1110 Hay Pty Ltd as trustee for the Hay Street Trust v Metso Minerals (Australia) Ltd [No 3]
[2018] WASC 230
•3 MAY 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION: PETERS PROPERTIES MADDINGTON PTY LTD -v- KEEN [2019] WASC 138
CORAM: ALLANSON J
HEARD: 24-27 JULY 2018
DELIVERED : 3 MAY 2019
FILE NO/S: CIV 1361 of 2015
BETWEEN: PETERS PROPERTIES MADDINGTON PTY LTD
Plaintiff
AND
PAUL ERNEST CHARLES KEEN
KAYE KEEN
Defendants
Catchwords:
Contract - Sale of land - Where contract used Joint Form General Conditions - Warranties - Where seller failed to disclose conditions of existing retrospective Development Approval - Where seller warranted use of land lawful
Misleading or deceptive conduct - Whether seller's warranties in contract misleading or deceptive
Damages - Where buyer paid above market value of land - Where buyer would not have purchased land if knew of conditions on Development Approval.
Damages - Where seller incurred costs in complying with conditions of Development Approval - Whether cost of compliance should be deducted from value of land at date of purchase or damages awarded for costs when incurred
Damages - Where Development Approval required environmental buffer - Whether seller liable for damages for loss of value of land in buffer - Where Development Approval required turning template - Whether seller liable for damages for loss of value of land affected by turning template
Damages - Whether seller liable for fine and costs incurred by buyer in continuing to use land without complying with conditions of Development Approval
Legislation:
Australian Consumer Law
Interpretation Act 1984 (WA), s 71
Planning and Development Act 2005 (WA), s 4, s 162, s 163, s 164, s 214, s 218
Town Planning and Development Act 1928 (WA)
Result:
Judgment for plaintiff
Category: B
Representation:
Counsel:
| Plaintiff | : | P G McGowan |
| Defendants | : | C Slater |
Solicitors:
| Plaintiff | : | Spyker Legal |
| Defendants | : | HFM Legal |
Case(s) referred to in decision(s):
Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
Chappel v Hart [1998] HCA 55; (1998) 195 CLR 232
Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64
Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500
Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640
European Bank Limited v Robb Evans of Robb Evans & Associates [2010] HCA 6; (2010) 240 CLR 432
Fox v Percy [2003] HCA 22; (2003) 214 CLR 118
Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1
Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215
Henville v Walker [2001] HCA 52; (2001) 266 CLR 459
J. Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585
Johnson v Perez [1988] HCA 64; (1988) 166 CLR 351
Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104
Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1980) 144 CLR 300
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183
Robinson v Harman [1848] EngR 135; (1848) 1 Ex 850
Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434
Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1996] UKHL 3; [1997] AC 254
Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272
Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627
Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603
Wise Energy Group Company Ltd v Rocke [No 2] [2016] WASCA 125
ALLANSON J:
The plaintiff is a corporation that carries on the business of owning and leasing investment properties. From 1 July 2011, it has been the registered proprietor of land at 176 Maddington Road, Maddington.[1]
[1] In these reasons, consistently with the terms used by the parties, I will refer to that property as the Land or the Property.
At the time of the events on which this action is based, Robert John Peters and Graham Henry Tucker were directors of the plaintiff, and also of Truckworld (WA) Pty Ltd.
Truckworld carried on the business of truck and trailer rental from 172 Maddington Road, Maddington, adjacent to the Land. In late 2012, Truckworld's growing business, and the need for additional land for the parking of returned trucks and equipment, led Mr Tucker and Mr Peters to decide that additional land should be purchased by the plaintiff and leased to Truckworld.
The defendants are husband and wife.[2] They were the registered proprietors of the Land from October 2011 until they sold it to the plaintiff.
[2] I refer to them individually as Mr Keen and Mrs Keen, and collectively as the defendants.
The defendants were also the sole shareholders and directors of Keen Bros (WA) Pty Ltd.[3] Keen Bros conducted a business of training truck drivers from the Land, and parked approximately 20 trucks on the Land, including heavy rigid vehicles and semi-trailers.[4]
[3] ts 308.
[4] Witness statement of Paul Ernest Charles Keen, exhibit 9 [38].
Keen Bros did not occupy the Land pursuant to a lease from the defendants. As Mr Keen said, 'the Property was ours and the business was ours'.[5]
[5] ts 313.
On 21 February 2013, the plaintiff and the defendants entered into a written Land Sale Agreement, by which the plaintiff purchased the Land from the defendants.
The plaintiff claimed that the defendants breached warranties in the Land Sale Agreement by failing to disclose conditions on a Development Approval for the use of the Land, and by failing to disclose that the use of the Land was not lawful. The plaintiff also claimed the defendants engaged in misleading or deceptive conduct in relation to the sale of the Land both before the Land Sale Agreement and between the date of the agreement and settlement.
The plaintiff claimed damages. A claim for rescission of the Land Sale Agreement was not pursued.[6]
[6] See ts 33.
Physical characteristics of the Land
The Land was described in a valuation report, received as Exhibit 8.1 in the trial. Relevantly:
(1)The Land is located on the north-western alignment of Maddington Road, about 800 m west of Tonkin Highway.
(2)The site area is 11,401 m². The rear boundary is irregular in shape, following the line of the Bickley Brook, and the boundary is the centre line of the brook.
(3)The Land is zoned Composite Residential/Light Industry and Local Open Space. Under the City of Gosnells Town Planning Scheme No 6, use of the Land as a motor vehicle (truck) and trailer sales/hire business was a discretionary use.
Under the City of Gosnells Town Planning Scheme No 6, cl 3.4, a person must not use or commence or carry out development on a Local Reserve without having first obtained planning approval.
Because the rear boundary of the lot was the centreline of the brook, part of the site could not be used for industrial uses.
An important feature of the use of the Land was that part of it was a foreshore reserve under a Water and Rivers Commission operational policy, and was required to be kept as an environmental buffer between the Bickley Brook and that part of the Land that was used for industrial purposes.[7] The width of the buffer was 3m.[8]
[7] ts 159.
[8] Exhibit 8.1 [17.1].
The valuer estimated the usable area of the Property was approximately 9,860 m².[9]
[9] Exhibit 8.1 [8.1].
The evidence
The plaintiff called eight witnesses, including an expert valuer:
(1)Alan Harry Jones, the plaintiff's agent in the purchase of the Land;
(2)Tony Michael Ives, a director of Truckworld at the relevant time;
(3)Robert John Peters, a director of the plaintiff and of Truckworld;
(4)Ashleigh Thompson, an employee of the City of Gosnells;
(5)Wayne van Lieven, Environmental Coordinator at the City of Gosnells;
(6)Graham Henry Tucker, a director of the plaintiff and of Truckworld;
(7)Corina Johnson, of Johnson Property Corporation Pty Ltd; and
(8)Timothy Heath, valuer.
The defendants each gave evidence but called no other witnesses.
With one exception, the evidence-in-chief was on witness statements, with the witness available for cross‑examination. The exception was Ms Johnson, who was subpoenaed by the plaintiff and gave all of her evidence orally.
The parties tendered a four volume trial bundle. It was received as Exhibit 2, with each separate document tendered identified also by its number in the trial bundle.
The facts
Many of the following matters were either not in dispute in the chronologies filed by each party, or were established by the documents to which they refer.
Events up to purchase of the Land by the defendants
Peter and Karen Breese were the registered proprietors of the Land between 14 December 2007 and 14 October 2011. During this period, they operated a company, Desert Ore Contracting Pty Ltd, from the Land. It was admitted on the pleadings that the defendants purchased the Land from Desert Ore Contracting Pty Ltd. The contract shows that the defendants purchased the Land from the Breeses.[10] The discrepancy between the pleading and the evidence is of no consequence.
[10] Exhibit 2.29.
On 23 December 2008, the City of Gosnells sent a letter and attached direction under s 214(2) of the Planning and Development Act 2005 (WA)[11] to Hayes Knight GTO Pty Ltd. The direction was in relation to the development of the Land by the 'storage of plant, machinery and associated equipment and the placement of a large quantity of limestone based material on the Land,' contrary to clause 5.1,[12] 9.1,[13] and the City's town planning scheme.[14]
[11] Section 214(2) provides:
If a development, or any part of a development, is undertaken in contravention of a planning scheme or an interim development order or in contravention of planning control area requires, the responsible authority may give a written direction to the owner or any other person undertaking that development to stop, and not recommence, the development or that part of the development that is undertaken in contravention of the planning scheme, interim development order or planning control area requirements.
[12] Clause 5.1: 'Any development of land is to comply with the provisions of the Scheme'.
[13] Set out in full, later in these reasons.
[14] Exhibit 2.2.
The role of Hayes Knight GTO Pty Ltd was not explained in the evidence, but is not material.
On 30 March 2009, Desert Ore Contracting submitted an Application for Planning Approval to the City, seeking approval for a development described as 'clear back of block, place hardstand and parking of trucks and trailers.'[15]
[15] Exhibit 2.6.
On 2 November 2010, the City deemed the Development Application refused because it had not received 'a biophysical assessment which recommends an appropriate buffer to the Bickley Brook', as requested in correspondence from the City of 21 June and 17 September 2010. The City advised that the application was unable to be assessed without the technical information required to determine the environmental buffer distance.[16] The applicant was further advised that the Council may still consider the application if the requested information was provided.
[16] Exhibit 2.12.
In early 2011, the Breeses were attempting to sell the Land, and engaged Ms Johnson. In March 2011, Ms Johnson prepared a Sales Report for the Land.[17] From the date of the copy of the certificate of title attached to the report, I infer that it was prepared around 22 March 2011. Relevantly, the Sales Report contained this notification:
Interested parties need to be aware that the property does not fully conform with its current zoning under the City of Gosnells Town Planning Scheme No 6 and further that it is the subject of a current application to City of Gosnells in respect to verification of encroachments to the Bickley Brook Reserve. Further details in this regard are available upon request but buyers are encouraged to make their own enquiries in this regard.
[17] Exhibit 2.16.
On 26 August 2011 the defendants inspected the Land and received a copy of the Sales Report. Ms Johnson made a file note about her meeting with the defendants.[18] I am satisfied from the file note, and her oral testimony, that Ms Johnson discussed with the defendants the outstanding application for approval with the City of Gosnells relating to the rear portion of the lot, fill, and Bickley Brook issues.
[18] Exhibit 2.28.
Mr Keen agreed that Ms Johnson told him that there was an outstanding Application for Development Approval. Mr Keen recalled it as 'an application for a hardstand and parking of trucks', but said he could not recall any discussion about Bickley Brook.[19] He did not ask to see a copy of the Development Application.
[19] ts 297.
On 7 September 2011, the defendants entered into an agreement to purchase the Land from the Breeses.[20] Annexure A to the agreement included the following condition:
Outstanding Application for Development Approval
The Buyers acknowledge having been made aware of the current development application in at City of Gosnells seeking a retrospective planning approval for hardstand for the Transport Depot on the rear portion of the subject property (i.e. between the Bickley Brook boundary and the north facing wall of the workshop).
This matter may or may not be finalised prior to settlement.
Seller undertakes to complete any works that council may reasonably require within 45 days of written notification from council.
Buyers and Seller agree that the lack of council approval will not hold up settlement of this contract of sale.
[20] Exhibit 2.29.
Ms Johnson met Mr Keen again on 23 September 2011. Again, she made a note of what was discussed, including that she left Mr Keen an aerial photograph showing the public open space around the Bickley Brook.[21]
[21] Exhibit 2.32.
On 4 October 2011, Ms Johnson forwarded to the defendants an email chain between the City, Mr Breese, Crossland & Hardy Pty Ltd (Consulting Surveyors) and herself, dated 9 June 2011 to 4 October 2011, regarding 'Development Application - Retrospective Fill and Transport Depot ‑ 176 (Lot 10) Maddington Road, Maddington'.[22] Most of the email chain was in relation to a query regarding the front boundary of the Property and a survey that had been done by Crossland & Hardy.
[22] Exhibit 2.22.
On 6 October 2011, Ms Johnson forwarded to the defendants another email chain regarding the Development Application.[23] Ms Johnson wrote in response to queries raised by Mr Keen earlier in the week - apparently in regard to whether a septic system had been approved by Council - and also to include an email trail 'regarding the City of Gosnells application'.[24] The first of the emails forwarded was from Mr Breese to Ms Johnson, and included the comment:
the council are waiting on me to supply a turning in to the property drawing which I will get done hopefully this week, then the application will go to a council meeting for approval, as you know we had an extensive environmental study and property drawings done which the council are happy with and part of the property has already been approved for use as a transport depot years ago so I do not think it will be hard to get [through] council once they have all the info.[25]
[23] Exhibit 2.23.
[24] Exhibit 2.23.
[25] Exhibit 2.23, TB p 244.
On 6 October 2011, Ms Johnson also forwarded to the defendants another email chain between the City, CadCentre, Mr Breese, and herself. The emails were dated 9 June 2011 to 6 October 2011 and related to the City’s request regarding a turning circle on the Land.[26]
[26] Exhibit 2.25.
The defendants did not admit that they received these and other emails sent by Ms Johnson. Although the emails may have been received at Keen Bros, the defendants said that was no guarantee that they saw them. Neither of them was competent in using computers. And there were occasions when both of them were away from the office, because their work took them to regional centres.
On 17 October 2011, the defendants became the registered proprietors of the Land.
At the time of purchase by the defendants, the City had not yet approved the Application for Development Approval that had been lodged by or on behalf of Desert Ore Contracting. The defendants were aware that the application was not yet approved.
The approval for development
On 8 November 2011, an Ordinary Council Meeting of the Gosnells City Council considered the application for retrospective planning approval that had been lodged by Desert Ore Contracting. The application sought approval for 'the placement of an unknown quantity of limestone fill and hardstand across the property' and the operation of a business 'which is involved in plant hire, mine site haulage, road maintenance, earthworks, dust suppression and site waste management'.[27] The meeting approved three resolutions, numbered 514, 515 and 516:
[27] Exhibit 2.43.
514.That Council approve the retrospective application for fill and a Transport Depot … subject to the following conditions:
1.The submission of an amended site plan, generally in accordance with the submitted plans but modified to remove reference to any storage within the portion of the site recommended as a buffer by the submitted Biophysical Assessment dated 17 March 2011 …
2.The applicant shall submit details prescribing a functional drainage system … to the satisfaction of the City.
3.The hardstand areas are to be paved, sealed and drained to the City's satisfaction.
4.Fencing shall be constructed along the boundary of the buffer as recommended by the submitted Biophysical Assessment dated 17 March 2011 … The fencing is to have a maximum height of 1.8 metres and shall be visually permeable, to the satisfaction of the City.
5.A Foreshore Management Plan, detailing the restoration of Bickley Brook adjacent to the subject site, is to be prepared and implemented, to the satisfaction of the City and the Department of Water.
6.Satisfactory arrangements being made with the City for the disposal of industrial wastewater.
7.A minimum of eight carparking bays are to be provided, prior to the occupation of the building, and maintained to the satisfaction of the City. The driveways, accessways and carbays are to be paved, drained and marked to City's standards in accordance with the approved plan …
8.Turning templates are to be provided demonstrating that the largest vehicle utilising the site can safely access the site from Maddington Road. If the manoeuvring of vehicles cannot be adequately accommodated within the existing geometry of the crossover and Maddington Road, modifications to the crossover and/or Maddington Road are to be made to the satisfaction of the City and at the cost of the developer. If the templates demonstrate the existing crossover is wider than required to accommodate vehicles, the crossover should be modified to reduce its width to the satisfaction of the City.
515.That Council direct the landowner(s) undertake the following work to the City's satisfaction and within 60 days of the date of Council's resolution:
•Remove all material, vehicles, plant, equipment and/or machinery from the portion of the site recommended as a buffer by the submitted Biophysical Assessment …
•Restore the levels of the portion of the site recommended as a buffer … to those levels that existed immediately prior to the unauthorised development.
•Revegetate the portion of the site recommended as a buffer by the submitted Biophysical Assessment …
516.That should the conditions of planning approval and/or the directions notice issued by the Council not be complied with, Council authorise the Director of Planning and Sustainability to initiate legal proceedings against the landowner in accordance with Part 13 of the Planning and Development Act 2005.[28]
[28] Exhibit 2.43, (37 ‑ 38) (emphasis added).
On 21 November 2011, Ms Johnson sent an email to Mr and Mrs Breese regarding the progress of the Development Application.[29]
[29] Exhibit 2.45.
On 29 November 2011, Ms Johnson forwarded to the defendants an email chain between the City, CadCentre, Peter Breese, and herself dated 9 June 2011 to 28 November 2011 regarding the progress of the Development Application with the City.[30] The emails in the chain referred, in particular, to the condition imposed by the City Council for provision of a turning template, but not the other conditions.
[30] Exhibit 2.24.
The text of the message to the defendants was:
I followed up with Peter Breese last week trying to find out if they had heard any more about the retrospective planning approval regarding 176 Maddington Road and City of Gosnells. It was on the agenda for November 8 and evidently was approved with some comment in respect to the turning circle drawing. This comment is below. Breeses' have not, however, had the formal letter from council in this regard. They will forward it on to you as soon as it is received.[31]
[31] Exhibit 2.24, 1.
The defendants pleaded that they were informed, from the substance of the email of 29 November 2011, 'that the Development Application was approved and no conditions in the Resolution remained current'.[32] That is not how I would understand what was written. In any event, and despite the defendants' plea, Mr Keen could not say whether he had read the email at the time.[33] Mrs Keen did not recall reading it.[34]
[32] Defence [13].
[33] ts 301.
[34] ts 326, 330.
On 7 December 2011, the City wrote to Desert Ore Contracting advising that the City had approved the Development Application.[35] The letter said, relevantly:
Council at its meeting of 8 November 2011 considered your application received 8 April 2009.
Please be advised that the application has been approved in accordance with the terms and conditions listed on the attached Town Planning Scheme No 6 Schedule 9. Your attention is drawn also to Resolution Nos. 515 and 516.
A footnote advised of the right to request review of the decision and identified the defendants as the owners of the Land.
[35] Exhibit 2.47.
The letter attached the Notice of Determination on the Application for Planning Approval and included the three resolutions of Council. Mr Breese sent the letter and notice by email to Ms Johnson on 16 December 2011.
On 15 December 2011, Keen Bros sent an email to Ms Johnson attaching a letter they had received from the City, addressed to 'the Submitter', dated 7 December 2011. That letter was not in the same terms as the letter to Desert Ore Contracting, but simply stated that the City had resolved to approve the Development Application.[36] It did not refer to conditions on the approval.
[36] Exhibit 2.51.
The plaintiff contended that, around Christmas 2011, Ms Johnson delivered a copy of the letter of 7 December 2011 and the documents attached to it to the defendants.
Ms Johnson's file had a copy of the letter and notice, with an attached 'post-it note' in Ms Johnson's handwriting, saying: 'DA copy delivered Keen - 176 Maddington we thank you Xmas gift'.[37] The post-it note was on the covering letter.
[37] Exhibit 2.47.
In her evidence‑in‑chief, it was put to Ms Johnson that she delivered the document to the Keens. Ms Johnson initially replied that she did not recall.[38] Counsel for the plaintiff, without objection, proceeded:
That note that's on there is attached to that document, is it not, on your file---That's the original, yes, it is.
Yes. And on the original what you've got there is a Post-it note with that handwriting attached to that letter---That's correct.
And what's referred to, that is, the DA that's referred to, is pages 347, 348, 349 and 350. That's right, isn't it---Yes, that's correct.[39]
[38] ts 194.
[39] ts 195.
In cross‑examination, Ms Johnson said that she could not recall the circumstances of the delivery of the letter to the defendants.[40] Ms Johnson further said:
… my recollection is that the Keen family were simply wanting to know whether it had been approved, not what the conditions were, and that it was me that was chasing it up because I was expecting that I would have to help organise some of the work that might have been required by Breeses not by the Keens.[41]
[40] ts 201.
[41] ts 202.
Ms Johnson could not say that the letter delivered to the defendants included the attachments.
Both defendants denied that Ms Johnson gave them the letter of 7 December 2011.
Mr Keen said that he did not think much about the approval for development after the purchase of the Land. 'As far as I was concerned, it only related to truck parking and hardstand approval, and if there was anything further required by the City, Desert Ore was required to do the work'.[42]
[42] Exhibit 9 [30].
Mr Keen said that he first became aware that the City had imposed conditions on the approval of the application and that the Property did not meet those conditions when he received a letter from the solicitors for the plaintiff in January 2014.[43]
[43] Exhibit 9 [98].
Mr Keen was not completely satisfactory as a witness, even allowing for the fact that he was recalling events from some seven years earlier. He was reluctant to admit having seen emails from Ms Johnson at about the time they were received, although he eventually agreed to having possibly seen the email of 29 November 2011, and that he may have read the emails 'at some time'.[44]
[44] ts 301.
Mr Keen not only denied receiving a copy of the Town Planning Scheme Notice, containing the terms and conditions of the planning approval, but said that he had not seen the covering letter of 7 December 2011, until after he had sold the Property.[45]
[45] ts 305.
I find extraordinary Mr Keen's evidence that, as the purchaser of a property for over $2 million, he was not concerned to know what conditions had been attached to a retrospective approval for its development.
Eventually, in cross-examination, Mr Keen agreed that around December 2011, he was pressing Ms Johnson to find out precisely what had been approved and on what terms.[46] I do not accept his evidence that he was prepared to act on a telephone call from Ms Johnson to the effect 'it was all good'.[47] Mr Keen could not say in what month that telephone call was made.[48]
[46] ts 304, 306.
[47] Exhibit 9 [36].
[48] ts 314.
Mrs Keen also gave evidence. It appeared that her role in the family's business affairs was limited and she had little involvement in the purchase or sale of the Land. Over the course of her cross‑examination, there was only one matter of substance where she professed an actual recollection. She was positive that Ms Johnson did not give her the letter of 7 December 2011, with or without attachments.[49]
[49] ts 333.
I am satisfied that Ms Johnson delivered the letter, and that she gave it to Mrs Keen. Ms Johnson impressed as professional in the way she went about her task as the agent for the seller, even after the sale was completed. Despite her present lack of recollection, the post‑it note is a contemporaneous record of what she did.
Normally I would have inferred that the whole letter was delivered - it would be more logical to deliver the attachments as well when the letter refers to them. But Ms Johnson's evidence at trial was not simply that she did not recall delivering this letter. Her recollection was that the Keen family only wanted to know whether the application had been approved and not the conditions. It is enough if I believe that an event has occurred, even if the strength of that belief is only that it is more likely than not. On Ms Johnson's evidence, and the evidence of the defendants, I have no positive belief that the attachments were given to the defendants.
In summary, I am satisfied that, at around Christmas 2011, the defendants were aware that the City had approved the development on the Land. Ms Johnson gave them the letter of 7 December 2011, and had previously advised them that the Development Approval was seeking a retrospective planning approval for hardstand for the transport depot at the rear portion of the Land. The letter advised that 'the application has been approved in accordance with the terms and conditions listed on the attached Town Planning Scheme No 6 Schedule 9', and referred specifically to resolutions 515 and 516. The defendants must have known that the approval was subject to conditions, but I am not satisfied that they knew what those conditions were.
As the owners and occupiers of the Land, the defendants would have been aware that nothing had been done on the Land while they were the owners and occupiers to satisfy any conditions on the approval. On the other hand, they were in possession of the Land until its sale to the plaintiff without any query or action by the City to alert them that there were things that still had to be done.
The environmental assessment
Before considering the sale of the Land from the defendants to the plaintiff, I will deal briefly with the concurrent assessment by the City of the Local Open Space reserve and the health of the Bickley Brook.
Mr van Lieven, as Environmental Coordinator for the City, had the task of reviewing the adequacy of the designated Local Open Space reservation along the Bickley Brook. On 14 February 2013, the City wrote to landowners along the Bickley Brook whose land included land reserved as Local Open Space and said that it intended to inspect the bank of the Brook for a biological and physical health assessment.[50] Mr van Lieven described the assessment as a 'mechanism through which we can ascertain values relating to a foreshore to then proceed to identify the width of foreshore that is required to protect, particularly the environmental values of the watercourse'.[51] The foreshore area that was required for environmental purposes served as a buffer. It was not necessarily consistent with the area reserved as Local Open Space. [52]
The sale of the Land to the plaintiff
[50] Exhibit 2.61.
[51] ts 159.
[52] ts 160.
On 12 December 2012, Keen Bros WA lodged an application with the City to upgrade the then existing crossover from the road to the Land.[53] On 13 December 2012, the City advised Keen Bros WA that the Crossover Application was approved.[54]
[53] Exhibit 2.52.
[54] Exhibit 2.54.
The plaintiff sought to rely on evidence that, in early 2013, an employee of the City, Ashleigh Thompson, took a counter inquiry from either one of the defendants or their representative. Ms Thompson gave evidence at the trial. She could not say with any precision who made the inquiry, what it was about, or what was said or what information was given to the person who made it. Her evidence did not advance the case.
On 18 February 2013, the plaintiff engaged Mr Jones and JMW Real Estate to assist it to purchase the Land.[55]
[55] Exhibit 2.62.
On 21 February 2013, the plaintiff and the defendants entered into the Land Sale Agreement for the sale and purchase of the Land.[56] The purchase price was $4 million plus GST.
[56] Exhibit 2.64; Exhibit 2.65; Exhibit 2.67.
The Land Sale Agreement was subject to the conditions contained in the 2011 Joint Form General Conditions for the Sale of Land.[57] The contract contained two special conditions:
This offer to purchase is subject to the City of Gosnells approving the use of the site for the purpose of truck rentals.
The Seller undertakes to provide a depreciation schedule to the Buyer before settlement.[58]
[57] Exhibit 2.67.
[58] Exhibit 2.67.
On 1 March 2013, the plaintiff engaged Cornerstone Legal to represent it at settlement.
On 13 March 2013, Cornerstone Legal recommended that the plaintiff apply to the City for approval to use the Land for the purpose of truck rentals, as soon as possible.
Mr van Lieven attended the Property on 15 March 2013. He saw a large volume of dark-coloured bituminous type material stored near the bank of the Brook. Some of the material was spread over the limestone on the property and had been compacted to form a hardstand.[59] Some was in the process of being distributed and compacted across the site.[60]
[59] Exhibit 6 [15].
[60] ts 162.
On 15 March 2013, the plaintiff instructed Cornerstone Legal that it had decided to forego the conditions requiring the City's approval of site use.[61]
[61] Exhibit 2.72.
On 5 April 2013, Mr Tucker reported to Mr Peters on his walk around the Land. In particular, he suggested the need to put up a rear fence 'which will run along the brook and join into the fence at the rear of the next door neighbour'. [62]
[62] Exhibit 2.73.
On 19 April 2013, Cornerstone Legal advised the representative for the defendants that the plaintiff would waive the condition regarding use.[63] Subject to the defendants providing a depreciation schedule, the contract was unconditional with settlement due to occur on 1 July 2013.
[63] Exhibit 2.76.
The defendants submitted that the waiver of the condition regarding use was an unequivocal indication that the plaintiff did not intend to rely on the approval or requirements of the City.[64] The conduct of the plaintiff does not bear that interpretation. In my opinion, it was consistent with the plaintiff relying on the present use of the Land being lawful.
[64] Defendant's opening submissions [36].
On 9 May 2013, the City issued a Zoning Certificate to Cornerstone Legal, as the representative of the plaintiff.[65] The certificate did not refer to the Development Approval or the conditions yet to be fulfilled. But that does not appear to have been part of the document's purpose.
[65] Exhibit 2.89.
On 25 June 2013, the plaintiff advised Cornerstone Legal that it was happy to settle without a depreciation schedule.[66]
[66] Exhibit 2.95.
The contract for the sale of the Land settled on 1 July 2013.[67]
[67] Exhibit 2.102.
On 1 July 2013, the plaintiff and Truckworld entered a lease of the Property for a period of 10 years. Item 6 of the schedule to the lease set out the permitted use of the Land by the lessee, 'Truck and Trailer Rental, Trailer Sales'.[68] By cl 3.4, the lessee covenanted:
(a)Not to use or permit the Premises to be used for any purpose other than the purposes set out in Item 6.
…
(d)To keep in force all licenses or permits required to be obtained from any Governmental Agency to enable the Lessee lawfully to carry on its business on the Premises, including any development approval required by the local authority and any prescribed premises licence required under the Environmental Protection Act 1986 (WA).
(e)To indemnify and keep indemnified the Lessor against any claims or liabilities arising out of the Lessee's business activities conducted within the Premises or the Lessee's use of the Premises.
[68] Exhibit 2.100, 40.
In July 2013, Mr van Lieven met Mr Ives on the site. He advised Mr Ives that the fence at the rear of the Property was on the wrong alignment.[69]
[69] ts. 164.
On 23 July 2013, Mr van Lieven sent an email to Mr Ives attaching a copy of the planning approval and minutes of the council meeting of 8 November 2011.[70] That was the first time written notice of the conditions had been given to Truckworld. No notice had been given to the plaintiff. Because of the relationship between Truckworld and the plaintiff, the plaintiff became aware of the conditions on the approval at around the same time as Truckworld.
[70] Exhibit 2.108.
Over the following months, the plaintiff and its representatives dealt with the City about compliance with the conditions.
I am satisfied, and there is no evidence to the contrary, that the plaintiff and its officers had no previous notice of the conditions attached to the use of the Land as a result of the Development Approval, and were not aware that, as a result of the existing development, the use of the Land was not lawful.
Action by the City of Gosnells
On 15 January 2014, Cornerstone Legal wrote to the defendants giving notice of possible proceedings.[71]
[71] Exhibit 2.116.
On 16 January 2014, Mr Brighouse, Manager Governance and Compliance of the City, wrote to the plaintiff regarding non-compliance with the Development Approval and the works required. The City proposed 14 days from the date of the letter for the plaintiff to provide a reasonable timeline for works to be conducted to bring the Property into compliance, and warned failure to comply could result in legal action.[72]
[72] Exhibit 2.117.
Mr van Lieven and other employees of the City met the plaintiff's representatives on 5 February 2014.[73] They discussed compliance with the conditions of the Development Approval, including whether, should the buffer boundary be found to unreasonably compromise the operations of the plaintiff's business, justified variations to the boundary of the buffer could be proposed for consideration by the City.
[73] See Exhibit 2.121.
Following that meeting, on 6 February 2014, Mr Brighouse wrote to the plaintiff advising that further compliance action would be put on hold for 28 days, pending a fence line survey, and to allow the plaintiff to ascertain the implications of the Development Approval.[74] The letter further advised, 'Should you wish to readdress the current approval, all commercial vehicles are to be removed from the buffer zone, pending any further approvals'.
[74] Exhibit 2.125.
Eventually, the City issued a prosecution notice on 14 March 2014, alleging that between 27 July 2013 and 10 March 2014 the plaintiff commenced, continued or carried out development otherwise than in accordance with conditions placed upon that Development Approval, contrary to s 12.4(b) of the Town Planning Scheme No 6 and s 218(a) and (c) of the Planning and Development Act 2005 (WA).[75]
[75] Exhibit 2.126.
The plaintiff attempted to negotiate with the City. On 16 June 2014, the Chief Executive Officer of the City wrote to the plaintiff advising that court action appeared to be the only solution.[76]
[76] Exhibit 2.131.
The plaintiff responded by filing an application in the Magistrates Court for a stay of proceedings on the ground of abuse of process.[77]
[77] See Exhibit 2.132; Exhibit 2.133.
On 6 January 2015, the City issued a second prosecution notice to the plaintiff pursuant to s 218(a) and (c) of the Planning and Development Act, alleging breach from 11 March 2014 and ongoing.[78]
[78] Exhibit 2.136.
On 15 September 2016, the plaintiff was convicted of the charges in the two prosecution notices. The Magistrates Court imposed a fine of $30,000 and required payment of the City's fees/costs of $15,000.[79]
[79] Exhibit 2.188.
I find that, at least until 14 March 2014, and perhaps as late as June 2014, the plaintiff could have avoided prosecution by the City.
The lease with Truckworld
Concurrently with the City's action against the plaintiff, Truckworld sought approval in writing from the City to sell ex-rental equipment from its locations at 172 and 176 Maddington Road. The City's approval was required for an application to be made to the Department of Commerce.[80] The inclusion of 176 Maddington Road in the application was a mistake. Truckworld only intended to carry out sales from its adjacent property.
[80] Exhibit 2.127; Exhibit 2.129.
On 31 March 2016, the plaintiff and Truckworld executed a deed by which Truckworld surrendered its rights and obligations pursuant to the lease with the plaintiff.[81] The surrender of the lease was not related to the actions required to make the Property comply with the Development Approval. The lease was surrendered because of the decline in Truckworld's business, which relied heavily on the mining industry.[82] The demand for trucks and trailers had dropped dramatically after the mining boom ended.
[81] Exhibit 2.146.
[82] ts 148.
After the lease had been surrendered, Truckworld continued to use the Land to park trucks until those trucks were sold.[83]
[83] ts 253.
The actions to comply with the conditions
The plaintiff led extensive evidence regarding the steps it took to comply with the Development Approval and the costs it incurred in doing so.
After Truckworld surrendered its lease, the Property was not leased to another tenant.
In around June 2016, the plaintiff began work to comply with the conditions of the planning approval. I accept the evidence of Mr Tucker that during the works:
(1)various contractors required continuous, unimpeded access to the Property;
(2)contractors needed to operate heavy machinery across a large portion of the Property;
(3)drainage works required extensive re-levelling over large areas;
(4)the removal of fill from the buffer, transportation of removed fill, and transportation of plants to the buffer area resulted in significant truck movements through the Property;
(5)access to the Property was not permitted while the hardstand area was sealed;
(6)access was impeded while the driveway to the Property was extended; and
(7)the security of the Property was compromised when existing gates were removed to accommodate the modified driveway and when the rear fence was removed pending installation of a new fence.[84]
[84] Exhibit 7.1 [62].
I accept that while those works were being carried out, the plaintiff could not provide quiet enjoyment of the Land to a tenant and the Property could not be leased.
I also accept that the plaintiff has shown that the steps that it took were reasonable and in compliance with the requirements of the City. The plaintiff engaged professional advice and acted in accordance with it.
On 9 June 2017, the City advised the plaintiff that the Land complied with the Development Approval and Development Approval Conditions.[85]
[85] Exhibit 2.221.
The valuation evidence
Valuation evidence on behalf of the plaintiff was given by Mr Heath, a senior valuer in the Commercial Division of Opteon Australia. The defendants called no valuation evidence.
Mr Heath prepared two reports, dated 27 October 2015,[86] and 31 May 2018.[87]
[86] Exhibit 8.1.
[87] Exhibit 8.2.
Mr Heath was specifically instructed to provide an opinion as to the loss in value of the Land as a result of:
1.the reduction in the size of the Land due to the buffer (that is, the reduction in the area that could be used for storage of trucks and equipment on the basis that the Land is used as a storage depot);
2.the reduction in the size of the Land due to the turning template (that is, the reduction in the area at the side and rear of the site that could be used for storage of trucks and equipment because it would encroach on the area that must be kept clear for the purpose of turning vehicles);
3.the compliance with the Development Approval conditions.[88]
He was further asked to value the Land with the Development Approval and without the Development Approval.
[88] Exhibit 8.1 [2.0].
As part of his first report, Mr Heath assessed the value of the Land without Development Approval, on the basis of legal use of the whole site, that is the whole of the estimated usable site area of 9,860 m².[89] His opinion was that the market value was $3,250,000, substantially less than amount paid by the plaintiff.[90]
[89] The site area was 11,401 m2, with the rear boundary the centre line of the Bickley Brook. Mr Heath estimated the usable area by using images of the land that was being physically used at 3 June 2013: exhibit 8.1 [1.2].
[90] Exhibit 8.1 [17.4].
Mr Heath calculated a market value rate for the Land of $330/m2, based on market evidence from the sales of comparable sites. Two of those properties included land zoned as Local Open Space, and the valuation included both a site rate and an 'effective site rate' excluding the Local Open Space.[91]
[91] Exhibit 8.1 [16.1].
The valuation of the whole of the Land, and the rate per square metre derived from that valuation, were not contested at trial. The area of contention was the effect of the Development Approval on the value attributed to the Land.
Mr Heath applied a rate of $330/m2 to the areas calculated as being lost to the storage of trailers due to the requirement for a buffer and the requirement of a turning template for a 19m semitrailer.[92] The value of those areas was then deducted from the value of the whole of the Land.
[92] Exhibit 8.1 [17.2].
Mr Heath calculated that 700 m² was lost to the buffer and 470 m² due to the turning template. He estimated the value per square metre to be approximately $330, resulting (with rounding) in a loss of value of $230,000 and $155,000.[93]
[93] Exhibit 8.1 [17.2] ‑ [17.3].
Mr Heath also did an alternative calculation based on the amount paid by the plaintiff, giving a rate per square metre of approximately $406.[94]
[94] Exhibit 8.1 [17.6].
In his first report, Mr Heath's calculation of the loss of value as a result of compliance with the conditions of the Development Approval was based upon an estimate of $643,454.50 for the cost of compliance.[95] The costs of compliance were substantially less. Mr Heath's report of 31 May 2018 used the values and estimated land areas from the earlier report, but updated the costs of compliance with the conditions of the Development Approval to the actual costs ($356,547), as provided to him by the plaintiff.[96]
[95] Exhibit 8.1 [17.3].
[96] Exhibit 8.2 [1].
In summary, Mr Heath estimated the loss of value as $740,000 (based on his calculation of market value).[97]
[97] Exhibit 8.2 [3].
The plaintiff's case
Under the agreement
The plaintiff pleaded that the defendants breached warranties in the Land Sale Agreement by failing to disclose, prior to settlement:
(a)there existed a demand, order, requisition or requirement relating to the Land by a local government, namely, the City of Gosnells;
(b)the use of the Land for a transport depot was not lawful; and
(c)the provision of fill and use of the land within the Buffer was not lawful.[98]
[98] Statement of claim [12].
The plaintiff pleaded that the defendants knew there existed a demand, order, requisition or requirement relating to the Land that had been made by the City.[99] The warranty regarding lawful use was not qualified by whether it was known to the seller.
Misleading or deceptive conduct
[99] Statement of claim [13].
The plaintiff pleaded that the contractual warranties were also representations.[100]
[100] Statement of claim [9(iii)].
The plaintiff further alleged that the defendants 'represented or suffered to be represented that they were conducting, on the Land, the business of a transport depot and a heavy haulage driver training school'.[101] And, 'in the premises', represented that they were lawfully entitled to conduct the business of a transport depot and a driver training school on the Land and use the fill and the land within the buffer (the Representations by Conduct).[102] The plaintiff relied on three particulars:
(a)The Defendants, parked motor vehicles, including trucks, on the Land and for payment, provided driver training services from premises situated on the Land utilising a number of trucks located on the Land and operated as a transport depot.
(b)There was no part of the Land fenced off, separated or limited as to the use otherwise made by the Defendants of the Land as a transport depot and heavy haulage driver training school.
(c)The Defendants used the filled area of the Land within the Buffer.[103]
[101] Statement of claim [19].
[102] Statement of claim [20].
[103] Statement of claim [19(a)-(c)].
The plaintiff pleaded that the representations were made in trade or commerce, and were misleading or deceptive or likely to mislead or deceive.[104]
[104] Statement of claim [22], [23], [25].
The plaintiff pleaded that, induced by the representations in the contractual warranties and by the defendants' Representations by Conduct, it completed settlement of the Land Sale Agreement.[105]
[105] Statement of claim [21].
The plaintiff separately alleged that, induced by the Representations by Conduct, it entered the lease agreement with Truckworld for use of the Land as a transport depot.[106]
[106] Statement of claim [21(b)].
The plaintiff further pleaded that any activity which it carried out on the Land, including using the buffer and leasing the Land to Truckworld, were in reliance upon the representations.[107]
[107] Statement of claim [29].
The plaintiff claimed damages for breach of warranty and damages under the Australian Consumer Law, for the following loss and damage:
(a)Loss of value of the Land as a result of the Development Approval;
(b)The costs of complying with the Development Approval Conditions;
(c)The costs, damages or penalties imposed on the Plaintiff arising from Prosecutions.[108]
[108] Statement of claim [33].
In opening submissions, the plaintiff referred to the body of law on misleading and deceptive conduct by silence, or where a party may be operating under an assumption induced by the conduct of the other party. Its pleaded case, however, was based on specified representations that were misleading or deceptive or likely to mislead or deceive.
The defendants' case
The defendants denied the claim for breach of warranty and pleaded that the warranties in the Land Sale Agreement:
i)were limited to the extent otherwise disclosed in writing; and
ii)related to any demand, order, requisition or requirement relating to the Land by an Authority; and
iii)the demand, order, requisition or requirement remained current; and,
iv)required both (ii) and (iii) above to be known by the defendants.[109]
[109] Defence [9(b)].
The defendants said that the resolution of the Council did not constitute a demand, order, requisition or requirement relating to the Land by an Authority. They further pleaded that their use of the Land was lawful, and the permission they gave to Keen Bros to park vehicles on the Land was not unlawful.[110]
[110] Defence [12].
The defendants further denied that they knew there was a demand, order, requisition or requirement relating to the Land. They said that they 'were informed from the substance of an email on or about 29 November 2011 from [Ms Johnson] that the Development Application was approved and no conditions in the Resolution remained current'.[111] The defendants further said that the City did not notify them of any unsatisfied or current conditions, nor did it require them to perform any action, while they were the owners of the Land.[112]
[111] Defence [13(a)].
[112] Defence [13(b)].
The defendants further pleaded failure by the plaintiff to comply with the terms of cl 15.4 of the Land Sale Agreement, which required notice within 10 business days of any claim for compensation for an error or misdescription of the Property.[113]
[113] Defence [9(c)(iii)].
The defendants pleaded that the matters the plaintiff said were not disclosed had been disclosed to the plaintiff by:
(1)the plaintiff's enquiries with the City;
(2)a letter the plaintiff received from the City on or about 14 February 2013; and
(3)the knowledge of Mr Tucker, a director of the plaintiff, who visited the Land on 5 April 2013.[114]
[114] Defence [11].
The defendants did not, however, assert that they disclosed any of those matters in writing pursuant to cl 9 of the Land Sale Agreement.
The defendants also pleaded that those matters would have been disclosed to the plaintiff had it made sufficient inquiry with the City 'in accordance with the inquiries reasonably required of it in accordance with the terms of the Land Sale Agreement.'[115] The defendants did not specify the terms of the agreement under which the plaintiff was required to make those inquiries.
[115] Defence [11(c)].
The defendants denied that they conducted a business on the Land or that they made the pleaded representations or suffered them to be made.[116]
[116] Defence [19].
The defendants denied that the plaintiff was induced by any representations they made, and pleaded that the plaintiff relied solely on its own enquiries.[117]
[117] Defence [21].
The defendants relied on the lease between the plaintiff and Truckworld. In particular they pleaded that the plaintiff and Truckworld agreed (as an essential term of the lease):
(1)The Land may only be used for 'Truck and Trailer Rental. Trailer Sales'.
(2)Truckworld would not permit the Land to be used for any illegal or unlawful use whether temporary or permanent.
(3)Truckworld would keep in force all licences or permits required to be obtained from any Governmental Agency to enable Truckworld to lawfully carry on the business on the Land including 'any developmental approval required by the local authority'.
(4)Truckworld would indemnify and keep indemnified the plaintiff 'against any claims or liabilities arising out of' Truckworld's business activities conducted within the Land or its use of the Land.
(5)Truckworld would comply at all times with all Laws affecting or relating to the use of the Land.[118]
[118] Defence [22].
The lease further provided that Truckworld would keep the plaintiff indemnified against all claims or loss whatsoever which the plaintiff may suffer or incur arising directly or indirectly from any breach by Truckworld of any Environmental Laws in respect of the Land as a consequence of the occupation and use of the Land by Truckworld during the term.[119]
[119] Defence [22(ix)].
Breach of contract
Construction
The contract was subject to the conditions contained in the 2011 Joint Form General Conditions for the Sale of Land. Relevantly:
9.1Except as otherwise disclosed in writing by the Seller to the Buyer before the Contract Date, the Seller represents and warrants to the Buyer as at the Contract Date and as at the earlier of possession or Settlement as follows.
(a) The seller does not know of any of the following.
(1)Any demand, order, requisition or requirement relating to the property which:
(A)has been made by an authority and remains current; [120]
(B) which an Authority proposes to make …
9.2Except as otherwise disclosed in writing by the Seller to the Buyer before the Contract Date, the Seller represents and warrants to the Buyer as at the Contract Date as follows
…
(b) the use of the Property is lawful.[121]
[120] 'Authority' was a defined term in cl 26 and means 'any governmental, statutory or other authority including a local government': Exhibit 67, 18.
[121] Exhibit 67, 10.
There was no dispute about the principles to be applied in the construction of the Land Sale Agreement as a commercial agreement:[122]
(1)It should be given an objective construction by determining what a reasonable business person would have understood its terms to mean.
(2)The text, context (the entire context), and purpose of the Land Sale Agreement are to be considered in objectively determining the rights and liabilities of the parties.
(3)The agreement should be construed to avoid it 'making commercial nonsense or working commercial inconvenience'. A reasonable commercial construction is to be preferred to a 'strict legal meaning' or a 'literal interpretation'.
(4)The agreement has to be considered as a whole and any apparent inconsistency should be avoided.
(5)If the language of the agreement is 'ambiguous' because it is 'susceptible of more than one meaning' or because there is a 'constructional choice', objective surrounding circumstances ('events, circumstances and things external to the contract which are known to the parties') may be considered in construing it.
[122] See Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7; (2014) 251 CLR 640 [35]; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37; (2015) 256 CLR 104 [46] ‑ [51]; Wise Energy Group Company Ltd v Rocke [No 2] [2016] WASCA 125.
The questions raised, on the proper construction of cl 9, are:
(1)did the city make a demand, order, requisition or requirement relating to the Land by imposing terms and conditions on the Development Approval;
(2)if so, was the demand, order, requisition or requirement current at the date of the Land Sale Agreement;
(3)does cl 9.1(a) require that the defendants have actual knowledge of the demand, order, requisition or requirement and that it is current;
(4)did the defendants have that knowledge;
(5)under cl 9.2(b), does the seller warrant that its use of the Land is lawful, and does it warrant that the whole of the Land is being lawfully used;
(6)is the use of the Land lawful if the occupier has not complied with or satisfied the conditions of the Development Approval; and
(7)was the use of the Property lawful.
The words 'demand, order, requisition or requirement' should be considered together, and the composite phrase is intended to have wide operation. By resolutions 514 and 515, the City imposed conditions which set out a series of things that the land owner had to do: submit plans; pave, seal and drain the hardstand; construct a fence along the boundary of the buffer; prepare and implement a Foreshore Management Plan; provide turning templates; and restore and revegetate the buffer. In my opinion, all of those things are properly described as demands or requirements made by the City. If I am wrong regarding all of them, at least the directions in resolution 515 to remove items from the buffer, restore its levels, and revegetate the area, come within cl 9.1.
The works directed in resolution 515 were to be undertaken within 60 days of the date of the resolution. Where, under a written law, something is required or directed to be done within a particular period, the obligation to do that thing continues until the thing is done, notwithstanding that the period has expired.[123]
[123] Interpretation Act 1984 (WA), s 71.
None of the conditions of the Development Approval had been satisfied at any time before settlement of the Land Sale Agreement.
The result is that there were demands or requirements that were current at the time of the Land Sale Agreement.
The defendants' warranty in cl 9.1 was that, as at the Contract Date and as at the earlier of possession or settlement, they did not know of a demand or requirement. The plaintiff's case was that the defendants knew of the conditions on the Development Approval (including the directions) from Christmas 2011 at the latest. There is no evidence that anything happened in the first half of 2013 that affected the defendants' knowledge. In the present case, there is no factual difference between the Contract Date (21 February 2013) and the date of settlement (1 July 2013).
The plaintiff pleaded a case of actual knowledge. The warranty, in my opinion, requires actual knowledge of a current demand or requirement relating to the Land.
There are circumstances where a combination of suspicious circumstances and a failure to make inquiry may sustain an inference of knowledge of the actual or likely existence of a relevant matter. I have taken into account the matters that were known to the defendants (or at least to Mr Keen):
(1)the notification in the sales report that Ms Johnson provided to the defendants;
(2)Ms Johnson told Mr Keen about an application for hardstanding and parking of trucks;
(3)the conditions in the annexure to the Land Sale Agreement between the defendants and the Breeses (including the obligation on the Breeses to complete any works the council might require);
(4)the emails forwarded by Ms Johnson; and
(5)the council's letter of 7 December 2011, with its reference to terms and conditions.
All of these would reasonably lead someone to at least inquire about current demands or requirements relating the Land.
I also take into account that the defendants had been in possession of the Land for about a year without any demand or action by the City. And I also take into account my assessment of the defendants. They appear to have run a successful truck driving school, but neither presented as sophisticated in business matters. To draw the inference sought by the plaintiff, I must be actually satisfied that the defendants knew of the requirements or demands made by the City, and taking all of these factors into account, I am not.
Accordingly, I am not satisfied that there was a breach of the warranty in cl 9.1(a).
Clause 9.2, however, was a warranty that the use of the Property was lawful, and not a warranty as to the seller's knowledge.
Whether the use of the Property was lawful requires consideration of the planning scheme and the Planning and Development Act.
The City of Gosnells, Town Planning Scheme No 6 was approved under the Town Planning and Development Act 1928 (WA),[124] and published in the Government Gazette of 15 February 2002.[125]
[124] Repealed and replaced by the Planning and Development Act 2005 (WA).
[125] Exhibit 2.1.
The relevant provisions of the Scheme mirror pt 10 div 5, ss 162 ‑ 164 of the Planning and Development Act:
(1)Development means the development or use of any land.[126]
(2)A person must not use any land or commence or continue to carry out any development within the Scheme area unless all approvals required by the Scheme have been granted and issued and otherwise than in accordance with any conditions imposed.[127]
(3)All development on land zoned and reserved under the Scheme requires the prior approval of the local government and a person must not commence or carry out any development without first having applied for and obtained planning approval.[128]
(4)The local government may grant planning approval for a use or development already commenced or carried out if the development conforms to the provisions of the Scheme.[129]
(5)Development which was unlawfully commenced is not rendered lawful by the occurrence of any subsequent event except the granting of planning approval and the continuation of the development unlawfully commenced is taken to be lawful 'upon the grant of planning approval'.[130]
(6)A local government may grant its approval with or without conditions.[131]
[126] Planning and Development Act, s 4.
[127] Exhibit 2.1, cl 12.4(b).
[128] Exhibit 2.1, cl 9.1.
[129] Exhibit 2.1, cl 9.4.1.
[130] Exhibit 2.1, cl 9.4.2; Planning and Development Act 2005 (WA) s 164(4).
[131] Exhibit 2.1, cl 11.3.
The defendants pleaded that the use of the Land was lawful and submitted that their use was to give possession of the Land to Keen Bros. That submission, in my opinion, gives too restrictive an operation to the warranty in cl 9.2.
In my opinion, a reasonable business person would understand the warranty to be as to the whole of the Land, or at least to only not include some use which was inconsequential. In warranting that the use of the Land was lawful, the defendants promised, in effect, that the new owner could lawfully continue to use the Land in the manner it was being used at the Contract Date.
The use of the Land (by anyone) was not lawful unless it was in accordance with the conditions subject to which the Development Approval had been granted.[132] Neither the existing owner (Seller) nor the new owner (Buyer) could lawfully continue the use of the Land. The only other alternative was to remove the existing development and restore the Land. The warranty in cl 9.2(b) was engaged because the conditions imposed on the Development Approval had not been complied with.
[132] Planning and Development Act 2005 (WA), s 162(1)(b).
Accordingly, I find that there was a breach of the warranty in cl 9.2(b) of the Land Sale Agreement.
The time bar pleaded by the defendants
The defendants relied on cl 15 of the Land Sale Agreement, by which the Buyer must give notice of any claim for compensation for an error or misdescription of the Property in the contract, not later than 10 Business days after the Buyer had been given possession. By cl 15.1, an error meant:
An error or misdescription in the Contract relating to:
(a)a physical structure or physical feature of the Property;
(b)a boundary of the Property; or
(c)the area of the Land.
I do not accept the defendants' contention that the alleged contractual breaches were subject to the time limitation in cl 15.3 of the Land Sale Agreement.
The meaning of an exclusion or limitation clause is to be determined 'by construing the clause according to its natural and ordinary meaning, read in light of the contract as a whole'.[133] Whether a clause excluding liability applies to particular breaches of contract is a matter of construction.[134]
[133] Darlington Futures Ltd v Delco Australia Pty Ltd [1986] HCA 82; (1986) 161 CLR 500, 510.
[134] Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Australia) Pty Ltd (1980) 144 CLR 300, 305.
The breaches alleged by the plaintiff are not an error or misdescription in relation to a physical structure or feature, the boundaries, or the area of the Land. They do not come within the meaning of 'error or misdescription' in cl 15.1 of the Land Sale Agreement.
Specifically, the warranty that the use of the Land is lawful was not an error or misdescription within cl 15.
Misleading or deceptive
The misleading or deceptive conduct case was based on representations made in the warranties in the Land Sale Agreement, and also Representations by Conduct.
A warranty in a contract as to a presently existing state of affairs may be a representation and, if misleading or deceptive, within the scope of the statutory prohibition against misleading or deceptive conduct.[135]
[135] Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [35]; Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470, 505.
For the reasons given above, I am not satisfied that the representation by the defendants that they did not know of any demand or requirement relating to the Land was false. A statement can be misleading or deceptive even if true. But there is no evidence that the plaintiff relied on the warranty in cl 9.1 other than in its literal meaning.
The warranty in cl 9.2(b) was a representation about a state of affairs existing at the Contract Date. It was false and as a result was misleading or deceptive.
The plaintiff also alleged that the defendants represented, by their conduct, that:
(1)they were conducting, on the Land, the business of a transport depot and a heavy haulage driver training school;[136] and
(2)they were lawfully entitled to conduct the business of a transport depot and a driver training school on the Land and use the fill and the land within the Buffer.[137]
[136] Statement of claim [19].
[137] Statement of claim [20].
In oral submissions, counsel for the plaintiff appeared to accept that the scope of his proposition was that the acts done by a person using land are a representation, to any person who might see what is being done, that all things being done on the land are lawful.[138]
[138] ts 395.
As a matter of fact, in this case, I am not satisfied that the plaintiff has established the defendants' conduct on the Land in fact conveyed to Mr Peters or Mr Tucker the implied representations the plaintiff has pleaded.
Mr Peters said that, from visiting the adjacent property of Truckworld at 172 Maddington Road, he observed that the defendants were using the Land as a truck driving school and parking trucks on it. Before then, he had seen Desert Ore operating as a transport depot and parking numerous trucks on the Land.[139] Mr Peters said he did an estimate from his observations of the 'filled area', and considered the Property was just large enough to park all of Truckworld's returned trucks and equipment.[140] Because Desert Ore and the defendants had used the Property as a transport depot, he saw no reason why Truckworld could not use it to park the overflow of trucks and equipment.[141] He believed that the Property was being lawfully used, and that the defendants had lawful permission to use the entire filled area of the Property, including the buffer.[142]
[139] Exhibit 4 [18] ‑ [19].
[140] Exhibit 4 [20].
[141] Exhibit 4 [38] ‑ [39].
[142] Exhibit 4 [53].
I am not satisfied that Mr Peters' belief arose from any perceived representation by the defendants (or Keen Bros).
Mr Tucker gave similar evidence about his observations from 172 Maddington Road. He also said that he considered 'the filled area of the Property' was just large enough to park all of Truckworld's surplus trucks and equipment.[143]
[143] Exhibit 7.1 [11].
The most detailed evidence was given by Tony Michael Ives, who at the relevant time was a director of Truckworld. In late February 2013, Mr Tucker advised Mr Ives that the plaintiff had entered an agreement to purchase the Property. Mr Tucker requested that Mr Ives undertake a physical inspection of the Property to confirm that the space was sufficient and suitable for Truckworld's requirements. In around March 2013, Mr Ives attended the Property and asked if he could 'take some critical dimensions of the Property to create a floor plan of how we would use the yard'.[144] Mr Ives then attended the Property on approximately seven occasions to try to work out the best way to make use of the yard, shed and offices.[145] While Mr Ives gave some general evidence of what he saw, no floorplan was produced. Neither Mr Peters nor Mr Tucker referred to what Mr Ives was asked to do, or to any floorplan or detailed consideration of how the Property could be used.
[144] Exhibit 3 [18].
[145] Exhibit 3 [20].
The question of a representation by conduct is, in the circumstances, probably sterile. There was both a contractual warranty and, by that warranty, an express representation that the use of the Land was lawful.
The plaintiff pleaded that it completed settlement of the sale of the Land in reliance on the representations. Mr Peters testified that, had he been told about the unlawful use, he would not have proceeded with the Land Sale Agreement.
Generally a plaintiff's evidence concerning what they would have done but for a misrepresentation or other wrong must be treated with caution.[146] Conclusions should be reached, as far as possible, on the basis of contemporary materials, objectively established facts and the apparent logic of events.[147] Looking at the objective probabilities, however, I have no hesitation in accepting that the plaintiff, as a purchaser, would not have proceeded to settlement had it known that the Land was subject to unperformed conditions on a Development Application and that the continued use of the Property was unlawful.
[146] Chappel v Hart[1998] HCA 55; (1998) 195 CLR 232 [32] (fn (64)); [93];Rosenberg v Percival [2001] HCA 18; (2001) 205 CLR 434 [24]; J. Attard v James Legal Pty Ltd [2010] NSWCA 311; (2010) 80 ACSR 585.
[147] Fox v Percy[2003] HCA 22; (2003) 214 CLR 118 [31].
On the basis of a breach of warranty and for misleading and deceptive conduct by the express representation in cl 9.2 of the Land Sale Agreement, the defendants are liable to the plaintiff.
Damages
The plaintiff claimed damages for:
(a)Loss of value of the Land as a result of the Development Approval;
(b)The costs of complying with the Development Approval Conditions; and
(c)The costs, damages or penalties imposed on the plaintiff arising from the prosecutions by the City.
In its written opening submissions, the plaintiff claimed damages of $860,702.04 - the sum of the loss of value of the Land (based on market value), compliance costs and prosecution costs. In oral opening submissions, the plaintiff appeared to confine that measure of loss to its claim in contract, but left open a different method of calculation should the claim under the Australian Consumer Law succeed.
A schedule filed shortly before trial departed markedly from what had been pleaded and detailed in the plaintiff's opening submissions. The plaintiff claimed (exclusive of GST):
Purchase Price $4,000,000 Real Value Market value at 21 February 2013 without being compliant with the Development Approval requirements $2,510,000 Difference $1,490,000 Fines $45,000 Lost Rent During the period of the compliance works (June to October 2016) 5 months at $34,399.04 per month $171,995.20 The plaintiff also claimed interest on the difference between the purchase price and the 'real value' from the date of settlement at 6% per annum.
Principles
Contractual breach
The plaintiff bore the onus to prove the nature and extent of the damages it suffered as a result of the breach of warranty.[148]
[148] Unity Insurance Brokers Pty Ltd v Rocco Pezzano Pty Ltd [1998] HCA 38; (1998) 192 CLR 603, 608, 612, 627 ‑ 628, 640; Commonwealth v Amann Aviation [1991] HCA 54; (1991) 174 CLR 64, 80.
The plaintiff is to be placed in the same situation with respect to damages, so far as money can do it, as if the contract had been performed.[149]
Misleading or deceptive conduct
[149] Robinson v Harman [1848] EngR 135; (1848) 1 Ex 850, 855; European Bank Limited v Robb Evans of Robb Evans & Associates [2010] HCA 6; (2010) 240 CLR 432 [11] ‑ [12]; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 [13]; Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64, 80.
The measure of damages to be awarded for breach of the Australian Consumer Law is not confined by analogy to those awarded in contract, tort or equity.[150] Questions of causation and the assessment of damages are to be answered having regard to the scope and purposes of the statute.[151]
[150] Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494 [15], [38], [151].
[151] Henville v Walker[2001] HCA 52; (2001) 266 CLR 459 [18], [66] - [69], [96], [164]; Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627 [30], [49], [54], [79].
Concepts of causation and damages are closely linked under the Act. The statutory criterion is that the damages are suffered 'by' the contravening conduct. Limitations on relief should not be imposed beyond the terms of the Act.[152]
[152] Henville v Walker [2001] HCA 52; (2001) 206 CLR 459 [68] [69] (McHugh J).
Generally speaking, the damages awarded are the amount required to put the plaintiffs, as nearly as possible, in the position in which they would have been had the misleading or deceptive conduct not occurred. Damages are generally assessed by reference to the detriment suffered as a consequence of the plaintiffs reliance upon the contravening conduct, and not by the amount required to make good the expectation created by the conduct.[153]
[153] Gates v City Mutual Life Assurance Society Ltd[1986] HCA 3; (1986) 160 CLR 1, 14 ‑ 15; Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215, 220 - 221; Henville v Walker[2001] HCA 52; (2001) 206 CLR 459 [132].
In Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2], Martin CJ said:
Where the conduct in contravention of the Trade Practices Act is found to have been a material cause in the acquisition of an asset by the innocent party, the ordinary measure of damage will be the difference between the price paid for the asset, and its true value at the time of acquisition … When assessing the value of that which has been acquired, subsequent declines in value can be taken into account if inherent in the asset itself at the time of acquisition, but not if 'independent', 'extrinsic', 'supervening' or 'accidental'. In addition, losses caused by and flowing from the acquisition of the asset, such as trading losses incurred in running a business may also be recovered. Provided the causal connection between the contravening conduct and the acquisition of the asset is established, it is otherwise unnecessary to establish a causal connection between the subject matter of the contravention and the cause of the loss.[154]
[154] Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 [101] (citations omitted).
His Honour qualified that general statement when he later said:
However, this is not to say that once a party has been induced to acquire an asset, all losses suffered thereafter can be taken to have been 'caused' in the legal sense, by the contravening conduct which induced the party to acquire the asset. In this context, losses incurred, or which come to light subsequent to the acquisition of the asset must be evaluated with care. If and to the extent that those losses flow from something inherent in the asset itself and its condition at the time of acquisition, they are properly taken into account in assessing its true value at the time of acquisition, which goes to the assessment of the loss on acquisition. However, if they are not of that character, or cannot be characterised as losses incurred during the period over which the asset was reasonably retained before and after knowledge of the true facts, then they are properly characterised as independent, extrinsic, supervening or accidental and fall outside the scope of the losses for which the contravener is responsible.[155]
Loss of value of the Land and costs of compliance
Land value
[155] Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183 [115] (citations omitted).
The first issue is the value of the Land itself. On the plaintiff's evidence, the market value of the Land would have been $3,250,000 if the representations had been true. The plaintiff now seeks damages calculated by reference to the price it paid, although the plaintiff agreed to pay well over market value.
In his report, Mr Heath recognised that a premium had been paid, possibly due to the plaintiff being an adjacent owner.[156] He did not attempt a valuation based on the combined use of the Land.
Loss of usable land due to the buffer and turning template
[156] Exhibit 8.1 [16.3].
In my opinion, it is reasonable to accept that the usable area of the Property does not include the area required to be fenced off and revegetated within the buffer. That buffer area exceeded the area that was apparently unusable even without the development conditions (for example, the bank of the brook). If the rate per square metre has been calculated on the basis the Property has 9,860 m2 usable area, the buffer should be excluded in calculating the value of the Property as an industrial property.
I am not satisfied, however, that the same approach applies to the turning template. There is nothing in Mr Heath's report, or the methodology he described, to support that approach. In each of the comparable sales used to estimate the market value rate for the Property, the site rate has been calculated by dividing the sale price by the site area. Except for the exclusion of Local Open Space, the market value has not taken into account whether all parts of the Property are of equal value, and the rate per square metre has not taken into account whether particular areas are potentially more (or less) valuable because of any specific use that can be made of them. It may be that, in valuing the Property, some discount overall would be made if parts of it were of limited use. But that is not what Mr Heath did.
I am satisfied that the land in the buffer should be valued and excluded from the market value of the Land. The estimate of area and value was carried out by Mr Heath.
I have found that the plaintiff would not have proceeded to settlement on the Land Sale Agreement were it not for the representation that the use of the Land was lawful. The fact that the plaintiff paid a premium does not lessen its loss. The plaintiff paid $4 million dollars. The market value of the land it purchased (when adjusted for the value of the land in the buffer) was $3,020,000 (the market value of $3,250,000 less $230,000 for the unusable area of the buffer). The plaintiff suffered a loss of $980,000.
Compliance costs
The next issue is how the costs of compliance should be treated. The plaintiff pleaded the loss of value and the costs of compliance as separate things.[157] In a schedule of damages filed 13 July 2018, however, the plaintiff claimed the costs of compliance with the Development Approval conditions as a component of the loss of value of the Land (based on Mr Heath's calculations). The practical consequence of doing the assessment in that way is to shift the date on which interest is claimed from the date amounts were paid to the various contractors to the Date of Contract.
[157] Statement of claim [33].
One difficulty in that approach is that there is no evidence that the cost of compliance in July 2013 would have been the same as what was actually paid in 2016 and 2017.
The general rule is that damages are assessed at the date of breach.[158] The rule is not universal, and 'must give way in particular cases to solutions best adapted to giving an injured plaintiff that amount of damages which will most fairly compensate him for the wrong he has suffered'.[159] Conceptually, it is possible to treat the cost of compliance as affecting the value of the Land at the date of purchase. But it is more consistent with the way in which the plaintiff pleaded its case and its written opening submissions, and, in my opinion, the fairest way to compensate the plaintiff for the loss it has suffered, to compensate for the actual costs of compliance from when those costs were incurred, rather than treat the costs of compliance as a component of loss of value of the Land. That part of the plaintiff's loss should be the costs actually incurred.
[158] Johnson v Perez[1988] HCA 64; (1988) 166 CLR 351, 367.
[159] Johnson v Perez[1988] HCA 64; (1988) 166 CLR 351, 355 - 356, 367, 371, 380; Tabcorp Holdings Ltd v Bowen Investments Pty Ltd [2009] HCA 8; (2009) 236 CLR 272 [26]; Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1996] UKHL 3; [1997] AC 254, 265.
The loss should be assessed at the date of payment and not the date of the breach.
Loss of rent
In final submissions, and in its revised schedules, the plaintiff claimed lost rent during the period of compliance works. The material facts relating to this loss were not pleaded and not included in the particulars.
Further, the loss claimed is based upon the rent previously received from Truckworld, a related company, which was using the Property in conjunction with the adjacent Truckworld premises. The plaintiff has neither pleaded nor proved what the market rent was during the relevant period when works were carried out. I am not satisfied I can infer the market rent from the rent it had actually received from Truckworld.
I would not allow the claim for lost rent.
Fines and costs
I am not satisfied that the fines and costs incurred by the plaintiff in the prosecution by the City can be taken to have been 'caused', in the legal sense, by the defendants' contravening conduct which induced the plaintiff to acquire the Land. The conditions of the Development Approval were brought to the plaintiff's attention in July 2013. Action against it was only commenced in March 2014, following its continued use of the Land without taking any steps to comply.
The plaintiff did not commence proceedings to rescind the Land Sale Agreement until March 2015. In the intervening period, Truckworld continued to use the Land.
Mr Peters was asked in evidence about the steps taken by the plaintiff to negotiate with the City about bringing the Land into compliance. He said only that he left that to Mr Tucker and the plaintiff's solicitors, and that he did not believe the City would take the plaintiff to court.[160]
[160] ts 131.
On 6 February 2014, the City advised that it would put compliance action on hold for 28 days, and further advised, 'Should you wish to readdress the current approval, all commercial vehicles are to be removed from the buffer zone, pending any further approvals'.[161]
[161] Exhibit 2.125.
Even when the first prosecution notice was issued, the plaintiff continued its use of the Land. The compliance work only began in 2015.
I would not include the fine and costs in the plaintiff's loss by reason of the defendants' conduct.
Conclusion
The plaintiff has proved a case in breach of warranty and for misleading or deceptive conduct. I assess damages in the sum of $980,000, plus $356,547 for the costs of bringing the Land into compliance with the Development Approval.
I will hear the parties on the form of the orders, including interest.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CG
Associate to the Honourable Justice Allanson2 MAY 2019
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