable, in this respect, until 2002. If there was loss in this respect, then logically, the fact of some loss could have been ascertained by July 2000, given the known facts.

41. [41]
    Senior counsel for the plaintiffs rightly pointed out that it is for the defendants to plead and establish that the causes of action are outside the relevant limitation period and he contended that, notwithstanding the criticism of the affidavit material, the matter is one which should be resolved at a trial. As Senior counsel for the third defendants pointed out however, the failure of the plaintiffs to show a proper evidential basis for the proposition in paragraph 55A(a) of their amended pleadings is significant in this case, in view of the direction which was made, without opposition. It was submitted that I should approach the matter on the basis that the material was “as good as it gets” for the plaintiffs, that nothing more could be said which would be helpful to their cases and that the known facts otherwise lead to the irresistible conclusion that some loss, in this respect, could have been ascertained by July 2000. It was also submitted however, that it is unnecessary for me to go so far, because summary judgment ought be granted, in any event, for other reasons.

42. [42]
    Where relief is claimed on the basis of misleading and deceptive conduct which induces entry into a transaction, and a series of losses flows from the transaction, the cause of action for damages may accrue at the time of incurrence of the first loss, even if the plaintiff is unaware that a cause of action exists^[29].  It was submitted for the defendants, that time had commenced to run, prior to 21 July 2000, in any event.

43. [43]
    As was pointed out for the defendants, there is no suggestion that the units ever had either a market value or a true value which exceeded the purchase price. The plaintiffs do not seek to make out such a case and the valuation evidence establishes to the contrary, as at the time of the transaction. On any view, the plaintiffs suffered a capital loss at the time of the transactions, because in order to purchase the units, the plaintiffs not only paid the purchase price but also incurred not insignificant transaction costs, for which they now claim (in addition to incidental costs of disposal). Loss was suffered when those costs were incurred. Unlike Bullock v O'Sullivan (supra) this is not a case where (my underlining) “there is no evidence that, at the time when the unit was purchased, its market value was less than what was paid for it plus the ancillary acquisition costs then incurred by the plaintiff”^[30].

44. [44]
    In short, having been induced to enter into the transactions, the plaintiffs incurred not insignificant expenditure over and above the monetary value of the assets then acquired. It is true that these were costs which the plaintiffs had been willing to incur to purchase the assets, but their case is that the decision to purchase was made in reliance upon actionable misrepresentations and conduct and that, but for the misrepresentations and conduct complained of, they would not have entered into the transactions and would not have incurred those costs. The costs represent expenditure incurred by the plaintiffs in consequence of the inducement upon which they say they relied, for which they did not receive a commensurate advantage in money or moneys worth^[31].

45. [45]
    I do not accept the submission for the plaintiffs, that no loss was suffered upon the transaction because, having purchased units at their market value, they could have promptly resold them, for the same price and suffered no loss. As was submitted for the third defendants however, there would, in those circumstances, have been recoverable loss because of the transaction costs in acquiring and disposing of an asset which the plaintiffs say they would never have purchased, but for having placed reliance upon actionable misrepresentations and conduct, for which the defendants are said to be liable.

46. [46]
    Further, each of the plaintiffs suffered consequential loss prior to 21 July 2000, by reason of having their respective funds invested in the units. The Hutchinsons funded their purchase mainly by way of borrowed capital, but partly with unborrowed capital. It was a negatively geared investment, such that they suffered losses in each and every year since the purchase. These losses, including those which were suffered prior to 21 July 2000, form part of the particulars of the plaintiffs’ loss for which damages are sought in the proceedings.

47. [47]
    Further, by reason of entering into the transaction, the Hutchinsons had a certain amount of unborrowed capital which was tied up in the unit rather than being available for investment otherwise. The loss of investment returns, dating back to April 1998, also forms part of the particulars of their loss.

48. [48]
    The Febray unit was positively geared. Accordingly, even though, by 2000, the period of fixed returns had expired there was still a modest excess of rent over expenses. Senior counsel for the plaintiffs suggested that this income (although diminished relative to projections) may be seen as a benefit, offsetting the transaction costs incurred in the purchase of the unit. As McKenna SC submitted, the loss represented by the transaction costs were incurred when they were expended. The purchaser was not prevented from then instituting proceedings by the prospect that future revenue might be achieved in holding the unit.

49. [49]
    Further, the submission for Febray, ignores the loss incurred by reason of Febray having its capital tied up in an under-performing investment. Those losses are calculated in the Vincents report^[32] and formed part of the particulars of loss for which damages were sought in the version of the Statement of Claim which was current when the subject applications were brought. 

50. [50]
    The claim for investment returns has been deleted in the most recent proposed Amended Statement of Claim, however there is no suggestion that such losses were not incurred. No affidavit material was filed explaining the basis for that amendment. Senior counsel for the plaintiffs acknowledged that it was a decision taken by him, to avoid any suggestion of seeking double recovery in claiming a loss of investment returns, as well as the difference between price and value together with interest on that difference. The limitation period commenced to run when loss was first suffered (or when it could first be ascertained that loss had been suffered). That is so even if that loss does not form part of the pleaded particulars of loss^[33].  It is apparent that, as at July 2000, it could have been ascertained that loss had been sustained. 

51. [51]
    It was submitted, on behalf of the plaintiffs, that the case falls within that category in which one looks to the difference in value between purchase price and true value of the asset acquired. It was submitted that loss otherwise, including transaction costs, could not be recovered until such time as that difference was ascertainable. Reliance was placed on the absence of any discussion of transaction costs in Murphy v Overton Investments Pty Ltd [2004] 216 CLR 388, HTW Valuers (Central Qld) Pty Ltd v Astonvale Pty Ltd (supra) and Environmental Systems Pty Ltd v Peerless Holdings Pty Ltd (supra).  As submitted on behalf of the third defendant however, the issue which is central to the present cases simply did not arise for discussion in those cases.  As was also submitted on behalf of the third defendant, there are a number of cases in which, in different circumstances, wasted expenditure has been recognised a head of loss or damage (see McRae v Commonwealth Disposals Commission (1951) 84 CLR 377, Commonwealth v Amann Aviation Pty Ltd (1992) 174 CLR 64 at [81]-[82], [107], Winnote Pty Ltd v Page & Ors [2006] NSWCA 287).

52. [52]
    As at July 2000 Febray held a unit which, contrary to the representations said to have been relied upon, was not performing to expectations. As in Dustar, Febray was made aware, prior to July 2000, that projected income was not being achieved. This had been reflected in the payments made to it, following the first year (in which the return was at a fixed rate). It is something that it raised, as a concern, in correspondence which pointed out the discrepancy between the actual returns and those projected in the key fact sheet, and asserted that “we have been badly misled”^[34]. 

53. [53]
    The unit held by Febray was also, contrary to the alleged representations, subject to a lease which did not give the owner a right to renew. It was patently not the worry free investment Febray says it was misled into believing at the time of purchase. It says it would not otherwise have purchased but for the misrepresentations and conduct relied upon. As a consequence it had by July 2000 spent a not insignificant sum (at least by way of transaction costs if not also by payment of a purchase price in excess of true value) over and above the value of the asset it had acquired. It could not dispose of that asset without incurring further expense. It was receiving a modest income from the asset (substantially less than had been represented), but not to a level which compensated for its loss of use of the funds tied up in the unit. It was ascertainable that loss had been suffered, both on the capital and income side, sufficient to provide the basis for an action.

54. [54]
    The events which occurred thereafter reflected on the quantum of loss or damage, but the commencement of the limitation period was not deferred until 2002. As Senior counsel for the third defendant submitted, it was a case of loss which just got worse. Merely because a substantial loss occurs at a later point of time does not establish that there was no damage at an earlier time, outside the limitation period, thereby barring the whole claim^[35].

55. [55]
    Mr Taylor, the director of Febray, says that in 1999 and 2000 he was encouraged by responses to concerns about the performance of the resort, but the fact that subsequent events might conceivably alleviate the plaintiffs’ position does not mean that no cause of action had accrued^[36].

56. [56]
    Similar observations apply to the Hutchinsons. As at July 2000 the Hutchinsons were holding a unit which was giving them a fixed return, but which had a poor underlying performance relative to projections and, contrary to the alleged misrepresentations was the subject of a lease which did not give them an option to renew. The investment could, at least by then, be seen to be attended with risks which they say they were unaware of when deciding to purchase. It was clearly not the worry free investment which they say they were misled into believing, even though their returns, at that time, were fixed. They say they would not have purchased, but for the misrepresentations and conduct complained of.

57. [57]
    To effect the transaction they too had incurred expense over and above the value of the asset which they had received in return (at least by the amount of the transaction costs) and would incur additional expense if they disposed of it. They had also incurred net losses, on an ongoing basis, in holding the property. There is no suggestion^[37] that those losses were ever offset by a rise in the capital value of the unit purchased.  It was, as at July 2000, ascertainable that loss, sufficient to support an action, had been suffered both on the capital and income side.

58. [58]
    I am mindful of the caution sounded by the High Court in Wardley Australia Limited v Western Australia (supra) against determining limitation questions of the kind there under consideration, in interlocutory proceedings, in advance of the hearing of an action, except in the clearest cases.  I have nevertheless come to the conclusion, as Martin J did in the Dustar proceedings, that present proceedings have no real prospects of success at trial because they cannot be supported as being brought within time.

59. [59]
    It is apparent from these reasons that I have addressed the matter on the basis of the proposed amended pleadings, which puts the matter at its highest for the plaintiffs. My conclusion that the actions are nevertheless time barred means that an order granting leave to amend would lack utility.