Basheer & De Conno Pty Ltd v Corani
[2005] SASC 291
•3 August 2005
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
BASHEER & DE CONNO PTY LTD v CORANI & ANOR
Judgment of The Full Court
(The Honourable Justice Bleby, The Honourable Justice Vanstone and The Honourable Justice Anderson)
3 August 2005
CONVEYANCING - RELATIONSHIP OF VENDOR AND PURCHASER - MATTERS ARISING BETWEEN CONTRACT AND CONVEYANCE - DESCRIPTION, MISDESCRIPTION AND COMPENSATION FOR "ERROR OR MISDESCRIPTION" - ``ERROR OR MISDESCRIPTION'' - DEFICIENCY IN OR EXCESS OF AREA
TRADE AND COMMERCE - TRADE PRACTICES AND RELATED MATTERS - CONSUMER PROTECTION - MISLEADING, DECEPTIVE OR UNCONSCIONABLE CONDUCT - CHARACTER AND ATTRIBUTES OF CONDUCT - REPRESENTATIONS
REAL PROPERTY - VALUATION OF LAND - METHODS OF VALUATION - COMPARABLE SALES - SALES OF COMPARABLE LAND
Appeal from a decision of a District Court Judge awarding damages of $29,204 plus interest to the respondents - respondents purchased land at auction - appellant acted as agent of the vendors - brochure produced by the appellant and distributed before the auction misdescribed the land as approximately 2,469 sqm - land in fact only 2,300 sqm - whether misrepresentation relied on by respondents - whether misrepresentation resulted in any loss - what was the true value of the land - effect of valuation evidence - whether evidence of underbid relevant - Held: true value of land, despite the misdescription, was the amount paid for it at auction - evidence of underbid relevant - no loss on the part of the respondents - appeal allowed.
Trade Practices Act 1974 (Cth) s52, s92; Fair Trading Act 1987, referred to.
Spencer v The Commonwealth (1907) 5 CLR 418, applied.
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; McDonald v Deputy of Federal Commissioner of Land Tax for NSW (1915) 20 CLR 231; Gregory v Federal Commissioner of Taxation (1971) 123 CLR 547; Butcher v Lachlan Elder Realty Pty Ltd (2004) 212 ALR 357; MacCormick v Nowland [1988] ATPR 40-852, discussed.
Commonwealth v Arklay (1953) 87 CLR 159; Electricity Trust of South Australia v O'Leary (1986) 42 SASR 26; Chaney v Maclow [1929] 1 Ch 461; Phillips v Buttler [1945] 1 Ch 358; Venuti v Toop Real Estate Group Pty Ltd [2004] SASC 169; Henjo Investments Pty Ltd v Collins Marrackville Pty Ltd (1988) 39 FCR 546, considered.
BASHEER & DE CONNO PTY LTD v CORANI & ANOR
[2005] SASC 291Full Court: Bleby, Vanstone and Anderson JJ
BLEBY J I agree with the orders proposed by Anderson J. I agree in substance with his reasons and have nothing to add.
VANSTONE J I agree that the appeal should be allowed and with the reasons given by Anderson J.
ANDERSON J This is an appeal from a decision of a Judge of the District Court given on 5 November 2004. The appellant is a corporation registered as a land agent. It represented the vendors of land situated at North East Road, Collinswood (“the land”). This land was offered for sale at an auction on 27 May 2000. At the auction the first respondent successfully bid for the land at the price of $513,000.
Background
A brochure had been prepared prior to the auction. This brochure was produced by the appellant. In the brochure, the land was misdescribed as being approximately 2,469 sqm whereas in fact the true area was 2,300 sqm. The respondents, and presumably other bidders at the auction, read the brochure prior to bidding at the auction. After the respondents were successful in their bid, they entered into a contract for the purchase of the land at the price of $513,000.
It was after the auction that the male respondent made some calculations of his own and determined that the area of the land had been misdescribed.
As indicated, the date of the auction was 27 May 2000. It was some time in early June when the male respondent discovered the shortfall in the nominated area of the property. At that stage he spoke to both his lawyer and to an engineer so that calculations could be made as to the exact dimensions. He was, however, able to make the calculation himself in the first instance. It was not a difficult calculation. He had not made any calculations prior to bidding at the auction.
It is necessary to go back prior to the auction to ascertain what information was available to anyone wishing to bid at the auction. The agent had provided to the respondents a folder which contained the advertising brochure referred to, a plan or diagram of the land and buildings, a rent schedule relating to properties existing on the land, and most importantly, copies of two Certificates of Title which related to the land. Those Certificates of Title set out the exact dimensions of the land.
The plan or diagram referred to above contained a disclaimer which stated:
This brochure is prepared for illustration purposes only. Intending purchasers must not rely on information contained herein in determining their offer to purchase. Neither the Vendor nor the Agent accepts any responsibility for errors or omissions contained in this brochure.
The terms of the proposed contract for any successful bidder were displayed at the auction, and the auctioneer drew attention to them before the auction began.
In the auction, the first respondent bid to $513,000 as I have indicated, and that bid was necessary to beat the bid of another bidder in the sum of $512,000. That underbidder was a genuine underbidder, being a representative of a firm of medical practitioners who leased one of the buildings on the land. There was no evidence that he was under any misapprehension as to the area of the land or that, in making his bid, he relied on the area stated in the brochure.
As previously indicated, before settlement was due the first respondent discovered the actual area of the land as being some 169 sqm less than the approximate square metreage on the brochure indicated. After he discovered the shortfall, and after he instructed his lawyer and engineer, it is alleged that the first respondent then contacted the agent and asked him to offer the property to the underbidder for an extra $10,000. In other words, at that stage he was seeking to make a profit of $10,000 over and above the purchase price he had agreed to pay. There is a dispute about this aspect of the evidence, and the trial Judge has not fully dealt with it. I will return to this aspect later.
The solicitors acting for the respondents then confirmed that their client would proceed with settlement by paying the amount of the successful bid, but at the same time, reserving their rights “to claim against the vendors and the agent regarding the misdescription or misrepresentation of the area of land being purchased”.
The respondents called valuation evidence, the suggested effect of which was to show an overpayment in the sum of $27,885 plus stamp duty and LTO fees, making a total of $29,204. That is the amount for which judgment was entered in favour of the respondents. In addition, an amount of $8,220 was awarded by the trial Judge for interest on the judgment sum. I deal with the valuation evidence later in these reasons.
As an important part of the background to this sale, it is worth noting that the first respondent who did the bidding at the auction was not a first-time bidder. He had considerable experience in the sale and purchase of real estate. In addition, he had read and understood the documents provided to him and furthermore he understood how auctions proceeded and the terms on which they were conducted.
In addition, as part of the background, the first respondent had been involved in the building industry running his own business for many years. Building work carried out by his business included houses, units, flats, shops, warehouses, commercial buildings and a club. He was also registered as a land salesman and was involved in the sale of some of the properties he constructed. It is fair to say that he had a good working knowledge of the way in which sales and auctions were conducted. He did not make any measurements or check any measurements before the auction and had no specific plans for the use of the land and had made no enquiries about its use of the Council before the auction. He had the precise dimensions of the land from the Certificates of Title.
The Judgment Appealed From
In the District Court the learned trial Judge dealt with arguments involving the interpretation of ss52 and 82 of the Trade Practices Act 1974 (Cth) and associated claims under the Fair Trading Act 1987.
Those arguments, dealt with extensively by the learned trial Judge, are not in issue in this appeal. His Honour dealt with each of the elements required to establish a breach of the respective Acts and the grounds of appeal did not pursue the analysis of the Act made by his Honour.
Arguments on Appeal
In this appeal, the appellant conceded that the statement in the brochure regarding the size of the land was a misrepresentation. It was not suggested that the addition of the word “approximately” to the estimate of area could neutralise an error of this magnitude. It was argued, however, that the misrepresentation was not relied on by the respondents and was not causative of the respondents’ loss and I deal with that argument later in these reasons. The main argument in this court was that there was no loss because the value of the land was established by the auction process.
The Valuation Evidence
The only valuation evidence was called by the respondents from a Mr Eyre. His evidence was discussed by the learned trial Judge at [57] where his Honour said:
His opinion and methodology were the subject of considerable challenge but no other expert view was arraigned against him.
His Honour again referred to that evidence at [94] where he said:
At the outset I accept the valuation evidence of Mr Eyre. There was no evidence to the contrary. I do not accept that he effectively abdicated his view in the course of cross-examination or that his opinion was wholly untenable. In summary, it was his opinion that the land and improvements thereon were worth less than that paid by the plaintiffs by $27,885. So together with the fees of $1,319 is that the measure of damages which are recoverable?
Mr Trim QC for the appellant criticised the last passage referred to because he contended that Mr Eyre admitted in cross-examination that the value of the land was the amount of the successful bid. He was asked in cross-examination to assume the actual sequence of events which occurred at the auction including the previous bid by a genuine bidder for $512,000. He was then asked this question:
On that basis, I would suggest to you that the most reliable indicators that you would have to make your commonsense appraisal of the value of this land as a whole would be what was in fact bid and paid for at auction at arm’s length, do you agree.
My Eyre answered “Yes”. He was asked again in cross-examination:
If that is what is to be paid for whatever is there, however it was described in an auction brochure, surely the value of the land and improvements that was transferred was $513,000 or at least $512,000.
Again, Mr Eyre answered “Yes”.
The learned trial Judge found that the first respondent relied on the misrepresentation as to area. However, that does not translate necessarily into an assumption that therefore 169 sqm less meant that there was a loss of value. There was no evidence that prior to bidding he had any particular proposals for the land such that 169 sqm made any difference to the proposals. There was a lease for another three years over part of the land in any event.
Mr Eyre, in cross-examination, conceded that there may be situations in which the loss of such an area is critical, but in this particular instance he had no evidence one way or the other as to whether it was a critical factor. That meant that his valuation exercise was therefore an arithmetical calculation of multiplying 169 sqm by whatever amount he considered was the appropriate square metre value for that piece of land.
Mr Eyre then engaged in an exercise of comparable sales in the normal way such sales are used in valuations. He was cross-examined extensively about his choices for the comparable sales, and in my view the cross-examination illustrated that the properties which he used, for the reasons canvassed in cross-examination, were not really all that appropriate. It was put to him in cross-examination, “I would suggest that that’s not what you would call a set of strongly related comparable sales”. His reply was, “I would concede that”.
It was following this cross-examination and in that context that the questions and answers set out earlier, including his concession as to value, were reached.
Having read the valuation report and the cross-examination of Mr Eyre, it is my view that the trial Judge was wrong in indicating that Mr Eyre had not abdicated his view in cross-examination.
The learned trial Judge dealt with the question of what is the measure of damages under the Trade Practices Act as a matter of law, and referred to the decision of Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494. His Honour referred to the following statement in Marks at 514:
It is necessary, then, to determine whether the value of what was acquired is less than what was paid. How is the value to be assessed? It is to be assessed objectively, not according to what either or both of the parties to the contract believed that it would obtain from the contract. That is, the value of what in fact was acquired is to be identified according to what price freely contracting, fully informed parties would have offered and accepted for it … It is only by comparison with the value assessed in this way that there can be an assessment of whether the party that is misled could have obtained some greater benefit or incurred less detriment. What is important is what that party could have done, not what it might have hoped for or expected.
In Spencer v The Commonwealth (1907) 5 CLR 418 a test was laid down by Griffith CJ at 432 which has come to be a classic definition of value. That test was:
In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring “What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?” It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together.
See also Commonwealth v Arklay (1953) 87 CLR 159 at 169-170.
It is also important to note that this exchange occurred in the examination-in-chief of the first respondent:
Q.Can you tell his Honour if you would have been prepared to bid to $513,000 at auction if you had known that the land was only 2,300 sq m.
A.That is something really honestly that I can’t say, because that would affect me and all other bidders, I don’t know.
It is my view, having regard to the Spencer test, to the terms of the auction, the way in which the auction was conducted, the fact that there was a genuine underbidder and the fact that the first respondent had to pay $513,000 to succeed at the auction, Mr Eyre could not do anything other than admit, as he did, that the value of the land was $513,000.
The Underbid
The appellant argued that the evidence of the underbid should also be used as evidence supporting the value of $512,000 or $513,000 because it was a genuine purchaser bidding in competition with the first respondent. It was argued that there was no proof that at the time of the auction the underbidders were influenced by any misrepresentation, and therefore the true value of the land was either $512,000, or $513,000, because the respondents had to pay the extra amount to outbid the underbidder. The respondents argue that history shows that evidence of such an underbid should not be admitted as evidence of value.
The point made by Mr Trim is that the cases supporting that proposition, namely, that the evidence should not be admitted, do not apply in this case because the evidence was admitted. It was admitted without restriction.
On the topic of offers as evidence of value, it seems to me that Hyam, in the third edition of his text The Law Affecting Valuation of Land in Australia (2004), has summarised the law conveniently. At page 92 he says:
It was held by Jacobs J in Nardone v South Australian Land Commission (1978) 40 LGRA 164 that an offer is not evidence of value. This principle was amplified by the Brisbane Land Court in Stanfield v Commissioner of Main Roads (1968) 21 The Valuer 624 at 627-628:
Reference was made by the claimant to certain options he had given for the purchase of portion of his land and it was urged that he sale price specified in the options was a guide to the value of the resumed land. Offers to buy and sell land, however, as distinct from concluded sales, are not evidence which can be applied in determining the value of the same or similar land sold or compulsorily acquired. This is nowhere better shown than in McDonald v Deputy Federal Commissioner of Land Tax (1915) 20 CLR 231 at 239 and 240.
In reading the judgment of the court, Isaacs J said at 239:
‘When the matter has reached the point of a concluded contract, there has been a definite concrete fact established, which not only evidences value, but to some extent helps to create or modify it. Where an owner has actually parted with his land for a fixed sum and a buyer has parted with his money for the land, a clear event has arisen, which, based on the ordinary instincts and impulses of human nature, indicates a consensus of opinion between two adverse parties in the community respecting the value of similar lands. Some advantage to justice is therefore manifestly possible from considering it, and the law presumes that up to that point the disadvantages of having to undertake the collateral inquiries as to comparison do not outweigh the possible advantages.
But if the negotiations do not end in a concluded bargain, the field is at once open to a multitude of other considerations before the same point of opinion is reached. Excursions into the realm of collateral circumstances would be endless. They would so add to the cost, delay and uncertainty of litigation as on the whole to render a great disservice to the cause of justice. The court might have to inquire whether the owner or the other party really terminated the negotiations, and, if so, for what reason. Had either of the parties discovered the true worth of the property or been misinformed by some means as to its real value? Did the owner mistrust the ability of the purchaser, or did the latter find and adverse claimant to the property, or did his circumstances change, or was there a personal quarrel? Or did he learn of a still better bargain? Or, again, was the offer a sham on either side, or both sides? Such inquiries would render litigation intolerable, and defeat the purpose for which they were permitted.’
It was argued that the rationale for the inadmissibility of other offers was that if such evidence were allowed, it would lead to all manner of collateral inquiries.
In Electricity Trust of South Australia v O’Leary (1986) 42 SASR 26 King CJ dealt with a similar issue when evidence of an offer had been used by a trial Judge to determine the value of a racehorse. King CJ cited McDonald’s case as authority for the proposition, as he put it at 28:
An offer to purchase is not admissible as evidence of the value of a chattel and cannot properly be made the basis of an assessment of its value.
The learned author Hyam, however, then points out that in Gregory v Federal Commissioner of Taxation (1971) 123 CLR 547, Gibbs J at 562-3 found an offer to be admissible evidence because:
[It] was followed by a concluded contract and the fact that it was made throws some light on the extent to which the price finally arrived at may be regarded as an indication of the real value of the shares.
Gregory was a case involving the sale of shares. Evidence of prices offered during the course of negotiations for the sale of the shares followed by a concluded contract was held to be admissible in determining the real value of the shares. McDonald’s case was distinguished. At page 562 Gibbs J said:
Authorities in this Court establish that in determining the value of land or shares evidence of a price offered for the property in question, in the course of negotiations which do not result in a concluded contract, is not admissible.
(His Honour then cites McDonald as authority for that proposition).
In relation to this case, it seems to me that both the comments of Gibbs J and those made by the learned author at page 97 are particularly pertinent. Hyam says at page 97:
Of course, before placing reliance upon a mere offer, a court must consider carefully the question of its genuineness. The offer might be a sham, designed to prop up an inflated compensation claim or to reduce rates and taxes; in either case without any cost to the offeror. It might be an attempt to manipulate the market for some other ulterior purpose, perhaps a purpose extraneous to the litigation. If the offer was genuine when made, it might not have led to a concluded contract, even if resumption had not intervened. The offer might have been withdrawn. The purchaser might have failed to complete the transaction. Because of matters such as these, even a genuine offer cannot be regarded as direct evidence of value. But it seems to me that, once the court is satisfied about genuineness, an offer by an arms-length party to purchase the land under valuation is something that the judicial valuer ought to take into account in considering the possibility of a sale at a price different from that indicated by conventional evidence, such as an analysis of comparable sales, or of a hypothetical development, or a calculation of the capitalised value of the rental return. How much weight should be given to such an offer is a question to be determined by reference to the facts of the particular case. In some cases, the appropriate weight may be minimal; in others considerable.
In this matter, it is my view that the factors mentioned by the author all fall in favour of the appellant. The offer by the underbidder was not a sham. It was not an offer made for any ulterior purpose. It is highly unlikely, in the circumstances of the bidder on behalf of the doctors who occupied a building on the land, that it would not have proceeded to a concluded contract, and again it was highly unlikely that the offer might have been withdrawn.
Had the bidding stopped at $512,000 the underbidder would have been required to sign a contract to purchase the land upon the terms displayed at the auction. If he did not, the auctioneer could have signed it on his behalf and the contract would have been enforceable: Chaney v Maclow [1929] 1 Ch 461; Phillips v Butler [1945] 1 Ch 358 and Venuti v ToopReal Estate Group Pty Ltd [2004] SASC 169.
In this case, it seems to me that none of the indicia which would operate to prevent a genuine offer from being regarded as evidence of value apply. I believe that the underbid in this case can and should be taken into account, and I believe that it was evidence of the value of the land which the purchasers had to bid to be successful at the auction.
There was a relevant temporal connection here where two people were bidding against each other and knew what they had to do to succeed in the auction. The first respondent knew that he had to go beyond $512,000 and therefore went the next step to bid $513,000 in order to succeed in the auction.
There is after all no evidence that the underbidders were influenced in any way by the misrepresentation as to the measurement of the land. The respondents did not seek to adduce any evidence to show whether the underbidder knew of and acted upon the misrepresentation.
The Respondents’ Attempt to On-Sell
In relation to the topic of the first respondent’s attempt to sell the land to the underbidders, the trial Judge deals with this matter at paragraph [42] as follows:
There was in the evidence considerable debate about the detail of an attempt to sell Mr Corani’s interest in the contract to the underbidders (88, 89, 90 (Corani), 150, 151 (De Conno)). It is not possible and nor is it necessary to make findings about this topic. Suffice it to say some approaches were made to the underbidders and nothing came of it.
In other words, the learned trial Judge made a finding that Mr Corani did try to sell the land to the underbidders, but no finding as to whether it was for an increased amount. Whereas, it seems to me, that if in fact Mr Corani did try to sell the land for an increased $10,000, it may be some evidence as to the possible value of the land. The evidence references on this topic indicated by the learned trial Judge in his reasons do not enable a finding one way or the other.
In any event, on appeal it is not necessary to deal with this aspect and indeed it was only raised peripherally in argument.
That disposes of the appeal but I will now deal briefly with the other arguments put by the appellant.
The Disclaimer
The appellant also argued that the learned trial Judge fell into error by failing to consider the disclaimer, which is set out earlier in these reasons, as part of the whole of the circumstances in determining whether the statement involved a misrepresentation. His Honour dealt with the question of the disclaimer at [85] as follows:
Such disclaiming clauses cannot operate so as to exclude the provisions of the Trade Practices Act or deprive a plaintiff of remedies under that enactment (see Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (supra) per Lockhart J at 98; McMahon v Pomeray Pty Ltd (1991) ATPR 52,851 (41-125) at 52,860; Burg Design Pty Ltd v Wolki (1999) 162 ALR 639 at 648). So I hold in this case that the clauses have no application. If necessary I would hold that if validly binding they could only apply to the said diagram document.
Having looked at the documents, with respect, I agree with the learned trial Judge that, apart from the proposition that such a disclaimer cannot operate so as to exclude the provisions of the Trade Practices Act, it is limited in any event to the one document, a single sheet, being a diagram or schematic representation of buildings on the land and therefore not related to the size of the land. It is an artist’s impression of how three buildings are situated on the land. That sheet contains the dimensions of the buildings and a copy of the diagram contained on the relevant Certificate of Title.
The High Court delivered a judgment in Butcher v Lachlan Elder RealtyPty Ltd (2004) 212 ALR 357 after judgment was given in this matter. That decision also involved a brochure issued by an agent. There was a question as to the accuracy of a survey diagram contained within the brochure, and in particular as to the exact siting of a swimming pool on the land in question.
The agents were sued for breach of s52 of the Trade Practices Act. There is a passage in the joint judgment of Gleeson CJ, Hayne and Haydon JJ to which Mr Trim referred. Their Honours said at 367 [39]:
In applying those principles, it is important that the agent’s conduct be viewed as a whole. It is not right to characterise the problem as one of analysing the effect of its “conduct” divorced from “disclaimers” about that “conduct” and divorced from other circumstances which might qualify its character. Everything relevant the agent did up to the time when the purchasers contracted to buy the Rednal land must be taken into account. It is also important to remember that the relevant question must not be reduced to a crude inquiry: “Did the agent realise the purchasers were relying on the diagram?” To do that would be impermissibly to dilute the strict liability which s52 imposes.
The court took into account matters including the experience of the purchasers in other real estate matters, and also the role of the agent. The court said at 367 [76]:
Here, the purchasers had the brochure for twelve days before the auction. They relied on it in instructing professional advisers, and they were embarking on a very serious venture. It is not inappropriate to look closely at the contents of the brochure before deciding whether the agent had made a representation.
The disclaimer in Butcher is expressed in such a way to illustrate that the agent in that case was simply acting as a conduit in reproducing the survey diagram. The disclaimer in this case is not of that type.
In any event, as I have already indicated, the disclaimer did not, in my view, relate to the misdescription of the land in relation to its size, but only to the schematic representation contained on one sheet of the documents comprising the bundle within the brochure.
Even if all the surrounding circumstances as set out as part of the background are taken into account, it would not help the appellant, in my view, because the disclaimer was never intended to suggest that the area of the land might not be as represented, namely, approximately 2469 sqm. I agree with the submission of the respondents that “it would hardly occur to a reader of the sheet in question that the disclaimer was saying that the area of the land might not be approximately 2469 sqm”. The disclaimer does not come to the aid of the appellant in the circumstances of this case.
Causation
The appellant also mounted an argument relating to causation. Simply put, the argument was that the cause of the loss was the purchasers’ choice to proceed to settlement, when they had the opportunity to avoid that. It is argued that they should have rescinded the contract on the basis of the alleged misrepresentation, and that their failure to do so is a failure to mitigate their loss. In other words, they should have rescinded, not proceeded with settlement, and sought damages pursuant to s82 of the Trade Practices Act.
In answer to that proposition, the respondents argue that the misrepresentation as to area was a matter which influenced the purchaser to proceed with his bid at the auction, and the trial Judge accepted that evidence. The fact that the respondents settled under protest should not be regarded as a novus actus. The chain of causation is unbroken and the respondents’ reliance on the misrepresentation remains causative.
The issue of causation is a question of fact and the learned trial Judge made findings in favour of the respondents. He found specifically that the representation as to area contained in the brochure was one of a number of factors which caused the respondents to bid at the auction. In my view, that finding was clearly available on the evidence and should not be disturbed.
After bidding and before settlement, the purchasers had to make a decision when they discovered the correct area of the land. Was it unreasonable to give notice and settle under protest as distinct from litigating the matter at that stage?
A similar situation arose in the Federal Court in MacCormick v Nowland [1988] ATPR 40-852. That case also involved a brochure which had been distributed by agents prior to the sale of a property. The brochure contained certain representations about the property. The purchasers inspected the property and proceeded to purchase it. After the contract was signed, the purchasers discovered before settlement that the representations in the brochure were untrue. On legal advice, they made a complaint to the vendors and gave notice that they reserved their rights but proceeded to settle.
They then sought relief in the Federal Court under the Trade Practices Act after settlement. The agents responsible for the production of the information in the brochure argued that the purchasers had lost their cause of action by proceeding to settle, and that they brought their misfortune on themselves because they should have rescinded the contract. Justice Pincus at 49, 182 - 49, 183 said:
In some circumstances, such an argument might perhaps succeed, but I am not prepared to uphold it here. It appears that the basis of the advice given to the applicants was that if they purported to rescind, that might well be challenged by a claim for specific performance. They thought it impractical to be left in a position of uncertainty and, reasonably in my view, informed the vendors by letter of their complaints “reserving their rights”, and settled.
No authority was cited in favour of the proposition that the applicants did not have such a choice as they claimed to have and, in my opinion, the advice they were given was correct. The general rule is stated in Halsbury 4th Ed. 31 dealing with remedies for misrepresentation: see para. 1082 and 1085. I accept that, as the respondents contended, the applicants having decided to go on with the transaction, gives some support to the respondents’ contention that the applicants were not induced to enter into the contract by either of the misrepresentations alleged, but I am satisfied in the end on the whole of the evidence that the misrepresentations were inducing factors.
It follows from what I have said that it is my opinion that the applicants are entitled to succeed against the second respondent, the company which inserted the misleading advertisement and prepared the misleading auction brochure.
For similar reasons to those expressed by Pincus J I consider that in this case the finding made by the learned trial Judge, that the first respondent was induced by the misrepresentation as to area, is sufficient to establish a causal nexus in the terms of s82 of the Trade Practices Act. See Henjo Investments v Collins Marrackville (1988) 39 FCR 546 at 558.
In my view, the actions of the respondents in settling under protest did not break the chain of causation.
Conclusion
It is my view, therefore, that the learned trial Judge erred in his interpretation of the evidence of Mr Eyre. The concession made by Mr Eyre during cross-examination was significant, and in my opinion, accords with the commonsense of the situation. When that factor is combined with the evidence of the underbid, which I regard as relevant for the reasons already stated, it is my view that the true value of the land was what the first respondent paid for it, namely, $513,000.
In other words, there was no loss because in the terms of a claim for damages pursuant to s82 of the Trade Practices Act, the purchase price equalled the true value. This was so even though there was an acknowledged misrepresentation, and even though the disclaimer did not oust the provisions of the Trade Practices Act. The disclaimer did not apply to the specific representation as to the size of the land. The purchasers were entitled to proceed to settlement after prior notice to the appellant and their actions in doing so did not interfere with the causal effect of their reliance upon the misrepresentation.
The appeal is allowed. The judgment of the District Court should be set aside and in its place there should be judgment for the appellant.
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