Arnot v Hill-Douglas

[2006] NSWSC 429

CITATION:	Arnot v Hill-Douglas [2006] NSWSC 429
HEARING DATE(S):	13 and 14 February 2006
JUDGMENT DATE :	12 May 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Defendants' cross claim regarding misrepresentation dismissed. Plaintiffs granted order to take first step towards specific performance.
CATCHWORDS:	CONTRACTS [120]- Construction- Entire contract clause- Scope. EQUITY [37]- Misrepresentation- Words said during general discussion- Contracts five months later- Little indication by alleged representee as to effect on him of such words- Held no representation made.
LEGISLATION CITED:	Trade Practices Act 1974 (Cth), s 52
CASES CITED:	Aneve Pty Ltd v Bank of Western Australia Ltd [2005] NSWCA 441 Australian Co-operative Foods Ltd v Norco Co-operative Ltd (1999) 46 NSWLR 267 Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 Deming v Darling 20 NE 107 (Mass SC 1889) Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471 Inntrepreneur Pub Co (GL) v East Crown Ltd [2002] 2 Ll Rep 611 Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190 Lamare v Dixon (1873) LR 6 HL 414 Macquarie Generation v Peabody Resources (2001) Aust Contract Rep 90-021 CG Mal Pty Ltd v Sanyo Office Machines Pty Ltd [2001] NSWSC 445 Pappas v Soulac Pty Ltd (1983) 50 ALR 231 Redgrave v Hurd (1881) 20 Ch D 1 Skywest Aviation Pty Ltd v Commonwealth of Australia (1995) 126 FLR 61 Traill v Baring (1864) 4 De GJ & S 318; 46 ER 941 Watson v Foxman (2000) 49 NSWLR 315 With v O'Flanagan [1936] 1 Ch 575
PARTIES:	5974/05 David Arnot and Kellie Anne Arnot (P) Bruce Talbot Boswell Hill-Douglas and Vicki Johanna Hill-Douglas (D) 5993/05 John Arnot and Anneliese Maria Arnot (P) Bruce Talbot Boswell Hill-Douglas and Vicki Johanna Hill-Douglas (D)
FILE NUMBER(S):	SC 5974/95; 5993/05
COUNSEL:	B A Coles QC and N Bilinsky (P) P Fox and L Young (D)
SOLICITORS:	B Bilinsky & Co (P) David Beattie Pty Ltd (D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Friday 12 May 2006

5974/05 – ARNOT v HILL-DOUGLAS
5993/05 – ARNOT v HILL DOUGLAS

JUDGMENT

1 HIS HONOUR: These two sets of proceedings are brought to secure the first step towards obtaining a decree of specific performance of two contracts for the purchase of land at Burradoo near Bowral.

2 The plaintiffs are two brothers and their respective wives. The two contracts are in respect of adjoining pieces of land, being part of a proposed subdivision. In 5993/05, the plaintiffs are John and Anneliese Maria Arnot. This case concerns Lot 21. In 5974/05, the plaintiffs are David and Kellie Anne Arnot. This case concerns Lot 22. Lot 21 adjoins Lot 22 to the west. At present both lots 21 and 22 form part of Lot 2 in the defendants’ current deposited plan.

3 In each case the defendants are Bruce Talbot Boswell Hill-Douglas and Vicki Johanna Hill-Douglas.

4 The defendants are the proprietors of a large piece of land at Burradoo. A large house, Green Loaning, is erected on the land which has been in the male defendant’s family since about 1948. The defendants proposed to subdivide some of the land adjoining the house. The plaintiffs became aware of this and contacted Angus Campbell-Jones, then a representative of Carpenters Real Estate trading in the district.

5 The Arnots had had previous dealings with Angus Campbell-Jones and asked him to ascertain whether the owners would be prepared to sell the land to them.

6 After discussion with Mr Campbell-Jones, the plaintiffs understood that the defendants would be reluctant to sell to a subdivider, but that they might sell to a person who wished to build a personal residence. The plaintiffs asked Mr Campbell-Jones to sound out the owners and provided him with a sketch plan, which later became p 11 in the defendants’ tender bundle.

7 Mr Campbell-Jones wrote to Mr Hill-Douglas on 24 May 2004, enclosing a copy of the sketch plan. In due course a meeting was called for Melbourne on 15 December 2004, a meeting that I will need to discuss in some detail later in these reasons.

8 There is no doubt that contracts for purchase were duly exchanged on 31 May 2005. The contracts were in identical format and were in the 2000 edition of the standard form. There were various special conditions. However, it is only necessary to refer to the following:

35.3 ENTIRE AGREEMENT
To the extent permitted by law, in relation to the subject matter of this contract, this contract:
(a) embodies the entire understanding of the parties; and constitutes the entire terms agreed on between the parties; and
(b) supersedes any prior written or other agreement between the parties.

37. PLAN OF SUBDIVISION

37.1 Completion of this Contract is conditional on registration of the draft Plan of Subdivision annexed hereto and marked with the letter “A" (“the Plan of Subdivision”).
37.2 The Vendor must use all reasonable endeavours to have the Plan of Subdivision registered within twelve (12) months of the date hereof.
37.3 If the Plan of Subdivision has not been registered within twelve (12) months from the date hereof either the Vendor or the Purchaser may rescind.

40. CONDITIONAL CONTRACT
40.1 This Contract is conditional and interdependent upon the completion of the Contract for the sale of part of the land (being Lot 21 in the proposed Draft Plan of Subdivision annexed hereto and marked with the letter “B”) to John Arnot and Anneliese Maria Arnot.
40.2 This Contract is not dependent upon the registration of the Plan of Subdivision marked “B”.
40.3 The Vendor will consent to the lodgement by the Purchaser of the proposed Plan of Subdivision marked “B” with the Wingecarribee Shire Council at any time prior to completion.

9 By letter of 23 August 2005, the vendor’s solicitor sent the plaintiffs a letter which contained the following:

Accordingly, I am instructed to advise you as follows:
1. My clients were induced to enter into the Contracts because of the misrepresentations made by your clients as set out above and had these misrepresentations not been made, my clients would never have entered into the Contracts.
2. As a result my clients now elect to treat the Contracts as void ab-initio.
3. The Agent has been instructed to return the deposit and all interest thereon to your clients save for the sum of $15,000 which will be retained pending the completion of all rectification work and payment of my costs.
I am further instructed to require that your clients:
1. Forthwith withdraw from Wingecarribee Shire Council any and all applications made to Council concerning the subject land.
2. Attend to the removal of all trees and any other plants which they have wrongfully planted on the land within 7 days from the date hereof, failing which my clients shall arrange for their removal, in all things at your clients’ expense.
3. Replace with similar indigenous flora and in the locations shown on the coloured plan all that which they wrongfully removed and pay for all costs associated with the establishment thereof.
4. Forthwith remove the security fence wrongfully erected on the land and replace it with an appropriate rural post, wire and netting fence.
5. Make good any and all other ways in which they may have wrongfully interfered with my clients’ land not hereinbefore referred to.
6. Make a suitable written apology to my clients’ tenant, Mr R. Aistrope, and reimburse him for water and sewerage usage charges which they have wrongfully incurred to his account.
Subject to the above, your clients are forbidden from further entering upon the property.

10 On 22 September 2005, the plaintiffs issued the statements of claim for declarations that there were contracts on foot and for specific performance of those contracts. As a first step towards specific performance, the plaintiffs sought an order that the defendants submit the appropriate plans of subdivision to the Wingecarribee Shire Council.

11 The principal defence was that of innocent misrepresentation, though there was an ancillary defence that equity would not grant specific performance because of breach of a deliberate promise made before the contract was made.

12 The defendants also filed cross claims. The essence of the cross claims is in paragraphs 3-7 in the final version. I set out paragraph 3 and summarize 4-7 below.

13 Paragraph 3 of the cross claim in John Arnot’s case (a corresponding pleading was filed in the other proceedings) provides:

“3. In order to induce the cross claimants to enter into the Contract for Sale, the cross defendants made the following representations at a meeting on 15 December 2004 by the provision of written material to the Defendants on or about 26 May 2004 as mentioned below (the 15 December 2004) representations which expression includes the representations made by the provision of written materials mentioned below on or about 26 May 2004):

a. That the dwelling proposed to be erected on the land the subject of the Contract for Sale would be of single storey [withdrawn shortly before the trial].

b. That the dwelling proposed to be erected would be no closer to Links Road than the rearmost south eastern corner of the house on the cross claimants’ adjoining land known as “Green Loaning”.

c. That the dwelling to be erected would not overlook Green Loaning.

d. That the dwelling on the land the subject of the Contract for Sale and also that on lot 22 would generally conform to the styles of dwelling contained in the brochure from Claron Projects Pty Ltd and the picture of “Patchway” both of which appear in exhibit BHD 1 at pp 12 and 13 respectively.

e. That the cross defendants would retain the trees on the land the subject of the Contract for Sale and on lot 22, save for those which it would be reasonably necessary to clear to enable building to take place.

f. That the rural character of the land and outlook from Green Loaning would be maintained."

14 Particulars were given to the effect that, the representations were made at a meeting between Mr Hill-Douglas on behalf of the cross claimants, Mr John Arnot on behalf of the cross defendants, Mr David Arnot and Mr Angus Campbell-Jones which took place at a conference room, Law Institute of Victoria. The representations were oral and in writing, the writing being the documents referred to in 3d above and a plan that accompanied a letter to the first cross claimant from Carpenters dated 26 May 2004 which plan is at p 11 in exhibit BHD 1.

15 The cross claim then claimed that at a meeting on 18 February 2005 at a coffee lounge called “Palate Pleasure” at Bowral NSW, the cross defendant David Arnot did not seek to resile from the 15 December 2004 representations and thereby confirmed them. It also alleged that on 2 March 2005, the cross defendants impliedly represented to the cross claimants that they did not resile from the 15 December 2004 representations and thereby confirmed them by procuring the first cross claimant to execute a form of consent to permit the cross defendants to lodge building and other plans relating to the subdivision of the land to be the subject of the contract for sale.

16 Again it is alleged that on 22 May 2005, the cross defendants, by way of Angus Campbell-Jones, repeated the 15 December 2004 representations to the cross claimants in Melbourne and made representations in terms of the “Master Plan” dated “May '05” particularised below. The cross claim calls these “the 22 May 2005 representations”. The representations were alleged to be oral and in writing. The oral part comprised statements made by Angus Campbell-Jones referring to the writing. The writing consisted of a detailed coloured layout plan entitled “Master Plan” dated “May '05” of the land the subject of the contract for sale showing proposed house sitings, house layouts at ground floor level, house set backs and landscaping, including the retention of 27 existing established trees.

17 The cross claimants then plead that acting in reliance upon the truth of the 15 December 2004 representations, the representations in February and March 2005 and the 22 May 2005 representations and induced thereby, the cross claimants entered into the contracts for sale dated 31 May 2005.

18 The cross claimants claim to have discovered later that each of the representations is untrue in that:

a. That pursuant to the Master Plan dated June '05 lodged with Wingecarribee Shire Council in connection with Land Use Application for the proposed dwelling on Lot 21 DP 9084, Lot 1 DP 1018039, 33 Links Road Burradoo NSW 2576 the dwelling proposed to be erected on the land the subject of Contract for Sale is approximately 14.25m closer to Links Road than as shown on the May ’05 plan and is closer to links Road that the rearmost south eastern corner of the house on the cross claimants’ adjoining land known as “Green Loaning”.

b. That the dwelling proposed to be erected on lot 21 overlooks Green Loaning.

c. That the dwelling proposed to be erected on the land the subject of the Contract for Sale does not conform to the style of dwelling contained in the brochure from Claron Projects Pty Ltd and the set back of the cross defendants’ proposed dwelling does not accord with that shown on a plan that accompanied a letter to the first cross claimant from Carpenters dated 26 May 2004 which is p 11 in exhibit BHD 1.

d. That the cross defendants without consent cut down about 24 of the trees shown on the May 05 plan on the land the subject of the Contract for Sale and on lot 22 regardless of what was reasonably necessary to enable building to take place.

e. That the rural outlook from Green Loaning has been destroyed and the character of the land ruined.

19 The cross claim then alleged that because of the 15 December 2004 representations and the 22 May 2005 representations by letter dated 23 August 2005, the cross claimants rescinded the contract for sale by reason of the 15 December 2004 representations and the 22 May 2005 representations.

20 The original pleading alleged that the representations were fraudulent, but this allegation was abandoned prior to the hearing.

21 Having set out the details of the dispute I have to resolve, I must return to the primary facts.

22 It is common ground that the meeting referred to in the cross-claim was held at noon on 15 December 2004 in a room of the Law Institute of Victoria’s building in Melbourne. There were present David Arnot, John Arnot, Angus Campbell-Jones and Bruce Hill-Douglas.

23 According to Mr Hill-Douglas, the parties sat around a table, with Angus Campbell-Jones to his left, John Arnot to the left of opposite and David Arnot to his right. The same photographs which had been sent to him previously by Mr Campbell-Jones were produced together with the Arnots’ plastic bound ringed type A4 size file which contained photographs of their houses, house plans and perspectives. Mr Hill-Douglas had his own file which included some correspondence and some plans of the land.

24 Early in the meeting, Mr Hill-Douglas claims that he said words to the effect:

“ My family has owned the land since 1948 and I have a very strong attachment to it and am mindful of its being probably the last example of unspoilt local rural character, thus I am concerned to protect this, the amenity of the house, its environs and the locality and have no wish to sell the land for subdivision into two side by side lots, which I could have done myself if I had wanted to. I note that Angus Campbell-Jones has spoken glowingly of you and believe that we have the same concerns, as well as concerns for both the standard of the houses which you intend to build and the quality of their grounds. You know that I do not want my house to be overlooked nor its outlook to be built out so the house to the east of Green Loaning must be of single storey and set back clear of Green Loaming as in the plan Angus Campbell-Jones sent to me.”

25 He says that during the course of the meeting, John and David Arnot were passive and agreeable and did not have a great deal to say. He claims that they said nothing to indicate that they disagreed with what he had said and he observed them nod their heads in apparent agreement.

26 He says that he was aware that the Arnots had sold their properties for about $6m and, as he did not want to sell the land for the construction of side by side houses, he entered into discussion with one or other of them about buying the dwelling, Green Loaning, itself. He says that he had earlier been told by Angus Campbell-Jones that the reason the Arnots had sold their houses was the subdivision and building out of what had formerly been a rural outlook.

27 He claims he said:

“I understand that you have lost your rural outlook and that this is why you sold your houses. This has happened to us twice in Melbourne with our privacy being lost by being overlooked so I sympathise. In the case of Green Loaning, I can stand on the front porch and look around and the only difference from 1948 is that trees have grown, which, in the case of the Gib, has resulted in its losing its identifying outline. I know of no reason why this will change.”

28 He says that the response from one of the Arnots was:

“That is very reassuring for us for we do not want to have to move again for this reason”.

29 He says that that statement and the agreeable demeanour of the Arnots during the course of his statement as to his wishes, led him to believe that they were as concerned as he was to preserve the existing environment and rural Burradoo character of the land they might purchase as well as its flora and fauna.

30 He says that the parties then also discussed the possibility of sale of the land at the rear of the house because both the Arnot brothers appeared more interested in each building a new house rather than for one to purchase the existing dwelling. Mr Hill-Douglas then says he said words to the effect: “I might be prepared to consider selling this land, for, to me, this could also avoid the building of the two houses side by side.”

31 Mr Hill-Douglas had only booked the conference room for an hour and, when this time had expired he claims to have said:

“Well, it seems to me that we are all in agreement on those matters which are important to me and I believe that the price is reasonable, but I am not in any hurry to do anything. Why don’t you have a look at the house and think about the land at the back and let me know what you want to do. As I have indicated, based upon what you have told me, I would be prepared to sell the whole property to you and then you would have one house ready for immediate occupation. Anyway, let me know.”

32 The parties then all went for lunch to Campari Bistro in nearby Hardware Lane and thereafter dispersed.

33 Mr Hill-Douglas says that he relied upon the matters discussed at the meeting in making his decision to sell 35 Links Road to them.

34 Angus Campbell-Jones filed an affidavit giving his account of the Melbourne meeting. He says that he remembers Mr Hill-Douglas speaking of how the land had been in his family for a long period and that he wished to preserve the amenity of the area. He recalls that one of the Arnot brothers said that each of the brothers intended to build a house on the eastern block and that David Arnot said that his house would be two storey with an attached granny flat for his mother and father “along the lines of Patchway”. He produced photographs of Patchway.

35 “Patchway” was a well known, almost historic, building in the Bowral area.

36 Mr Campbell-Jones then remembers that John Arnot said that he proposed to build a single level home on the western side of the eastern block and produced a photograph to illustrate its style.

37 He also remembers John Arnot saying:

“I plan to set my house back so that it is further away from Links Road than the living room of Green Loaning so we can both have some privacy. David’s house will be stepped back again to ensure that the character of the area is maintained. I’d like you to think about moving the western boundary of the land closer to the existing house by way of a boundary adjustment to give a greater street frontage to the eastern block and therefore give David and I more flexibility within the building site."

38 When this case was being prepared for hearing by the plaintiffs’ solicitors, they asked Mr Campbell-Jones for a statement which he provided by letter of 12 October 2005. This letter set out an abbreviated version of the meeting.

39 During cross-examination, Mr Campbell-Jones was asked (T83) about why there was no mention of the conversation which I have set out in [37] above in his letter. He admitted that he had made no notes of the meeting. He also admitted that at the time of the Melbourne meeting, neither of the Arnots had inspected Green Loaning.

40 Mr Campbell-Jones did not come out of this fiery piece of cross-examination very well and, even though Mr David Arnot said in cross-examination that he agreed with Mr Campbell-Jones’ affidavit version of the meeting, I am not satisfied that the words I have set out in [37] were said. It is, however, common ground that Mr Hill-Douglas mentioned his family connection with the land.

41 Turning to the plaintiffs’ evidence, both male plaintiffs swore that they were conducting a landscape gardening business in the Bowral/Burradoo area and became aware that there was vacant land in Links Road, Burradoo. They made enquiries and ascertained that it was owned by the defendants.

42 David Arnot says that the meeting lasted approximately one hour and was quite informal. Both he and his brother said to Mr Hill-Douglas words to the effect, “We wish to buy land for the purposes of building our new homes as we expect that the option to purchase our own land will be exercised. We are not developers nor do we propose to further subdivide the land and sell it, other than to create two blocks identical in size for each of us.”

43 Later in the meeting, David Arnot says that he said to Mr Hill-Douglas words to the effect, “Angus suggested we show you the type of house which each of us proposes to build. We have brought photographs of our own houses and also photographs of other houses in Burradoo which we are interested in. We have not made any final decision except that the house which Kellie and I propose to build would be a 2-storey house which would incorporate a granny flat for my parents.”

44 In supplementary oral evidence, David Arnot said that he had with him a folder containing a number of photographs of houses of various styles with which he would be comfortable and that Mr Hill-Douglas appeared to peruse these with interest.

45 David Arnot says that his brother, John, then said, “The house which Anneliese and I propose building is generally in the style of the house in the brochure of Claron Projects Pty Limited”, and then showed Mr Hill-Douglas the brochure.

46 David Arnot says that during the course of the meeting, there was never any discussion about the exact nature of the house proposed and, at that point in time, no final decision had been made by his wife and himself as to the type of house they wanted to build. At no time was there any discussion about the size, location of house or any other condition attaching to the building of a house on the land. Had conditions been insisted upon which now the defendants insist upon, they say they would never have considered purchasing the land.

47 David Arnot says that at no time during the Melbourne meeting was any agreement reached regarding the purchase of the land, nor did Mr Hill-Douglas say that he would sell the land to the Arnots, nor was there any mention of price.

48 John Arnot gave very similar evidence.

49 The Arnots say that, apart from a brief meeting with Mr Hill-Douglas on 18 February 2005, all communications with him were through Mr Campbell-Jones or through solicitors.

50 On 18 February 2005, the Arnots were working on a job when they received an unexpected telephone call from Mr Campbell-Jones that Mr Hill-Douglas was in Bowral and would like to see them. The Arnots went to a coffee shop in Bowral where there was a 15 minute meeting, but no discussion about the land. I assume that the coffee shop was “Palate Pleasure”.

51 The Arnots said that they understood that Mr Hill-Douglas was in Bowral to see a valuer about the price he should be asking for the land. Mr Hill-Douglas denied this and there is insufficient material for me to draw any firm conclusion.

52 On the morning of 28 February 2005, John Arnot received a telephone call from Mr Campbell-Jones to the effect that Mr Hill-Douglas was prepared to sell the Arnots the land for $1,500,000 which he considered to be reasonable.

53 The parties agreed on the price and draft contracts then commenced flowing between the solicitors. There was a delay because the Arnots wanted two interdependent contracts, one in the name of each set of husband and wife. Contracts were finally exchanged on 31 May 2005.

54 I believe that I have now recounted all the necessary evidence as to the major facts save for: (1) the defendants’ version of what happened on 18 February 2005; (2) what occurred on 22 May 2005; and (3) the land clearing episode.

55 Mr Hill-Douglas says that he was visiting Bowral on 18 February 2005 and that Mr Campbell-Jones had arranged a meeting with the Arnots. He was peeved because the Arnots ran late for the meeting and, while they were waiting, he and Mr Campbell-Jones had coffee at a table outside the "Palate Pleasure".

56 When the Arnots arrived, they indicated that they would like to buy the land as two separate lots. Mr Hill-Douglas said he had no wish to do this as it would require him to spend more money on surveyors, but told the Arnots that they could make their own arrangements.

57 The Arnots deny this alleged conversation and say that as they had not yet even been offered the land, it is unreal to speak in terms of "fine tuning".

58 Mr Hill-Douglas says that he regarded the discussion as covering matters of fine tuning and that he felt it important that the Arnots had not in any way contradicted the matters of personal concern to him which had been discussed in Melbourne.

59 On 22 May 2005, Mr Hill-Douglas says that Mr Campbell-Jones called at the defendants’ Melbourne home in order to have them sign the final version of the contracts. He says that the agent brought with him a Master Plan which showed house sitings, tree retentions and landscaping including new planting. He saw that the Master Plan was in accordance with previous discussions and signed the contracts and authorised their exchange.

60 The Arnots say that there never was any Master Plan, but they assume that what is being referred to is the then current Landscape Plan. They say that they did not provide this to the defendants, though they had given a copy to the agent.

61 The Arnots further say that as the form of contract had only been agreed by the respective solicitors on 20 May 2005, any form of contract that Mr Campbell-Jones took to Melbourne did not come from them. I assume the contract was the final version and provided by the defendants’ solicitors.

62 It is quite clear that the form of contract and plan which Mr Hill-Douglas saw in May 2005 were provided to him by Mr Campbell-Jones, then a representative of Carpenters Real Estate.

63 The defendants’ pleadings endeavoured to say that Mr Campbell-Jones was the plaintiffs’ agent to make representations. This would be very difficult to establish. Although it may be said that the plaintiffs retained him for some limited purposes, he was principally the defendants' agent.

64 In cross-examination a different tack was taken. Mr Fox, for the defendants, put to David Arnot that there was no reason for giving Mr Campbell-Jones the May ’05 plan except for it to be shown to Mr Hill-Douglas. There is a lot of sense in that suggestion, though David Arnot denied it. However, it does not amount to sufficient evidence for me to find that the plaintiffs authorised Mr Campbell-Jones to make representations with respect to the plan.

65 The particulars to the cross claim which I have set out earlier identify the plans of which the cross claimants are speaking. The plan on page 11 of his exhibit is a small plan on which someone has sketched two oblongs each marked “house” on lots #1 and #2. (Another copy of this plan was marked MI 15: MI 15 also has a sketch of the defendants’ house).

66 The plan which Mr Hill-Douglas says he saw in May 2005, Exhibit 101 to his principal affidavit is entitled “Master Plan” and is drawing 0504A/1 of Michael Bligh & Associates Pty Ltd.

67 There is no doubt that the plan was changed after that date and that a later plan called for the removal of eucalypts which the Arnots say they were advised to do by their architect to provide more suitable plantings.

68 I now come to the problem caused by clearing the land. The allegation is that, after contracts were exchanged, sometime in early June 2005, the Arnots entered the land and removed 67 trees without the defendants’ permission.

69 The Arnots say that they obtained permission from Mr Campbell-Jones. David Arnot said at T35, “I specifically asked Angus Campbell-Jones could we remove the trees and he said yes. To quote his exact words, 'You have paid your deposit, exchanged contracts. The block is virtually yours. Go ahead.' "

70 Mr Fox put to John Arnot that Mr Campbell-Jones had said that the Arnots could remove trees because Mr Hill-Douglas was so impressed with the plan of the property that if the Arnots stuck to the plan he would be happy. John Arnot denied that he had been told anything like “if you stuck to the plan”. However, he said that the permission was given to his brother over the telephone and he did not hear the exact words.

71 I thought it was significant: (1) that the question was put at all; and (2) that the question was not put to Mr David Arnot.

72 Mr Campbell-Jones cannot remember giving any such permission. He gave evidence that he had had a conversation with Mr Hill-Douglas earlier in 2005 in which the latter wished him to ask the Arnots to attend to some clearing of the land required by the Council. He believes that he then may have said that the Arnots could remove dead trees, blackberries and the like.

73 In any event, the Arnots say that it is nonsense to say that their activities ruined the outlook. They say that before their action the land was overgrown with weeds and blackberries.

74 The proceedings came on for hearing before me on 13 and 14 February 2006. Mr BA Coles QC and Mr N Bilinsky appeared for the plaintiffs and Mr P Fox and Ms L Young appeared for the defendants.

75 The issues for me to decide were those raised by the cross claim as, if those issues were not decided in favour of the defendants, the plaintiffs were clearly entitled to the orders which they seek.

76 The issues are best considered under the following headings:

1. Does clause 35.3 of the contract exclude reliance on any representation?
2. Was there any misrepresentation made on 15 December 2004?
3. Was any representation made in May 2005?
4. Did any such misrepresentation have any effect on the contracts on 31 May 2005?

5. Are there any applicable estoppels that assist the cross claimants?
6. Should any order be made on the cross claim?
7. What is the result of the litigation?

I will deal with each of these matters seriatim.

1. The effect of cl 35.3 of the contract.

77 I have already set out this clause which endeavours to make it clear that the contract includes the entire understanding of the parties as to their bargain.

78 Mr Coles QC and Mr Bilinsky submit that the purpose of this type of clause is to ensure that commercial litigation does not get bogged down in the “wilderness of pre-contractual conversations” and communications, which threaten the stability of commercial dealings and the primacy of the written document.

79 They note that in Johnson Matthey Ltd v AC Rochester Overseas Corp (1990) 23 NSWLR 190, 196, M McLelland J expressed the view that entire agreement clauses were effective to exclude an estoppel by convention:

“The effect of any particular clause will of course depend on its own terms and context, but in general it may be said that except in the case of fraud, and subject to any statutory provision, an “entire contract” clause will bind the parties in accordance with its terms, properly construed. Such a clause itself gives rise to an estoppel by convention which excludes any antecedent estoppel which might otherwise have had effect.”

80 This passage has been endorsed by Miles CJ in Skywest Aviation Pty Ltd v Commonwealth of Australia (1995) 126 FLR 61, by Bryson J in Australian Co-operative Foods Ltd v Norco Co-operative Ltd (1999) 46 NSWLR 267 and, more recently, by me in C G Mal Pty Ltd v Sanyo Office Machines Pty Ltd [2001] NSWSC 445.

81 Mr Fox and Ms Young say that the Johnson Matthey case is distinguishable. They say that the relevant clause in that case, clause 18.9 (at p 194), expressly dealt with “representations” and stated “There are no prior ... representations, warranties or agreements”. It was also expressed to cancel and supersede all previous agreements, negotiations, comments and writings. The present clause goes nowhere near as far.

82 They put that even on the widest construction of a relatively modest “entire agreement" clause by Lightman J in Inntrepreneur Pub Co (GL) v East Crown Ltd [2000] 2 Ll Rep 611 at 614 para [8], Justice Lightman drew the line when it came to misrepresentations, saying:

“An entire agreement provision does not preclude a claim in misrepresentation, for the denial of contractual force to a statement cannot affect the status of this statement as a misrepresentation. The same clause in an agreement may contain both an entire agreement provision and a further provision designed to exclude liability e.g. the misrepresentation or breach of duty.”

83 They thus put that clause 35 must be construed as dealing with consensual matters which are, or have the character of, agreements and understandings (including estoppel by convention but not estoppel by representation).

84 They note that in Australian Co-operative Foods Ltd v Norco Co-operative Ltd, the relevant clause, 22.1, set out at p 276, expressly stated that the agreement “sets out the only conduct relied on by the parties and supersedes all earlier conduct by the parties with respect to its subject matter”.

85 Clause 35.3 merely says that the written contract embodies the entire understanding of the parties, constitutes the entire terms agreed on between the parties and supersedes any prior written or other agreement between the parties. It is not sufficiently strong to operate as ousting claims or defences based on misrepresentation or on estoppel by representation.

86 Defendants’ counsel argued that the fact that these kinds of cases are not affected is evident from the concern expressed in them with “agreements” and “understandings", both being of the consensual kind, and the derivation of the principle from the parol evidence rule. They referred to Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471, 483.

87 In my view the submissions of the defendants’ counsel on this point should be accepted. There is a distinction between a formed contract and a misrepresentation prior to contract. It is quite possible to exclude reliance on representations, but the present clause is not strong enough to do so.

2. Were there misrepresentations on 15 December 2004?

88 To answer this question, one must examine and test the evidence given by the four persons who were present at the conference held on that day.

89 We know that Mr Campbell-Jones did not keep notes and that he has given two accounts which have led me to disregard what he claims was said set out in [37] above.

90 The accounts of the Arnot brothers are far too similar for me to readily accept that they are the product of two independent memories. The brothers also did not keep notes.

91 Mr Hill-Douglas also agrees that he kept no notes or any aide memoire. Furthermore, his account on some vital aspects to the defendants’ case is not corroborated by any other person. Furthermore, it seemed to me that a substantial part of his evidence was a reconstruction from memory as to what he believed happened.

92 As Mr Coles points out, the absence of notes by Mr Hill-Douglas bears not only on accuracy and content, but also on materiality and inducement.

93 The general background makes me discount Mr Hill-Douglas’ account. There was no contract to sell the land at the time and the Arnots were really in Melbourne just to test the water. They knew from what Mr Campbell-Jones had told them that Mr Hill-Douglas would not wish to sell to a developer who might sub-divide and that they should arm themselves with ideas of houses if they wished to convince him that they were not developers.

94 The meeting ran out of time. No decision was made as to whether there would be any sale at all: no price was mentioned. I find it extremely difficult to find that what was said by the Arnots could amount to any of the representations pleaded.

95 The plaintiffs submit that there is nothing in the discussions that took place between the plaintiffs and Mr Hill-Douglas to evince a crystallised bargain of any kind between the parties. This is precisely because the conversations were made prior to the plaintiffs’ learning that the defendants were interested in selling the property to them and because the discussions were pitched at a level of considerable generality. I agree with this submission.

96 I do not believe that either of the Messrs Arnot nor Mr Hill-Douglas were overly much affected by cross-examination. All of them had to admit to some inconsistent conduct.

97 Mr Hill-Douglas had been a Victorian solicitor between 1972 and 1985 and I found his answers to questions on that topic a little strange and reluctant. I also consider that for a person who had practised that long as a solicitor in wills and conveyancing, it was strange that he did not grasp the opportunity to insert into the contract the matters which he now says concern him.

98 Again, it is strange that virtually all the aspects of the discussion now relied upon by the defendants were absent from Mr Campbell-Jones’ letter to the plaintiffs’ solicitors referred to earlier.

99 Furthermore, if what had been said on 15 December 2004 was so significant, why did Mr Hill-Douglas even take the plan that was produced at the meeting out of his satchel in which he kept the papers pertaining to the land?

100 His answers that he trusted the Arnots sounded to me too naïve for a former solicitor.

101 Thus, if I had to do so, I would prefer the evidence of the Arnots to that of Mr Hill-Douglas.

102 However, the Arnots say that there was no fixing of the price until February and that one of the reasons why Mr Hill-Douglas visited Bowral was to obtain a valuation. This sits ill with Exhibit DX06, a facsimile from Carpenters to Bruce Hill-Douglas of 28 January which refers to “David and Johns offer of $1,500,000”.

103 However, this problem was not explored and it is another aspect of the case which shows that peoples’ memories of dates and the sequence of events on both sides were unreliable.

104 However, even if I fully accepted Mr Hill-Douglas’ version of what happened at the December meeting, I could not find a representation which induced the contract made five months later.

105 Mr Coles reminded me that to be actionable, a representation should be clear and unambiguous.

106 He put further that this apparent requirement goes to more than simply an identification of the content of the facts alleged to have been asserted as constituting the representation. Clarity, specificity and lack of ambiguity also bear heavily on:

(a) whether the alleged misrepresentation was actually material; and

(b) whether the representee has discharged the burden of proving that the alleged representation was capable of and did in fact induce the representee’s entry into the transaction which he seeks to avoid.

107 Further, unless a representation is sufficiently clear, the representee will also be in difficulties in attempting to show that the representor should have known that the representee was relying on the asserted fact, and that the asserted fact was actually false.

108 I accept those submissions.

109 As Mr Coles put, oral or informal “representations” create particular difficulties due both to the imprecision of recollections, and the implausibility of the representee’s reliance upon imprecise, informal, oral communications.

110 Although spoken in the context of a case based on an oral statement said to be false and misleading under s 52 of the Trade Practices Act 1974 (Cth), M McLelland CJ in Eq said in Watson v Foxman (2000) 49 NSWLR 315, 318-9:

“In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition.”

111 Because of this, and because of the frailty of human memory, courts must be extremely careful when assessing cases of misrepresentation by spoken word, a fortiori when nobody kept notes. See also Aneve Pty Ltd v Bank of Western Australia Ltd [2005] NSWCA 441 at [49] where the observations of McLelland CJ in Eq in Watson v Foxman were endorsed.

112 Mr Coles pointed out that OW Holmes J in Deming v Darling 20 NE 107 at 108-9 (Mass SC1889) referred to a suggested “rule of law” to the same effect when he said, although in a slightly different context:

“The rule of law is hardly to be regretted, when it is considered how easily and insensibly words of hope or expectation are converted by an interested memory into statements of quality and value when the expectation has been disappointed.”

113 This was noted by Fisher J in the Federal Court in Pappas v SoulacPty Ltd (1983) 50 ALR 231 at 235. Fisher J in that same case at 234 noted that courts should be careful of giving much significance to “introductory comments in the nature of puffery, made at the start of negotiations for the purpose of attracting the interest of a possible purchaser”, which become subsumed in the provision of later, more detailed information.

114 That comment is apposite in the instant case (though for "purchaser” read “vendor”). All present at the December meeting seem to say that those present spoke in generalities, and at a time before there was any firm deal made.

115 Again, as Messrs Coles and Bilinsky reminded me, a court does not consider minutely each individual alleged representation on a discrete and disembodied textural basis. The court must examine not only what was said but the context and surrounding circumstances, and the whole situation of the parties.

116 Messrs Coles and Bilinsky also made the further point that the content of some of the alleged representations was extremely nebulous. For instance, what is meant by “outlook” or what is meant by “in the style of Patchway”? Does this latter expression merely mean “looks like Patchway”? This must be put into the mix as to whether the court should hold that representations were made.

117 Part of the problem for the defendants is that so much of their case relies on the silence of the Arnots, and of inferences that the Arnots must have known and intended that Mr Campbell-Jones would pass on statements to Mr Hill-Douglas.

118 Mr Fox says that, when properly analysed, this is not a problem. Clearly the initial sketch was handed to Mr Campbell-Jones to show to Mr Hill-Douglas to make him amenable to discussions and that sketch represented that the houses to be built were to be at a particular spot.

119 The December discussions showed that Mr Hill-Douglas was very concerned about the amenities of the area and his outlook from Green Loaning.

120 The Arnots knew that this was the motivation for Mr Hill-Douglas selling to them and traded on it. As soon as contracts were exchanged, the Arnots abandoned the scheme they had put together in December, redrew their plans, felled many trees and, if allowed to proceed, would ruin the rural amenities.

121 Mr Fox points out that there is abundant authority for the proposition that a person who makes a representation that might have been correct at the time it was made, cannot allow it to continue to affect the representee if it ceases to be true. He cites Traill v Baring (1864) 4 De GJ & S 318, 329; 46 ER 941, 946, With v O’Flanagan [1936] 1 Ch 575 (CA) and Macquarie Generation v Peabody Resources (2001) Aust Contract Rep 90-021 (NSWCA).

122 There is no doubt in my mind about the principle, though the reasons of Mason P in the last cited case show that it is not a universal principle and a court must always be aware of the factual matrix.

123 The same sort of principle applies to silence. Silence of itself cannot be a misrepresentation, but the circumstances might be such that there is a duty to speak in which case silence may constitute a misrepresentation. As Black CJ said in Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31, 32, there is no such thing as "mere silence".

124 The problem for the defendants is to glean to what extent the Arnots might have been aware of what was flowing through Mr Hill-Douglas’ mind as a result of him having the sketch plan and as a result of what was said at the December meeting.

125 I accept the general scenario put forward by the Arnots, that is, that they did endeavour to convince Mr Hill-Douglas that they were not developers, they did put forward proposals as to where they might put their houses if they bought the land, that Mr Hill-Douglas did say that he had affection for the land, but all this was in the context where there was no firm proposal on either side that the land would be sold or even where any price was mentioned.

126 Mr Fox and Ms Young acknowledge in their submissions that the defendants must show that: (a) there were misrepresentations which (b) satisfy the tests of materiality and inducement and (c) were false. Thus they must show (i) what was said; (ii) that what was said was a representation; (iii) that the representation was false; and (iv) that it was material and induced the contract.

127 It must also be remembered that the gist of the defence of misrepresentation is that in all the circumstances it would be unconscionable for the contract to be enforced in a court of equity. It is unconscionable for a person to take advantage of a contract gained by his or her own misrepresentation: see Redgrave v Hurd (1881) 20 Ch D 1, 17.

128 For the reasons discussed above, I have reached the conclusion that nothing that was said at the December meeting went beyond generalities in discussion of what might happen. It may be that Mr Hill-Douglas then or later in his own mind placed significance to certain parts of the discussion when he came to sign the contracts in May 2005, but there is nothing to show that the Arnots were aware of this.

129 Thus I do not consider that anything that was said by the Arnots at the December meeting in the context of which it was said, amounts to a representation.

130 Accordingly, the defendants’ case insofar as it relies on the December 2004 meeting and the plan submitted previously through Mr Campbell-Jones, fails.

131 It follows that the reliance on what may have happened at the "Palate Pleasure" in February 2005 or in March 2005 can have no significance.

132 It also follows that what I might call the back up defence to specific performance based on Lamare v Dixon (1873) LR 6 HL 414 that the plaintiffs had reneged on an essential promise in a collateral contract, also must fail.

133 The case based on the plan marked “Master Plan” which Mr Hill-Dougles saw just before he signed the contracts fares no better. I have some difficulty in tracing how Mr Campbell-Jones obtained the plan, but that is of little moment. There is no satisfactory material from which I could infer that the Arnots understood the effect that plan might have on Mr Hill-Douglas’ mind or, indeed, whether he ever saw the plan.

134 In view of these findings, it is unnecessary for me to go into the detail as to whether any statements (or silences) of the Arnots were of fact or intention or whether any of them was false.

135 Mr Fox and Ms Young, in their written outline of final submissions, went into considerable detail in an endeavour to show the falsity of the alleged representations as particularised. I will leave these with the papers.

136 Mr Coles also discussed these issues in the written submissions which he and Mr Bilinsky provided me.

137 Evaluating these matters would take considerable time and would also mean that I would need to assess the credibility of Mr Webb, the plaintiffs’ draughtsman and Mr Bligh, their landscape architect, against the evidence of the Arnots to establish the precise date on which plans were changed in the period May-July 2005 and the reasons for changes. The evidence, particularly as to dates is imprecise, and as nothing could be gained by evaluating it, I will not attempt to do so.

138 I thus answer question 2, “No”.

3. Was any representation made in May 2005?

139 It follows from what I have said above, that this question must also be answered, “No”.

4 . Did any such misrepresentation have any effect on the contracts on 31 May 2005?

140 This question does not arise in view of my answers to questions 2 and 3.

5. Are there any applicable estoppels that assist the cross claimants?

141 I have already noted that, in view of clause 35.3 of the special conditions to the contract, there is no room for any estoppels by convention.

142 As to estoppel by representation, for the reasons given in my answer to question 2, none relevantly arise.

6. Should any order be made on the cross claim?

143 For the above reasons, the cross claim should be dismissed with costs.

7. What is the result of the litigation?

144 The cross claim fails, and the defence of misrepresentations and the defence based on Lamare v Dixon also fail. Thus, the plaintiffs are entitled to the orders as the first step along the way for specific performance of the contracts.

145 The orders sought are as follows:

Defendants to specifically perform the contract, and (in compliance with 37.2 of the contract):

(a) comply with all outstanding requisitions of the Wingecarribee Shire Council preventing the release of the plan of subdivision annexed to the contract for sale and marked “A”, especially the extension of the existing concrete crossover (approximately 3 metres) from Links Road to the road frontage of the land;

(b) restore their consent to the Wingecarribee Shire Council processing the subdivision application and considering the plan of subdivision;

(c) take all necessary steps to comply with the aforementioned orders within 14 days;

(d) within 14 days of release of the plan of subdivision by the Wingecarribee Shire Council, deliver the original plan as released by Council and signed by each of the defendants, together with 4 copies thereof to the plaintiffs’ solicitors for lodgment with the Department of Lands; and

(e) simultaneously with the delivery of the plan of subdivision to the plaintiffs’ solicitors, cause Certificate of Title Folio Identifier Auto Consol 14158-124 to be produced at the Department of Lands to enable the plan of subdivision to be registered.

146 Nothing was said against the appropriateness of these orders and I make them. However, I will direct that the orders not be taken out for fourteen days and should the defendants now seek to vary the above orders and the plaintiffs do not consent, the matter may be listed before the Duty Judge on 2 days’ notice or before me on a Tuesday or Thursday after 31 July 2006.

147 There is no reason why the defendants should not pay the plaintiffs’ costs of both proceedings to date and I so order.

148 It is clear that further orders will need to be made once the local Council has considered the plans. Accordingly, I will stand the matter over before the Registrar in three months’ time for mention.

149 If something requires attention before I return to the court on 31 July, a party may apply to the Duty Judge on 2 day’s notice.

150 Thus I make the following orders:

(a) The orders noted in [145];
(b) These orders not to be entered for 14 days;
(c) Cross claim dismissed;
(d) Defendants to pay the plaintiffs’ costs of both sets of proceedings to date;
(e) Further consideration and further costs reserved;
(f) Exhibits to be retained until further order;
(g) Liberty to any set of parties to apply to the Duty Judge on 2 days’ notice to opponents and to the judge.

(h) Proceedings to be listed before the Registrar for mention on 15 August 2006.

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