Bennett v Elysium Noosa Pty Ltd (in liq)
[2012] FCA 211
•9 March 2012
FEDERAL COURT OF AUSTRALIA
Bennett v Elysium Noosa Pty Ltd. (in liq) [2012] FCA 211
Citation: Bennett v Elysium Noosa Pty Ltd. (in liq) [2012] FCA 211 Parties: LUKE ANTHONY BENNETT v ELYSIUM NOOSA PTY LTD. (ACN 101 485 634) (IN LIQUIDATION), CONSOLO LTD (ACN 000 022 266), PEARSON PROPERTY GROUP (NOOSA) PTY LIMITED (ACN 112 256 612), PEARSON PROPERTY GROUP PTY LIMITED (ACN 076 423 268) and CONSOLO PROPERTY PTY. LTD. (ACN 093 500 059) File number: QUD 171 of 2010 Judge: REEVES J Date of judgment: 9 March 2012 Corrigendum: 12 September 2012 Catchwords: TRADE AND COMMERCE – s 52 Trade Practices Act 1974 (Cth) – pre-contract representations – sale of lot in Community Title Scheme – facilities to be provided as part of Scheme – Scheme – whether misleading or deceptive representations made – conduct likely to mislead or deceive – implied representations – conveying something more – whether lead into error – content and circumstances of conduct
TRADE AND COMMERCE – s 53A(1)(b) Trade Practices Act 1974 (Cth) – false or misleading representations in connection with the sale of an interest in land –– sale of lot in Community Title Scheme – false or misleading representations in connection with facilities associated the land – common property
TRADE AND COMMERCE – s 51A Trade Practices Act 1974 (Cth) – misleading representations as to future matters – sale of lot in Community Title Scheme – facilities to be provided as part of Scheme – reasonable grounds for making – evidence to the contrary – operation of deeming provision in s 51A(2) – whether misleading under s 51A(1)
TRADE AND COMMERCE – s 84(2) Trade Practices Act 1974 (Cth) – misrepresentations by sales agents – sale of lot in Community Title Scheme – conduct engaged in on behalf of corporation – conduct engaged in as part of central and main part of the business, affairs and activities of corporation – at the behest of – director and agent of corporations giving direction – joint venture
TRADE AND COMMERCE – s 82(1) Trade Practices Act 1974 (Cth) – damages – quantum – loss claimed for being induced to enter contract – sale of lot in Community Title Scheme – loss assessed at date of acquisition – consideration of common approach and alternative approach – true value of asset acquired – onus of proof
TRADE AND COMMERCE – s 87CB(1) Trade Practices Act 1974 (Cth) – apportionment – claims for damages under s 82 and 87 – contraventions of s 52 and 53A – whether apportionable claims
REAL PROPERTY – Community Title Schemes – s 223(3) Body Corporate Community Management Act 1997 (Qld) – seller’s warranties – material prejudice to buyer – breach of seller’s warranty – disclosure statement
Legislation: Acts Interpretation Act 1901 (Cth)
Body Corporate and Community Management Act 1997 (Qld)
Property Agents and Motor Dealers Act 2000 (Qld)
Trade Practices Act 1974 (Cth)Cases cited: Ackers v Austcorp International Ltd [2009] FCA 432
Australian Competition and Consumer Commission v Universal Sports Challenge Ltd [2002] FCA 1276
BHPB Freight Pty Ltd v Cosco Oceania Chartering (No 2) [2008] FCA 1656
Bill Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242
Bonett v The Barron and Dowling Property Group Pty Ltd (2006) 67 NSWLR 475; [2006] NSWSC 975
Brown v Jam Factory Pty Ltd (1981) 53 FLR 340
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25
Campomar Sociedad Limiteda v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12
Cummings v Lewis (1993) 41 FCR 559
Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199
Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199
E K Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172
Fubilan Catering Services Limited v Compass Group (Australia) Pty Ltd [2007] FCA 1205
Given v Pryor (1979) 39 FLR 437
Gould v Vaggelas (1985) 157 CLR 215
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 79 ALR 83
Henville v Walker (2001) 206 CLR 459; [2001] HCA 52
Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216
HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109; [2002] HCA 41
Lisciandro v Official Trustee in Bankruptcy (1995) ATPR 41-436
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Marks v GIO Australia Holdings Limited (1998) 196 CLR 494Mayne Nickless Ltd v Multigroup Distribution Services Pty Ltd (2001) 114 FCR 108; [2001] FCA 1620
McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230; [2008] FCAFC 2
Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Limited (2010) 241 CLR 357; [2010] HCA 31
Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1991) 33 FCR 1
NMFM Property Pty Ltd v Citibank Ltd (2000) 107 FCR 270; [2000] FCA 1558
North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60
Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193; [2011] WASCA 76
Parkdale Custombuilt Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Street v Luna Park Sydney Pty Ltd [2007] NSWSC 588
Taylor v Crossman (No 2) [2012] FCAFC 11
Ting v Blanche (1993) 118 ALR 543
Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333
Videon v Barry Burroughs Pty Ltd (1981) 37 ALR 365
Walplan Pty Ltd v Wallace (1985) 8 FCR 27
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Winterton Constructions Pty Limited v Hambros Australia Ltd (1992) 39 FCR 97Halsbury’s Laws of England (3rd ed), vol 26, para 1515
Macquarie Dictionary (The Macquarie Dictionary Online, accessed 2012)
Oxford Dictionary (Oxford English Dictionary Online, accessed 2012)Dates of hearing: 7, 8, 11, 12, 13 April 2011 and 16, 17 June 2011 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 281 Counsel for the Applicant: Mr RJ Douglas SC with Mr JW Lee Solicitor for the Applicant: Griffiths Parry Lawyers Counsel for the First Respondent: The First Respondent did not appear Counsel for the Second and Fifth Respondents: Mr D Savage SC with Ms M Luchich Solicitor for the Second and Fifth Respondents: Gadens Lawyers Counsel for the Third and Fourth Respondents: Mr TJ McBride Solicitor for the Third and Fourth Respondents: Russell and Company Solicitors FEDERAL COURT OF AUSTRALIA
Bennett v Elysium Noosa Pty Ltd. (in liq) [2012] FCA 211
CORRIGENDUM
1.On the cover page and in [20], line 3, delete “Campomar Sociedad Limiteda v Nike International Ltd” and insert in lieu thereof “Campomar Sociedad, Limitida v Nike International Ltd”.
2.In [244], line 5, delete “dice” and insert in lieu thereof “die”.
I certify that the preceding two (2) numbered paragraphs are a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Reeves. Associate:
Dated: 12 September 2012
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 171 of 2010
BETWEEN: LUKE ANTHONY BENNETT
ApplicantAND: ELYSIUM NOOSA PTY LTD. (ACN 101 485 634)
(IN LIQUIDATION)
First RespondentCONSOLO LTD (ACN 000 022 266)
Second RespondentPEARSON PROPERTY GROUP (NOOSA) PTY LIMITED (ACN 112 256 612)
Third RespondentPEARSON PROPERTY GROUP PTY LIMITED
(ACN 076 423 268)
Fourth RespondentCONSOLO PROPERTY PTY. LTD. (ACN 093 500 059)
Fifth Respondent
JUDGE:
REEVES J
DATE OF ORDER:
9 MARCH 2012
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.The respondents pay the applicant $500,000.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 171 of 2010
BETWEEN: LUKE ANTHONY BENNETT
ApplicantAND: ELYSIUM NOOSA PTY LTD. (ACN 101 485 634)
(IN LIQUIDATION)
First RespondentCONSOLO LTD (ACN 000 022 266)
Second RespondentPEARSON PROPERTY GROUP (NOOSA) PTY LIMITED (ACN 112 256 612)
Third RespondentPEARSON PROPERTY GROUP PTY LIMITED
(ACN 076 423 268)
Fourth RespondentCONSOLO PROPERTY PTY. LTD. (ACN 093 500 059)
Fifth Respondent
JUDGE:
REEVES J
DATE:
9 MARCH 2012
PLACE:
BRISBANE
REASONS FOR JUDGMENT
INTRODUCTION
“Elysium Noosa” is a residential community title development located near Noosa on the Sunshine Coast of Queensland. The development was undertaken as an unincorporated joint venture between two property development companies: NR Nominees Pty Ltd (NR Nominees) and Pearson Property Group (Noosa) Pty Limited (PPG Noosa). Elysium Noosa Pty Ltd, the first respondent, owned the land upon which the development was located. On one side of the joint venture, Consolo Ltd (Consolo), the second respondent, owned all of the shareholding in NR Nominees which, in turn, owned all of the shareholding in Elysium Noosa Pty Ltd. Consolo also held all of the shareholding in Consolo Property Pty Ltd (Consolo Property), the fifth respondent. On the other side, Pearson Property Group Pty Limited (PPG), the fourth respondent, held all of the shareholding in PPG Noosa, the third respondent. Where appropriate in these reasons, I will refer to Elysium Noosa Pty Ltd, Consolo Property and Consolo as the Consolo respondents and PPG and PPG Noosa as the Pearson respondents.
Dr Luke Bennett, the applicant, is a medical practitioner. In early 2005 he signed a contract to purchase a lot – Lot 181 – in the proposed Elysium Noosa Community Title Scheme, for the sum of $2.1 million. Lot 181 comprised a house and land package. The development was constructed over the ensuing three years and Dr Bennett completed his purchase of Lot 181 on 11 March 2008.
Approximately 18 months later, on 23 September 2009, receivers and managers were appointed to Elysium Noosa Pty Ltd. It was subsequently placed in liquidation.
Dr Bennett was dissatisfied with his purchase of Lot 181 in various respects. As a result, he commenced these proceedings in May 2010. In his original statement of claim, he claimed that the two sales people who were involved in selling Lot 181 to him made certain misleading or deceptive representations about the property in contravention of s 52 and other sections of Pt V of the Trade Practices Act 1974 (Cth) (the TPA). Dr Bennett claimed that he was induced by those representations to enter into the contract to purchase Lot 181. One of his main points of complaint were representations that he claimed were made that a Community Centre and related facilities would be constructed at the Elysium Noosa development. Further, in a subsequent amendment to his original statement of claim, Dr Bennett also claimed that the respondents had, by their silence, engaged in misleading or deceptive conduct by not disclosing to him that there were insufficient funds available to complete the construction of the first stage of the Elysium Noosa development, including the Community Centre, at, or within a short period after, the time he completed his purchase of Lot 181.
The two sales people who allegedly made the misleading or deceptive representations to Dr Bennett were Nick and Julieanne Burke. The Burkes were neither employed by any of the respondents, nor parties to any other contract with any of them. Instead, they were employed by PRD Consulting Services Pty Ltd (PRD), which company was appointed by Elysium Noosa Pty Ltd in 2004 to be the sole exclusive marketing consultant for the Elysium Noosa development. It will be noted that neither the Burkes, nor PRD, is a party to these proceedings. The relationship, if any, between the Burkes and the respondents is, therefore, a significant issue in these proceedings.
In his original statement of claim, Dr Bennett claimed damages totalling $2 million under s 82 of the TPA. At trial, his damages claim was altered to make a claim for damages under s 87(1A) of the TPA, as well as s 82, and it was reduced to $1.2 million on the basis that Lot 181 was valued at $900,000 at the time of the trial. This value was agreed between the parties. For their part, the respondents claimed that the correct measure of damages, if damages were payable (which they denied), was based upon the value of the property at acquisition, viz settlement on 8 March 2008. The parties also agreed that value was $1.6 million. Therefore, if any damages were payable to Dr Bennett, they claimed they should be limited to $500,000.
TEN ISSUES ARISE
During the course of these proceedings, Dr Bennett sought leave to amend his original statement of claim on four occasions. Two of those occasions occurred on the first day of the trial. By the end of this series of amendments, Dr Bennett came to rely upon two sets of alleged misleading or deceptive representations: one set made before he signed the contract to purchase Lot 181 in early 2005; and the other set made before he completed the purchase of that property in March 2008. In these reasons, the former will be referred to as the pre-contract representations and the latter will be referred to as the pre-completion representations.
By the time of closing submissions at the trial, the counsel for the parties agreed that the following 10 issues arose for determination:
Issue 1 – Were the pre-contract representations made?
Issue 2 – Were the pre-completion representations made?
Issue 3 – If the pre-contract representations and/or the pre-completion representations were made, were they made in connection with the sale of an interest in land and/or facilities associated with land under s 53A(1)(b) of the TPA?
Issue 4 – If the pre-contract representations and/or the pre-completion representations were made, were they misleading?
Issue 5 – If the pre-contract representations were made, did the respondents have reasonable grounds for making them under s 51A of the TPA?
Issue 6 – If the Burkes, by their conduct, made the pre-contract representations, were they, in doing so, engaged in conduct on behalf of the respondents pursuant to s 84 of the TPA?
Issue 7 – If the pre-completion representations were made, did this amount to conduct engaged in on behalf of the respondents pursuant to s 84 of the TPA?
Issue 8 – Did Dr Bennett rely upon the pre-contract representations and/or the pre-completion representations?
Issue 9 – If so, what is the measure of Dr Bennett’s damages?
Issue 10 – If any damages are awarded to Dr Bennett, should they be apportioned?
I will consider these issues in the order set out above. However, as will become apparent later in these reasons, it will not be necessary to consider every one of these issues and it is convenient to consider some of them together. It will also become apparent that my task of determining these issues has been rendered significantly more difficult by the deficiencies which exist in various parts of the final amended statement of claim in this matter. As a result, I have had to draw a number of inferences to fill in for essential matters that have not been pleaded, or to attempt to clarify inconsistencies. While I have endeavoured to do the best I can to identify and determine the issues that were fairly raised by the final amended statement of claim, the pleading of one aspect of Dr Bennett’s case has proved to be so deficient that no amount of inferences or clarification could result in my identifying a properly pleaded claim (see issue 2 at [67]–[79] below).
ISSUE 1 – WERE THE PRE-CONTRACT REPRESENTATIONS MADE?
The pleadings
Most of the pre-contract representations are set out in a schedule to Dr Bennett’s final amended statement of claim, described as Schedule A. Some of those representations are no longer being pursued: specifically those in paras 15, 16, 17, 18, 21, 22 and 23 all of which relate to various aspects of the house constructed on Lot 181. The representations in Schedule A that are still relied upon fall into two broad categories: one category dealing with aspects of the Elysium Noosa development more generally (paras 1–11 inclusive); and the other category dealing with aspects of the house constructed on Lot 181 (paras 13, 14, 19 and 20 – there is no para 12).
According to the final amended statement of claim, those in the first category, the Elysium Noosa development category, were all allegedly made by one of the Burkes, in the company of the other, during discussions held at the site office at the Elysium Noosa development at the time of Dr Bennett’s initial visit to the development in January 2005. Dr Bennett’s friends, Robb and Maree Major, accompanied him on this visit and the other visits he made to the site in early 2005. In para 8 of the final amended statement of claim, Dr Bennett claimed that during discussions held with the Burkes at his initial visit, they:
(a)Showed [him], in the site office, a large scale model of the site as completed, with models of houses and other buildings on it, and the streetscape and landscaping clearly identified;
(b)Showed [him], in the site office, various posters which served to demonstrate the characteristics and qualities of individual house structures within the Development, as well as the overall development ambience;
(c)Showed [him], in the site office, some A3 sheets detailing the architecture of the various design choices available to purchasers;
(d)Gave [him] two elaborate and detailed colour brochures in relation to the Development, each brochure noting that the Development was one undertaken by “Pearson Property Group in Association with Consolo Property”.
Then, in para 10 of the final amended statement of claim, Dr Bennett claimed:
Further, on the occasion of the initial visit … to the site office, while engaged in the conduct referred to above in paragraph 8, Nick and Julieanne, or one of them, in the company with the other, orally informed [me] to the effect of each of the matters pleaded in paragraphs 1 to 11 of Schedule A to this pleading.
The 11 matters set out in Schedule A are as follows:
1.Nick and Julieanne Burke … advised that Elysium Noosa would have a Community Centre that featured:
a. A business centre with a meeting room and computer facilities;
b. BBQ and dining facilities;
c. Child minding facilities;
d. A tennis court;
e. A 25 metre lap pool;
f. A relaxation pool;
g. A gymnasium;
h. A steam room;
i. Massage rooms; and
j. A yoga deck.
2.Nick and Julieanne advised that the houses in Stage 1 of the Development would be completed and would settle at the same time.
3.Nick and Julieanne advised that the Community Centre would be completed contemporaneously with Stage 1.
4.Nick and Julieanne advised that a free shuttle bus service would be available for the use of Elysium residents and their guests.
5.Nick and Julieanne advised that Elysium would have a vehicle which would be available for the use of Elysium residents and their guests.
6.Nick and Julieanne Burke advised that prominent architects would be heavily involved in the design and construction phase of each dwelling. The architects would have free range to ensure that unique, high quality finishes and materials would be used in each dwelling and the Community Centre.
7.Nick and Julieanne Burke advised that the finishes used on all dwellings both internally and externally would be of the highest quality and that the whole purpose of Elysium was to set a new benchmark for high end architecture and good quality development.
8.Nick and Julieanne advised that the Community Centre would have free morning newspapers and a tea/coffee/juice bar available for residents and their guests.
9. Nick and Julieanne Burke advised that:
a.The site landscaping would utilise tens of thousands of new native plants;
b.Non-native and noxious plants would be removed;
c.The existing forested areas would be comprehensively rehabilitated, vines and non-native undergrowth would be removed; and
d.Landscape areas and open spaces would appear and would be professionally landscaped to the highest standards to the specifications of renowned consultants Edaw Gillespie.
10. Nick and Julieanne advised, in relation to street-scaping, that:
a. Swales would be used instead of the usual curbing and channelling;
b. Mature trees would be planted; and
c. The landscaping would be completed at the time of settlement.
11.Nick and Julieanne represented, based on the specifications of the marketed product, that Lot 181:
a.Was likely to be an asset of substantially greater value than the price paid; and
b.Was likely to increase in value over subsequent years and was unlikely to decrease in value.
The second category of pre-contract representations, the house construction representations, were allegedly contained in a draft copy of a sale and purchase contract for Lot 181 which had the plans for the house to be constructed on that lot attached to it. According to his final amended statement of claim (see at [16] below), those documents were provided to Dr Bennett by one of the Burkes during his second or third visit to the Elysium Noosa development in early 2005. The house construction representations set out in Schedule A, that are still being pursued, are as follows:
13.The plans that were attached to the contract for the purchase of Lot 181 (“the original plans”) indicated that the house on Lot 181 would have a single-opening triple garage door.
14.The original plans indicated that the western wall of the house would have three large rolling shutters fixed externally to the house and which extended to the full height to the corridor gallery area.
…
19.The original plans indicated that there would be large openings onto the downstairs patio by way of a unique Perspex roller blind and timber stacking shutters.
20.The original plans indicated that the windows for the master bedroom and ensuite comprised stacking structures for the entire eastern wall, such that both rooms could be fully opened as in the fashion of a veranda.
Finally, Dr Bennett alleges that two further sets of implied pre-contract representations were made. In his closing submissions, Dr Bennett’s senior counsel, Mr Douglas SC, described those representations as follows:
40First, in paragraphs 12 to 15A of the statement of claim certain representations, express from documents and implied therefrom are pleaded.
41Second, in paragraph 18, there is pleaded an implied representation in respect of the express representations that occurred, to the effect that the development plans were final, the costing of the development was complete and funds had been secured to undertake the development construction.
As to the first of these two sets of implied pre-contract representations, paras 12–15 inclusive of the final amended statement of claim are as follows:
12.On or shortly after 14 February 2005, [Dr Bennett] was given by Nick or Julieanne a draft copy of the Agreement in respect of the purchased lot.
13.Such draft copy of the Agreement contained plans in respect of the construction of a residence on the purchased lot.
14.The plans, on a sensible and reasonable reading and perusal of the same, conveyed the representations pleaded in paragraphs 13 to 23 of Schedule A to this pleading.
15.[Dr Bennett] read and perused the plans and construed them as conveying the last mentioned representations.
Then the first of these implied pre-contract representations is pleaded in para 15A of the final amended statement of claim as follows:
Further, it was implied as a representation in the conduct referred to above that there would be in place at the time of construction of Development Works, sufficient funds, borrowed or independently sourced with the respondents, to enable the same to be constructed as represented in paragraphs 1 to 23 of Schedule A.
The second of these two sets of implied pre-contract representations is pleaded in para 18 of the final amended statement of claim as follows:
Further, or in the alternative, such conduct was misleading and deceptive or likely to mislead or deceive [Dr Bennett] as a prospective purchaser, in contravention of s.52 and, or in the alternative, s 53A of the TPA on account of the fact that:
(aa)The substance of the pre-agreement conduct, by way of representation, was such that there was an implied representation that in respect of the matters represented:
A. Development Plans were final;
B. Costing of the Development was complete;
C. Funds had been secured to undertake the Development construction;
(a)It was engaged in without qualification or caveat as to the unconditional availability of finance to enable the future construction of the Development, and to the represented standard, to be undertaken as represented irrespective of the number of sales effected in the Development, or like market or financial conditions;
(b)At the time it was engaged in, there did not exist any unconditional credit provider finance approval, or any dedicated separate body of funds which would allow of completion of the Development, in the manner and with the timing represented to be undertaken irrespective of the number of sales effected in the Development, or like market or financial condition;
(c)At the time it was engaged in, any costing of the Development was preliminary in that it was based on sketch plans not detailed design plans and incomplete;
(d)At the time it was engaged in, no schedule of works existed such that construction completion was scheduled as was represented.
These allegations are in a different category to the other two categories of pre-contract representations in that they are both said to constitute implied representations that are said to arise from the conduct pleaded earlier. Accordingly, I will first determine whether the first two categories of pre-contract representations were made, as alleged, before I determine whether these implied representations arise from them.
The principles
Whether or not conduct amounts to a representation is “a question of fact to be decided by considering what [was] said and done against the background of all surrounding circumstances”: Campomar Sociedad Limiteda v Nike International Ltd (2000) 202 CLR 45; [2000] HCA 12 at [100]. Furthermore, the conduct concerned must be viewed as a whole and “where the conduct complained of consists of words it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words”: Parkdale Custombuilt Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 (“Parkdale”) at 199 per Gibbs CJ. However, it is important to note that s 52 of the TPA is not confined to representations, but proscribes “conduct” that is misleading or deceptive: see Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592; [2004] HCA 60 at [103]. Nonetheless, in this case, the conduct is confined to words, both oral and written. Furthermore, the words were used in pre-contract negotiations between individuals, as distinct from statements made to the public, or a particular section of the public, in a non-contractual setting. This distinction was highlighted by French CJ in Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304; [2009] HCA 25 (“Campbell”) at [25]. Taking into account these principles, I will now turn to consider the evidence going to whether Dr Bennett has established that the pre-contract representations described above were made.
Dr Bennett’s evidence
Dr Bennett made an affidavit in which he set out his evidence about the statements the Burkes made to him and the promotional and other material that they provided to him in the weeks before he signed the contract to purchase Lot 181 in February 2005. I interpolate that while Dr Bennett signed the Buyer’s Acknowledgement section and one other part of the contract on 14 February 2005, his signature on the execution clause was not dated. Nonetheless, the “contract particulars” section of the contract states that the contract date was 7 March 2005.
While he was challenged in cross-examination about other aspects of his evidence, particularly that going to whether he relied upon the various representations allegedly made to him, Dr Bennett was not challenged on his evidence as to whether the various representations were in fact made. Furthermore, neither the Burkes, nor the Majors who (as noted above) were present at the time of Dr Bennett’s visits to the site in early 2005, were called to give evidence. Accordingly, I accept Dr Bennett’s evidence on what he saw and what the Burkes said to him, and gave to him, during his visits to the Elysium Noosa site in January and February 2005. That evidence was to the following effect.
Dr Bennett first became aware of the Elysium Noosa development from articles he read in the local media in January 2005. As is already noted above, some time in January 2005, together with his friends Robb and Maree Major, Dr Bennett visited the site of the proposed development. There he met Nick and Julieanne Burke, who introduced themselves as the on-site sales representatives of the developer. He informed the Burkes that he wished to gain a better understanding of the development and he asked them to explain it to him. This meeting and discussion took place in the on-site sales office at the development. Dr Bennett observed that this sales office was well set-up to provide information about the development to interested parties.
During the course of his first meeting with the Burkes in that sales office, Dr Bennett’s evidence was that he was given, or observed, an amount of promotional material for the development as follows:
a)A large scale model of the site as completed (to early stages), with models of houses, vegetation, and other site amenities on it;
b)Various posters were situated on the wall of the Sales Office which served to demonstrate the characteristics and qualities of individual house structures within the development, as well as the overall development ambience. The posters depicted:
i. the location of Elysium as part of Noosa and its waterways; and
ii. designs and impressions of houses for sale;
c)A photograph of the poster situated on the wall of the Sales Office, depicting the locality of Elysium as part of Noosa and it’s (sic) waterways …;
d) A large double-sided colour brochure for Lot 181 … which featured:
i. a computer generated impression of the home;
ii. plans of the home;
iii. a description of the home by the architect; and
iv. key features of the home;
e)Large double-sided colour brochures for all of the homes available for purchase in Stage 1 of the development …;
f)A3 black and white floor plans and elevations for Lot 181 …, which were subsequently attached to the sale contract …;
g)“Finish boards” which provided the type of finish for the internal and external finish material for each home in Stage 1; and
h)A schedule of materials and finishes for the homes. A copy of “Issue C”, being the schedule of materials and finishes for the homes ….
He was also provided with the following marketing material:
a)A large pamphlet entitled ‘Elysium Noosa’ (undated) showing how Elysium was to look upon completion and the lifestyle available at Elysium …; and
b)A large pamphlet entitled ‘Elysium Noosa’ with ‘Architecture’ faintly embossed at the top of the first page (undated) ….
On reading the first of these pamphlets, the Elysium Noosa lifestyle pamphlet, Dr Bennett said he noted the following statements:
a)“Elysium n. abode of the blessed; (place of) ideal happiness
Is there a definition for a place that sets new benchmarks in architectural design, promotes harmonious community living, and protects and enhances its natural environment? There is now. Elysium Noosa. The best. The last. The ultimate”;
b)“Elysium Noosa brings together two seemingly contradictory attributes of place - diversity and unity. Diversity is reflected in the individual residential designs by leading Australian architects. Unity is embodied firstly by the creation of a Community Village, and secondly by harmonious integration of the community and residences with the natural environment”;
c)“Upon completion, Elysium will comprise 189 individually designed homes plus a multi-purpose community centre with health and well-being facilities, swimming pools, tennis courts, parks and a network of linked walkways. Privacy is ensured through a single access point and 24 hour on-site security”;
d)“To be the best, we had to commission Australia’s best architects. Then we briefed them to create architecture that is inspiring, harmonious and diverse. The result is Australia’s only architecturally designed residential community where no two houses are the same and every single one is a masterpiece”;
e)“Every home at Elysium Noosa is an inspirational statement in individual design. The architects involved have collaborated closely to ensure that neighbouring properties complement and enhance each other’s features and appearance. You’ll discover homes where every aspect of design, including landscaping, has been given full creative consideration”;
f)“A prestigious address is one thing. A place where like-minded individuals who appreciate design, balance and well-being can come together is something else altogether. With a range of exclusive recreation and health spa facilities as well as dedicated function and business areas, Elysium Noosa will be a thriving living community”;
g)“Residents of Elysium Noosa can look forward to being part of a cohesive neighbourhood and community where a diversity of activities are on offer. Walking trails, tennis, swimming cycling are just some of the lifestyle pursuits that can all be enjoyed without even having to leave the grounds of Elysium Noosa” (sic); and
h)“Elysium Noosa is the realisation of the vision of Pearson Property Group in association with Consolo Property to create the ultimate Noosa community. The development team saw the potential to combine their project expertise and experience with the talents of the best architects, landscape designers and community planners. As the first and last opportunity of its kind in Noosa Heads, the developers have ensured every aspect of Elysium Noosa has met uncompromising quality standards.”
From these statements, Dr Bennett reached the following conclusion about the Elysium Noosa development. That:
… the plan was for the development to have a lifestyle theme throughout, to have high quality architecture throughout and to have the availability of a significant community centre involving multiple facilities. The combination of those three elements impressed [him] as likely to produce a very attractive living environment.
Within the second of these pamphlets, the Elysium Noosa architecture pamphlet, Dr Bennett noted the following statements:
a)“Elysium brings together those two seemingly contradictory attributes of place – diversity and unity. Diversity is reflected in the designs of the residences by a number of Australia’s foremost architects, each responding to the natural assets of their particular sites. Unity is embodied in two ways – the first by creating a community heart that will feel like an extension of home, a true village to be enjoyed every day. The second is by landscape of extraordinary beauty and serenity with lakes and parks, forest walks, cycle ways and streets designed to integrate the variety of residential designs into a cohesive community environment”; and
b)“Gabriel and Elizabeth Poole Design Company is a dynamic team of young architects headed by Gabriel Poole. The company ethos is to meet the needs of each client through the creation of beautiful architecture that maintains a balance with the environment and natural surrounds. Each member of the team has an individual method of expressing the company’s goals. It is a small practice where communication between the whole team is an integral part of its successful operation.”
Having read these statements, Dr Bennett said that the impression he gained about the architectural components of the development was that:
… the development when finished would be a combination of very attractive lifestyle and high quality architecture, centred around a significant multi-function community centre, in an immaculately presented site.
During this first meeting with the Burkes, Dr Bennett said that they also explained various features of the Elysium Noosa development. They included the Community Centre, the features of which are described in some detail in para 1 of Schedule A: see at [13]1 above. He said that the Burkes told him this Community Centre, otherwise referred to as “The Club”, “would be the focal point for the lifestyle activities within the estate”. While he was attracted generally by the overall lifestyle theme of the Elysium Noosa development and was particularly interested in ensuring that any dwelling he purchased in the development was of high architectural and design quality, he said in his affidavit that: “the presence of the community centre was a significant factor to [him] in [his] decision to continue investigations and to ultimately purchase in the development”. He added that this combination of lifestyle, quality architecture and the community facilities “would underpin [his] investment in the development”. Dr Bennett also gave evidence that the Burkes told him about each of the other features of the Elysium Noosa development set out in paras 2–11 inclusive of Schedule A to the final amended statement of claim: see at [13]2–11 above.
Despite what is pleaded in para 12 of the final amended statement of claim (see at [16] above), Dr Bennett did not say in his affidavit when it was that he first received the draft contract for the purchase of Lot 181, nor who it was that provided it to him. However, as noted above (at [21]), on 14 February 2005, he signed the “Buyer’s Acknowledgement” that the selling agent had made the requisite disclosures to him under the Property Agents and Motor Dealers Act 2000 (Qld). Furthermore, Mr Nick Burke signed the “Selling Agents Disclosure Declaration” which appears immediately above the “Buyer’s Acknowledgement” section referred to above. From this I infer that Dr Bennett received a draft copy of the contract on or before 14 February 2005 and he probably received it from Mr Nick Burke. Furthermore, the signed copy of the contract in evidence has attached to it the plans and specifications for the house to be constructed on Lot 181, so I infer that the draft copy of that document had the same material attached to it.
In cross-examination Dr Bennett was asked about his understanding as to what the expression in para 2 of Schedule A, “completed and would settle at the same time”, meant. His evidence on that aspect was as follows:
MR SAVAGE: Dr Bennett, in your statement you refer to the completion of the homes in stage 1 and, at different points, you refer to them as being “completed and settled at the same time” and/or that they would be completed and settled simultaneously?---Yes
You’re not suggesting it’s your belief, is it, that on a day all the homes would be completed at the same time?---Well, certainly, in the very early days of the marketing of the estate, that was suggested. I’m not naïve enough to think that a precise day would be selected, but I took that to mean within a very close period of time, perhaps weeks or even a month or two.
As to para 11 of Schedule A, Dr Bennett said that this was a belief he held as a result of the various statements made to him by the Burkes. In particular, he said that the following matters the Burkes told him over the course of his three pre-contract visits to the Elysium Noosa development led him to that belief:
a)Such sophisticated high quality homes could not be built by an independent builder for such prices;
b)The dwellings could only be built by a developer with significant market leverage and efficiencies;
c)The best land in the development was on sale earliest, at the best prices;
d)The architecture offered in the Lot 181 design exceeded that offered in properties in the same price range in the adjacent Noosa Springs development; and
e)Each house would be made more attractive by the fact that, on settlement, the community facilities would be available for immediate use and that the site landscaping would be immaculately conceived and maintained.
In general, Dr Bennett said that he believed that by purchasing in Stage 1 of the Elysium Noosa development, he would be purchasing a residence in a development with the following features:
a)A significant emphasis on health, physical activity and sporting activity;
b)It was being deliberately marketed to people who placed value on such matters;
c)It would therefore probably attract such people as purchasers; and
d)The houses in Stage 1 would be completed and settled at the same time, contemporaneously with the community facilities.
He added:
… what Nick and Julieanne told [him] caused [him] to conclude that the subsequent stages of Elysium were likely to be sold to purchasers who valued the same sort of lifestyle factors, and that the entire development, when complete, would be an attractive, vibrant and healthy community environment.
Dr Bennett visited the Elysium Noosa development on two further occasions before he signed the contract to purchase Lot 181 in February 2005. He was not able to identify the statements made at the second and third visits respectively, but he said that the following statements were made at one or other of them:
a)[He] asked about the house designs that were available in Elysium. [He] was informed by Nick and Julieanne that each of the structures in Elysium would be designed by well known architects. A house which attracted [his] interest on Lot 181 was designed by architect Gabriel Poole. [He] was aware that Gabriel Poole was an architect of significant renown and [he] thought that if [he] purchased a house designed by Gabriel Poole, his involvement would be an attractive selling point, if [he] ever decided to sell in the future;
b)[He] was particularly attracted to acquiring property in the development because of the promotion of the notion, from what [he] was told and given above, that the architecture was of highest quality and was by high profile architects. In the various meetings [he] had prior to the execution of the sale contract, [he] was told by Nick and Julieanne that the architects would be heavily involved in the construction phase, and fully in command of each design. Further, [he] was told that the architects would have free range to ensure that their choice of unique, high quality finishes and materials would be utilised in each home and The Club;
c)Nick and Julieanne showed [him] a number of different house designs. They told [him], and [he] believed, that the houses would be built with superior materials. They told [him] that the finishes internally and externally would be of high quality, and that the whole purpose of Elysium was to bespeak of high end architecture and good quality development. The entire emphasis was on high quality;
d)Nick and Julieanne reiterated the information they gave [him] at the first meeting about the community facilities. They said there would be an onsite pool of at least 25 metres in length. That was important to [him], since it was [his] intention to swim regularly, as part of [his] fitness regime;
e)They told [him] of the various facilities that would be within community facilities. Whilst it was not a matter of particular attraction to [him] that [he] could mingle with other people from Elysium at the community facilities, [he] intended to make use of almost all of the facilities described. It was a matter of importance to [him] that the existence of community facilities meant that the development would attract as purchasers people who had a sense of community and were likely to therefore be supportive and cohesive in their dealings with each other;
f)They explained to [him] that “The Club” would have free morning newspapers and a tea/coffee/juice bar freely available for the residents and guests;
g)[He] asked Nick and Julieanne about the infrastructure on the site. They told [him] that the landscaping would utilise native vegetation. They said any non-native plants would be removed, tens of thousands of new native plants introduced, and the existing forested areas would be rehabilitated in great detail, specifically with removal of vines and non-native undergrowth;
h)Nick and Julieanne spoke about the street scaping intended for the development. They described the use of swales, which [he] understood to be street-side drainage structures in the nature of a rock gully, which provided drainage instead of the usual curbing and channelling. They told [him] that mature trees would be planted so that the landscaping would be complete at the time of settlement, rather then (sic) having to wait for the trees to grown after settlement; and
i)Nick and Julieanne told [him] the development was superior to Noosa Springs located on Links Drive, Noosa Heads, Queensland, in its physical aspects including The Club, its architecture and as being a much more vibrant community socially.
After spending considerable time studying the double-sided colour brochures and the floor plans and elevations for the various dwellings that were available for construction in the development, Dr Bennett said he identified Lot 181 as the property of his choice. He said that the Burkes told him that a number of features would be included in the design of the house to be constructed on Lot 181, including the following:
a)[He] required a three bay garage to accommodate vehicles. There was a great deal of practical and architectural appeal to the single-opening triple garage designed by Gabriel Poole for Lot 181, Elysium. [He] was reassured by Nick and Julieanne that this would be provided and it was clearly evident on brochures, floor plans and on a scale model of the home presented in the site sales office;
b)The western wall of the house should have had three large rolling shutters fixed externally to the house and which extended full height to the corridor gallery area. Again, these were of enormous aesthetic and architectural appeal, they would have contributed significant additional light and ventilation to the entire upper floor;
c)The master bedroom ensuite should have had a large enclosed double shower with a timber floor and a timber seat within the shower;
d)The master bedroom and ensuite should have had a caulked timber floor;
e)There should have been a polished concrete finish to the driveway;
f)There should have been a polished concrete finish in the downstairs living areas;
g)There should have been large openings onto the downstairs patio by way of a unique perspex roller blind and timber stacking shutters;
h)The windows for the master bedroom and ensuite should have comprised stacking structures for the entire eastern wall, such that both rooms could be fully opened as in the fashion of a veranda;
i)There was supposed to be a drying court situated in the backyard with a water tank below;
j)The external timber cladding boards for the house were supposed to be of high quality and a superior low-maintenance natural finish; and
k)There was supposed to be full insect screening of all doors and windows.
Dr Bennett said that the statements the Burkes made to him persuaded him to sign the contract to purchase Lot 181. He said he was impressed by “the quality and integrity of the architecture” as these would be “important to the underpinning of the value of [his] purchase, both for the purposes of [his] use of it, and also in the sense of it being an investment”. He also said that he took into account the Burkes’ repeated assertions “that construction would be coordinated such that all [Stage 1] homes would be completed and settled simultaneously along with the advertised community facilities and body corporate services”. Finally, he said that “[he] believed that when [he] paid [his] purchase price upon settlement, [he] would be living in a completed stage with completed community facilities”.
Most of the representations in Schedule A were made
With the qualification expressed hereunder, based on this evidence of Dr Bennett, I find that the Burkes advised him of each of the matters set out in paras 1–10 of Schedule A. Accordingly, I find that the Burkes made representations to Dr Bennett to the effect pleaded in those paragraphs. Further, I find that, by providing the contract attaching the plans and specifications for the house to be constructed on Lot 181 to Dr Bennett, Mr Nick Burke made representations to the effect pleaded in paras 13, 14, 19 and 20 of Schedule A. These representations are specifically supported by the evidence set out at [37]a, b, g and h above, respectively. Whether any of these representations was misleading or deceptive will be dealt with in issues 4 and 5 below. The qualification relates to para 2. It is that, consistent with the evidence of Dr Bennett (see at [32] above), the words “at the same time” in that representation, in context, should be taken to mean within a reasonably short period of time of each other. I have excluded the representations in para 11 from these findings because, unlike the preceding 10 paragraphs in Schedule A, those matters were not things of which the Burkes orally “advised” Dr Bennett, but instead they are pleaded as things they “represented”, based on the “specifications of the marketed product”. In this sense, they are of a similar kind to the third category of pre-contract representation relied upon by Dr Bennett (see at [15]–[18] above) which are alleged to be implied from the express representations that are pleaded in the final amended statement of claim. I will now turn to consider para 11 of Schedule A and this third category of implied pre-contract representations in that order.
The approach to determining whether an implied representation was made
Before doing so, it is important to note that the determination of the question of fact whether a statement was made that constitutes a representation (as above) is of a different kind to the determination whether an implied representation was made. With both, the ultimate issue is whether the applicant was lead into error by the representation: see Parkdale at 198. However, the exercise involved with the latter is to determine whether what was actually said or done, in all the relevant circumstances, conveyed something more, such that it lead the applicant into error. The example given by Stephen J in Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216 at 227 was a situation where a person announced “… an opera as one in which a named and famous prima donna will appear and then to produce an unknown young lady bearing by chance that name …”. About this example his Honour observed: “The announcement would be literally true but none the less deceptive, and this because it conveyed to others something more than the literal meaning which the words spelled out.” Similarly, in Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 79 ALR 83 (“Henjo”), where it may have been literally true to say that the restaurant concerned had seating arrangements for 128 persons. Nonetheless, Lockhart J held (at 93–4) that the provision of a card on which the words “Seats 128” appeared immediately above the word “Licensed”, combined with a sign on the front of the restaurant which said “Fully Licensed”, conveyed the impression that the restaurant was licensed to seat 128 persons when in fact it was only licensed to seat 84. I should add that while Lockhart J came to this conclusion (at 94), his Honour also proceeded to deal with the case as one involving a representation by silence (see at 94–5). Burchett J agreed with Lockhart J at 106 and Foster J dissented on a different aspect at (106–109).
So, in determining whether these three implied representations were made in this case, the question is whether what the Burkes actually said, in all the relevant circumstances, conveyed something more to Dr Bennett, such that he was lead into error. In other respects the determination of this question proceeds along similar lines to the characterisation of conduct as misleading or deceptive. That is, among other things, the determination is an objective one, but it may take account of the state of knowledge of the individuals concerned when considering the “content and circumstances of the conduct”: see Campbell at [25]–[27].
It is also worth noting that in claiming these implied representations were made, Dr Bennett appears to have limited his reliance to the express representations the Burkes made to him, viz those in Schedule A. Further, he does not rely upon any implied representation arising out of the contract he subsequently made for the purchase of Lot 181, as distinct from the representations in paras 13, 14, 19 and 20 of Schedule A that were made by providing the draft contract to them. Nor does he claim that any of these implied representations are founded on silence in the face of a reasonable expectation of disclosure (see Henjo at 94–5), nor that a particular subject matter was so “absolutely vital” to these pre-contract discussions that there was a reasonable expectation that it would be broached in them (see Winterton Constructions Pty Limited v Hambros Australia Ltd (1992) 39 FCR 97 at 113–4 per Hill J).
From all this it follows that the determination of this question in this case is quite confined. It requires a careful examination of what the Burkes actually said to Dr Bennett. It also requires the identification and consideration of all the relevant surrounding circumstances in order to determine whether what the Burkes actually said to Dr Bennett conveyed something more and thereby lead him into error such that it was misleading or deceptive under s 52 or, depending on the subject concerned, false or misleading under s 53A(1)(b) of the TPA.
The implied representations about the future value of Lot 181 were not made
Paragraph 11 of Schedule A is set out in [13] above and does not require reiteration. The representations pleaded therein both relate to the future value of Lot 181. On this aspect it is appropriate to interpolate that I do not consider that s 51A comes into operation until such time as this alleged implied representation is established. Until then, one cannot know what it is that the representor has reasonable grounds for: see issues 4 and 5 below at [104]) et seq.
In his final amended statement of claim, Dr Bennett has not identified what particular “specifications of the marketed product” (pleaded in para 11 of Schedule A) it was that he claims led to the Burkes making these representations about the future value of Lot 181. Since the only matters pleaded that appear to fall into that description are the express representations in Schedule A, I will assume that it is those to which he refers. On that basis, it will be noted that none of the express representations set out in Schedule A mentions the future value of Lot 181. Moreover, none of them goes to a subject matter that could be reasonably said to be connected with the future value of Lot 181.
While they are not pleaded as part of the express representations in Schedule A, in his affidavit, Dr Bennett did identify the five matters set out in para [33] above. In relation to those five matters, it will be noted that the first four go to the current price of the land and house comprising Lot 181 and the other dwellings in the Elysium Noosa development. None of those four matters expressly mentions the future value of the land or dwellings concerned. Further, the fifth matter is confined to the community facilities to be provided at the development and mentions neither price nor value. While the price of Lot 181 is clearly one factor going to its value, there is a myriad of other factors that will have a bearing upon its future value, including demand in the local real estate market and economic conditions, for example, the monetary settings of the Reserve Bank of Australia. There is no evidence that any of these sorts of factors was ever raised in the discussions between the Burkes and Dr Bennett. I do not therefore consider the statements the Burkes made about the price of Lot 181, or the other dwellings in the Elysium Noosa development, could, in all the relevant circumstances, reasonably convey anything about the future value of Lot 181.
The only other evidence in Dr Bennett’s affidavit that appears to be relevant to this matter is his subjective belief that “[his] investment in Stage 1 was likely to increase, rather than decrease, in value over the ensuing years”. Read in context, this belief appears to be based upon Dr Bennett’s knowledge of the Noosa real estate market, rather than any information the Burkes provided to him. On this point, it is pertinent to record that Dr Bennett gave evidence that he had been involved in the Noosa real estate market since about 2003: prior to his purchase of Lot 181 in early 2005, he had bought and sold two properties, each for a profit, and bought a third property, which he continued to own at that time. He said in cross-examination that in early 2005 he believed the Noosa real estate market was “reasonably solid”. This evidence leads me to conclude that this implied representation about the future value of Lot 181 is more likely to have its genesis in Dr Bennett’s subjective views about that issue rather than anything the Burkes said or conveyed to him.
As to the surrounding circumstances more broadly, it may be accepted that in any negotiations for a real estate investment of the kind and in the circumstances involved here, both sides to the negotiation may well be proceeding on the unspoken premise that the particular piece of real estate concerned will appreciate in value over time. However, to convert this circumstance into an implied representation that the vendor’s agent is thereby impliedly expressing some assurance about the future value of the investment would be, in my view, to introduce a radical reallocation of the risk involved in such negotiations of a kind that could not possibly have been intended by ss 52 or 53A(1)(b) of the TPA. This is all the more so here where Dr Bennett was an experienced investor in the Noosa real estate market (see at [47] above). The situation may have been different, if Dr Bennett had expressly sought and obtained from the Burkes an assessment as to the likely future value of Lot 181, but that did not happen.
Taking into account what the Burkes actually said (or did not say) to Dr Bennett on this subject in all the circumstances outlined above, I do not consider that Dr Bennett has established that the Burkes made the implied representations about the future value of Lot 181 pleaded in para 11 of Schedule A.
The implied representation about funding to construct the house on Lot 181 was not made
I turn then to the first of the other two alleged implied pre-contract representations. This representation is pleaded in para 15A of the final amended statement of claim (see at [17] above). It relates to the funding for the construction of the Elysium Noosa development: “there would be in place at the time of construction of Development Works, sufficient funds, … to enable the same to be constructed”. In para 15A, Dr Bennett claims that this representation is to be implied from “the conduct referred to above”. In his closing submissions (see at [15]1 above), Mr Douglas identified paras 12–15A of the final amended statement of claim (set out at [16] and [17] above) as the place where this implied pre-contract representation is pleaded. I will therefore assume that it is those paragraphs that describe “the conduct referred to above”. Mr Douglas also said the representation pleaded in those paragraphs was “express from documents and implied therefrom”. Consistent with this, when one goes to those paragraphs, it can be seen that the conduct pleaded in them is directed solely to the provision of the draft copy of the contract for purchase of Lot 181, which, in turn, contained the plans and specifications for the construction of the house on Lot 181. However, no attempt is made in the final amended statement of claim, or in Mr Douglas’ closing submissions, to identify what parts of those plans and specifications are said to give rise to the implied representation that “there would be in place at the time of construction of [the] Development Works, sufficient funds, borrowed or independently sourced with the respondents, to enable the same to be constructed as represented in paragraphs 1 to 23 of Schedule A”.
There are also some other confused aspects of the pleading of this implied representation. The reference at the end of para 15A to all the paragraphs in Schedule A suggests that the expression “Development Works” pleaded in this representation refers to the completion of all the items described in Schedule A, ie the construction of Stage 1 of the development including the Community Centre and the related landscaping and streetscaping. However, the conduct pleaded in the immediately preceding paragraphs (paras 12–15 inclusive at [16] above) which, as mentioned above, were the only paragraphs identified by Mr Douglas as supporting the representation pleaded in para 15A, only relates to the provision of the plans for the house to be constructed on Lot 181 (see para 13 at [16] above). Furthermore, those plans are then said to convey the representations pleaded in paras 13–23 of Schedule A (see para 14 at [16] above), all of which solely relate to the house to be constructed on Lot 181. It may be noted in passing that seven of these alleged representations are no longer being pursued: see [10] above.
Taking into account these aspects of the pleading of this implied representation, the expression “Development Works” in para 15A must be intended to be confined to the works associated with the construction of the house on Lot 181. That being so, the concluding words of para 15A must be intended to be limited to those paragraphs in Schedule A that deal with the house to be constructed on Lot 181, viz paras 13–23. I will therefore proceed to determine this matter on that basis. However, even if, contrary to these assumptions, Dr Bennett has properly pleaded this implied representation as going to the funding necessary to construct the whole development (or even Stage 1 of it), I would, for the reasons expressed hereunder, reject that claim as well.
The four representations in paras 13–23 of Schedule A that are still relied upon are set out at [14] above. The whole 11, as taken from the affidavit of Dr Bennett, are set out at [37] above. Whether it is the four remaining, or the whole 11, when they are examined, it soon becomes apparent that none of them mentions funding for the house construction on Lot 181, or funding for the development generally, or any subject that could be said to be reasonably connected with that subject matter. Then, if one turns to the evidence of Dr Bennett, there is a similar dearth to that mentioned in relation to para 11 of Schedule A above. Dr Bennett does not mention the issue of funding for the construction of the house on Lot 181, or the development generally, anywhere in his affidavit. The closest he comes to broaching that subject is as follows (at paras 15 and 16):
15.I recall that on at least one of the three occasions that I visited the site office, Nick and Julieanne informed me, in the course of their marketing discussions, of a company called “Consolo”, who they described as an important partner in the development. They told me that Consolo was a company with interests in a variety of commercial activities, including property development, and that Consolo was based in Sydney.
16.Nick and Julieanne described David Pearson as the architectural or creative driver being the project, and “Consolo” as the primary commercial driver behind the project. At no point did Nick and Julieanne (or anyone else for that matter), in relation to Consolo, draw any distinction between different corporate bodies within any Consolo corporate group.
There is no mention of funding for the construction of the house on Lot 181, or the development more generally in this evidence. There was extensive evidence given by other witnesses in relation to the funding and financing of the Elysium Noosa development in the period after March 2005, and more limited evidence relating to the period before. However, there was no evidence from Dr Bennett, the Burkes, or anyone else, about that subject matter ever being raised in the discussions that occurred between the Burkes and Dr Bennett in this pre-contract period prior to 7 March 2005.
Finally on this issue, it is appropriate to recall that the question here is whether what the Burkes actually said to Dr Bennett, when considered in all the relevant surrounding circumstances, conveyed something more to him and thereby lead him into error. With that in mind, when one goes to Dr Bennett’s final amended statement of claim, it can be seen that he claims that the pre-contract representations, including this implied representation, mislead him into entering into the contract to purchase Lot 181 (para 4B) or, conversely, had it not been for the pre-contract conduct, he would not have entered into that contract (para 23(a)). Against that background, the claim in relation to this alleged implied misleading representation presents a paradox. It is that the contract for Lot 181 effectively provided that: “there would be in place at the time of construction of Development Works, sufficient funds, … to enable the same to be constructed” in the terms of this implied representation. That is so because the contract included the following terms:
4.1Development of Scheme Land
Subject to clause 4.3, the Seller will procure construction of the Scheme Improvements substantially in accordance with the Plans and Specifications.
4.2Construction of Dwelling
(a)Subject to the other provisions of this Contract, the Seller will procure construction of the Dwelling substantially in accordance with the Dwelling Plans and Specifications.
(b)Subject to clause 3.1, the Seller will use reasonable endeavours to procure the commencement of substantial construction of the Dwelling within 12 months from the Contract Date. The Seller may extend this date by the period of any delay which is outside the control of the Seller.
…
6.3 Seller warranties
(a) …
(b) The Seller warrants that at settlement:
(i) it will be capable of completing this Contract;
…
7.3 Payment of Balance Purchase Price
On the Settlement Date, the Buyer must pay the Balance Purchase Price to the Seller by bank cheques payable as directed by the Seller’s Lawyers.
In exchange for the Balance Purchase Price and a copy of the Body Corporate Notice signed on behalf of the Buyer, the Seller must give the Buyer at settlement:
(a)vacant possession of the Lot;
(b)any instrument of title for the Lot required to register the transfer to the Buyer;
(c)all keys and access codes for all locks included in the Property;
(d)Transfer Documents capable of immediate registration after stamping; and
(e)a release in registrable form (after stamping) of any mortgage or withdrawal of any caveat lodged over the Lot (but the Buyer may not require the Seller to register the release or withdrawal before settlement or produce a discharge or release of any other charge).
(Emphasis in original)
The expression “Scheme Improvements” mentioned in cl 4.1 (above) is defined elsewhere in the contract to include “all necessary civil works, road works, entry statements, communal facilities and other improvements to be built” on the Scheme land: see at [89] below. It is self-evident from these provisions of the contract that, in order to comply with these terms, Elysium Noosa Pty Ltd would have had to obtain the funding necessary to undertake the construction of the house on Lot 181, Lot 181 itself and the Scheme Improvements in Stage 1 of the development. It is therefore difficult to see how Dr Bennett can claim that this alleged implied representation lead him into the error of entering into the contract to purchase Lot 181, when that contract effectively provided him with the same outcome as he seeks to achieve by establishing this implied representation. This is, of course, different to claiming an implied representation arising out of the terms of that contract itself, which is something Dr Bennett is not pursuing in these implied pre-contract representations: see at [42] above.
For these reasons and in all the relevant surrounding circumstances, I do not consider that it can be reasonably implied from the express representations in paras 13–23 of Schedule A that “there would be in place at the time of construction of [the house on Lot 181] sufficient funds, borrowed or independently sourced … to enable the [house on Lot 181] to be constructed as represented in paragraphs [13–23] in Schedule A” or for that matter, Stage 1 of the development, or the development generally.
The implied representations about the final state of the plans, costing and funding for the development were not made
Finally, I turn to the implied pre-contract representation pleaded in para 18 of the final amended statement of claim set out at [18] above. This representation is pleaded in sub-para (aa) of para 18. It is as follows:
(aa)The substance of the pre-agreement conduct, by way of representation, was such that there was an implied representation that in respect of the matters represented:
A. Development Plans were final;
B. Costing of the Development was complete;
C. Funds had been secured to undertake the Development construction;
In short, this implied representation relates to the finality of the planning, costing and funding for the development. Unlike the other two alleged implied representations, it is directed to the current state of affairs: “were final”; “was complete”; and “had been secured”, rather than to future matters. It relies upon “the matters represented” which, as I have already observed above (at [42]), are the express representations. Since it is directed to “the Development”, subject to the qualification expressed below (at [60]), I assume that the relevant express representations are those contained in paras 1–10 of Schedule A rather than paras 13–23, which relate specifically to the house construction on Lot 181. This is confirmed at [15]41 above, where I have recorded Mr Douglas’ submission to the effect that these implied representations arise from “the express representations that occurred”. However, even if this is not what is intended, and instead this implied representation applies to the house representations in Schedule A as well, I do not consider that affects the conclusion I have reached below.
Before turning to consider this alleged implied representation, it is necessary to resolve some confusion in the way it is pleaded. The word “Development” is used three times in sub-para (aa). That word is defined in para 3(c) of the final amended statement of claim by reference to para 2, to mean “the unregistered residential community title development … known as ‘Elysium Noosa’”. I interpolate that the whole development is shown in the disclosure statement attached to Dr Bennett’s contract as involving the construction of 189 lots over as many as 17 stages. Nonetheless, this reference to the word “Development” in para 18(aa) is inconsistent with paras 2 and 3 of Schedule A where only Stage 1 of the development is mentioned. Furthermore, in his closing written submissions, Mr Douglas described the Elysium Noosa development for the purposes of this implied representation as: “a final development, to the extent of Stage 1, fully completed in content and detail but unconstructed”. For these reasons, I will approach this implied representation on the basis that Dr Bennett did not intend to claim that it applied to the whole development, but rather, only to Stage 1.
As I have already observed (at [43] above), to determine whether the Burkes implicitly conveyed something more than what they actually said in the terms of this implied representation (in the way I have assumed it was intended to be pleaded), it is necessary to carefully examine what the Burkes actually said to Dr Bennett in the context of all the relevant surrounding circumstances viewed as a whole. So, turning to the express representations in paras 1–10 of Schedule A, as with the other two alleged implied pre-contract representations above, it is apparent that none of the express representations in paras 1–10 of Schedule A expressly mentions the planning, costing or funding of the development, or even goes to a subject that could be reasonably connected with those aspects of the development. Similarly, there is no evidence in Dr Bennett’s affidavit that the planning, costing or funding for the development (whether for Stage 1 or the whole development) was ever discussed between the Burkes and himself in the pre-contract period prior to 7 March 2005.
Turning then to the relevant surrounding circumstances, it is important to bear in mind that the express representations in paras 1–10 of Schedule A were all made in early 2005, before the contract for the purchase of Lot 181 was entered into on 7 March 2005. At that point in time the construction of Stage 1 of the development was not due to begin until some time in the future: at that time it was expected to take about two years to complete. Dr Bennett was aware of this timetable, because he had a special condition inserted in his contract for Lot 181 that guaranteed he would not be required to settle his purchase until two years from the date of that contract.
Furthermore, at about this time, Dr Bennett obtained a copy of the draft contract for the purchase of Lot 181. Dr Bennett said in his evidence that he was familiar with this kind of contract from his earlier real estate investments in the Noosa area. He also said that, before he signed the contract for Lot 181, he obtained advice from a solicitor in the legal firm Virgil Power & Co, who had assisted him in his earlier real estate investments. Mr Savage SC, Consolo’s senior counsel, took Dr Bennett to some of the terms of the contract for Lot 181 in cross-examination. They included most (but not all) of the following clauses, which have an obvious bearing on whether the planning, costing and funding for Stage 1 of the development was in a state of finality at this pre-contractual stage:
3.1Development approvals
The Seller may terminate this Contract by giving written notice to the Buyer if, by 31 December 2005:
(a)a development permit from the Noosa Shire Council authorising construction of the Scheme Improvements, on terms satisfactory to the Seller, has not taken effect; or
(b)the Seller is not able to obtain any other approval necessary for the reconfiguration of the Land, construction on the Land or the Lot, or sale or use of the Land on terms satisfactory to the Seller; or
(c)the Seller, decides, in its absolute discretion, not to proceed with construction of the Development.
…
3.3Sunset Date
Either party may terminate this Contract by written notice to the other if the Subdivision Plan has not registered by the date 3½ years after the Contract Date.
…
4.2Construction of Dwelling
…
(b)Subject to clause 3.1, the Seller will use reasonable endeavours to procure the commencement of substantial construction of the Dwelling within 12 months from the Contract Date. The Seller may extend this date by the period of any delay which is outside the control of the Seller.
(Emphasis in original)
Taking into account the terms of the express pre-contract representations themselves and all these surrounding circumstances, I do not consider that the express representations that the Burkes made to Dr Bennett before 7 March 2005 could reasonably be said to give rise to an implied representation that at about that time the planning, costing and funding of Stage 1 of the Elysium Noosa development had reached a stage of finality. To the contrary, I consider that what the Burkes actually said or provided to Dr Bennett at that time conveyed that finality was not to be reached in relation to the planning, costing and funding of the development until 31 December 2005, at the earliest, which was the last date by which Elysium Noosa Pty Ltd could act to give notice that it did not wish to proceed with the development under the terms of the draft contract: see cl 3.1(c) above. I do not therefore consider Dr Bennett has established there was an implied representation of the kind I have assumed is pleaded in para 18(aa) of the final amended statement of claim.
Conclusion on issue 1 – were the pre-contract representations made?
To sum up on this issue, for the reasons set out above, I consider Dr Bennett has established that:
(a)the pre-contract representations set out in paras 1–10 of Schedule A were made by the Burkes; and
(b)the pre-contract representations set out in paras 13, 14, 19 and 20 of Schedule A were made based on the plans attached to the draft contract that Mr Nick Burke provided to Dr Bennett.
However, I do not consider that Dr Bennett has established any of the implied pre-contract representations, whether that pleaded: in para 11 of Schedule A about the future value of Lot 181; or in para 15A of the final amended statement of claim about the future funding for the house construction on Lot 181; or in para 18 about the finality of the plans, costing and funding for Stage 1 of the development, as at early 2005.
ISSUE 2 – WERE THE PRE-COMPLETION REPRESENTATIONS MADE?
The deficiencies in the pleading
The pre-completion representations were allegedly made after the contract to purchase Lot 181 was entered into in March 2005 and before that purchase was completed in March 2008. As is apparent from the pleading of these representations (set out hereunder), Dr Bennett has not nominated when, in this three year period, these representations were said to have been made. Furthermore, this pleading has many other deficiencies which I will turn to consider after setting it out in full. It is contained in para 18A of the final amended statement of claim as follows:
18AFurther or in the alternative, subsequent to the Applicant entering into the Agreement but before completion thereof:
(a)there came a point in time (which the Applicant cannot further particularise on the state of the Respondent’s disclosure) when there existed no credit provider finance approval, or other dedicated separate body of funds such as would allow and be sufficient for the completion of the Development, in the manner and with the timing represented, to be undertaken irrespective of the number of sales effected in the Development, or like market or financial condition;
(b)The lastmentioned fact was known by each of:
A.Pearson, as a director of PPG and PPG Noosa;
B.Austin, as a director of Consolo, Consolo Property, Evenland, NRN and Elysium;
C.The other directors and general managers of these companies.
(c)Each of the Respondents knew that the Applicant had entered into the Agreement and that such Agreement was eventually due for completion on its terms;
(d)The lastmentioned fact was known by each of:
A.Pearson, as a director of PPG and PPG Noosa;
B.Austin, as a director of Consolo, Consolo Property, Evenland, NRN and Elysium;
C.The other directors and general managers of these companies.
(e)No attempt was made to communicate to the Applicant, in the sense that there was silence apropos the Applicant, the fact referred to in (a) above;
(f)The pre-completion conduct referred to above in this paragraph was conduct:
(i)engaged in “in trade or commerce” within the meaning of the TPA, in that it was engaged in or about the sale to the public of proposed lots of residential land, in the course of a business;
(ii)engaged in by Consolo, Consolo Property, NRN, Evenland, Elysium, PPG and PPG Noosa or one or some of them;
(iii)engaged in the course of the business, affairs or activities of each of the Respondents;
(iv)by reason of the above matters in this paragraph and paragraphs 1 and 4C(a) to (e), was engaged in on behalf of each Respondent, or one or some of them, within the meaning of s 84(2) of the TPA;
(g)Such pre-completion conduct was misleading and (sic) deceptive or likely to mislead or deceive the Applicant as a prospective purchaser, in contravention of s 52, and or in the alternative s 53A of the TPA in that, by reason of such conduct, any person in the position of the applicant may have been induced to believe that the lot construction, infrastructure and services the subject of Schedule A to this pleading would be constructed within a short period, namely by completion but if transcending the date of completion then with (sic) a short period thereafter;
(h)the Applicant was so induced to the lastmentioned belief.
In any event, even if the Propell valuation was relied upon, in part, by Dr Bennett and he was somehow able to avoid his obligation to settle his purchase of Lot 181, for the reasons given above, I do not consider that either of these events effected a break in the chain of causation between the Burkes’ representations and his alleged loss.
For these reasons, I consider that the representations the Burkes made to Dr Bennett, which caused him to enter into the contract for Lot 181 and in turn eventually obligated him to settle that contract, notwithstanding the failure to provide the Community Centre and related facilities in accordance with those representations, was a cause of his alleged loss.
The loss should be calculated at the date of acquisition
As I noted near the outset of these reasons (at [6]), Dr Bennett has claimed his damages should be assessed at $1.2 million on the basis Lot 181 was valued at $900,000 at trial. The respondents say that if any damages are to be awarded, they should be limited to $500,000 on the basis that Lot 181 was valued at $1.6 million at settlement. Both of these values have been agreed by the parties.
As to the appropriate method by which I should measure Dr Bennett’s damage, Mr Douglas submitted that it was difference between what Dr Bennett paid for Lot 181 and its value as at the date of trial. In making this submission, Mr Douglas acknowledged that the common approach in a case of this kind is to subtract the value of the property from its price as at the date of acquisition. However, he relied upon the “alternative approach” identified by the High Court in HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640; [2004] HCA 54 (“HTW Valuers”) at [63] and following. He also relied upon the similar approach taken by the Full Court in North East Equity. In support of that submission, he submitted that Dr Bennett’s case was, in truth, a “no transaction” case in that, but for the Burkes’ representations, the transaction would not have ensued at all. As a consequence, Dr Bennett would not have been left with a property which, he submitted, was now worth less than the purchase price. He added that Dr Bennett has also been left with “an incomplete development and if he were forced to sell now ‘a notional purchaser [would be] able to point to the absence of the community centre on this high end development. The very problem has tainted his asset.’”
Mr Savage submitted that, if Dr Bennett has suffered any damage, the usual approach should be taken to the assessment of that damage, ie to calculate the difference between the “real” value of the property at the time of purchase and the price he paid for it. He also submitted that market conditions had declined significantly since March 2008 and the global financial crisis had also intervened. These factors made an assessment by reference to the value of the property at trial inappropriate. He also submitted that Dr Bennett’s damage was not to be measured by reference to the difference between the value of the property as purchased and the value it would have had if the Burkes’ representations were true. Further, he submitted that there was no evidence that the failure to build the Community Centre building had an adverse impact on the value of the property. Finally, he relied upon the evidence that the new owner of the Scheme land, AV Jennings Ltd, has recently agreed to build the Community Centre on the land. Mr McBride essentially supported Mr Savage’s submissions on this issue.
In turning to consider these submissions, I can say at the outset that I consider all of Mr Douglas’ submissions must be rejected and most (but not all) of Mr Savage’s must be accepted. To begin with, I consider Mr Douglas’ reliance on HTW Valuers and Northeast Equity is misplaced. Neither of those cases involved representations made by a vendor in connection with the sale of an interest in land such as occurred in this case. The issues relating to the measurement of damage that arose in those cases were of a different kind and considerably more complicated than they are in this case.
HTW Valuers involved representations made by a valuer to the proposed purchaser of a shopping centre to the effect that a new shopping centre to be constructed nearby was not likely to adversely affect the tenancy levels in the proposed purchase. That turned out to be quite inaccurate. After the new shopping centre opened the applicant suffered a collapse in its rental income. The damages issues in HTW Valuers were complicated by the fact that the applicant had unsuccessfully tried to sell the shopping centre it purchased. Significantly, for present purposes, while the High Court said (at [63]–[65]) that the alternative approach of assessing damages by calculating the purchase price of the asset, less whatever was left in the purchaser’s hands, was open under s 82 of the TPA, it did not ultimately take that approach in that case. Instead, it held that the common approach should be applied, viz to deduct the true value of the asset at purchase from the purchase price. There is no evidence in this case that Dr Bennett has tried to sell Lot 181 without success. There is, therefore, no basis for taking this “whatever was left in the purchaser’s hands” approach. Moreover, despite that complication being present in that case, as I have already noted above, the High Court still adopted the common approach. Since there is no such complication in this case, there would appear to be even more reason why the common approach should be adopted here.
Turning then to North East Equity. That case involved the sale of a carrot processing plant. The applicant had financed the purchase by entering into a five year lease of the plant with a financier. The new plant was then integrated with an existing plant, with the result that the integrated new plant was so large and complex that the applicant claimed it was locked into using it: see North East Equity at [157]. The damages issue was complicated by these factors and a number of others, including disputes about the effect the allegedly faulty equipment had on the applicant’s business operations and whether there had been a break in the chain of causation when the applicant had moved its whole packing operation to another location. In the end result, the Full Court did not actually decide that the alternative approach should be applied in the circumstances of that case. Instead, it found that the trial judge had erred in not considering whether that alternative approach should be applied and therefore referred the matter back to him to make that assessment: see North East Equity at [176].
However, even if the Full Court had adopted the alternative approach in that case the complications that arose there with the damages issues are so vastly different to those in this case, that I consider it provides no support for adopting the alternative approach here. In particular, there is no evidence that Dr Bennett is “locked into” Lot 181 and there was no business activity associated with his purchase of that asset.
Aside from rejecting these cases as supporting the application of the alternative approach in this case, there is another good reason why, in the circumstances of this case, the common approach should be taken. That is, the need to separate out events that occurred after the purchase of Lot 181 when one is assessing whether Dr Bennett suffered loss and, if so, how that loss is to be quantified. In Henville, Gleeson CJ explained why the common approach is apt when such a need arises (at [24]–[25]), as follows:
24.Although there has been some discontent with its apparent rigidity, a primary reason for the general principle that damages in deceit, where there has been a fraudulent inducement to acquire shares in a company, are measured by the difference in the value of the shares at the time of acquisition and the price paid for them, is the need to separate out losses resulting from extraneous factors in the later conduct of the company’s business. Peek v Derry was a case concerning shares in a tramway company that were taken up on the faith of a false prospectus. Cotton LJ said :
“Neither can the Plaintiff get the benefit of any loss or depreciation in the shares which was occasioned by subsequent acts. If the company at the time was a good company and the shares had an intrinsic value, then no fact which subsequently occurred, as for instance, some Act of Parliament being passed to prevent such tramways from using steam-power, or anything else, ought to add to the damages to be paid by the Defendants. And of course a plaintiff cannot aggravate the damages he is to get by acting unreasonably, and if here the Plaintiff had in any way acted unreasonably, then any loss which was the consequence of that would not be added to the damages which were to be paid by the Defendants.”
25.Later, his Lordship referred to “events injurious to the company, which occurred not from intrinsic defects in it, but from events which happened after the purchase”, which “cannot be taken into account”.
And further (at [28]–[29]):
28.In Gould v Vaggelas, a case of deceit which induced the purchase of a business, Gibbs CJ said:
“There is no reason in principle why the defrauded purchaser should not recover damages for all the loss that flowed directly from the fraudulent inducement (unless, possibly, the loss was not foreseeable). If the purchaser, besides paying more for the business than it was worth, has suffered additional losses which resulted directly from the fraud he ought to be compensated for them. Of course, the court (sic) must be satisfied that the loss did result directly from the fraud and not from some supervening cause such as the folly, error or misfortune of the purchaser himself …”.
29. Dawson J said in the same case:
“Moreover, for a loss to be recoverable it must be clear that it is suffered as a direct consequence of the deceit and is not referable to something else such as the purchaser’s ineptitude in the conduct of the business.”
There is no suggestion in this case that Dr Bennett was inept and, as I have already noted above, there was no business activity associated with his purchase of Lot 181. However, there was a number of events subsequent to Dr Bennett’s purchase of Lot 181 that were not the direct consequence of the Burkes’ representations and yet had an adverse effect on the market value of Lot 181. Many of them were identified in one of the valuations tendered on behalf of the respondents. That valuation was prepared by Mr Doyle, a certified practising valuer with the firm CB Richard Ellis. He noted the following:
As at January 2011, the Noosa market continued to display recessionary trends being impacted greatly by the ongoing effects and impacts of the global financial crisis. Key factors that have impacted the Noosa market, including but not isolated to the “Elysium Noosa” project include:
·The impacts of the global financial crisis, lending liquidity and buyer uncertainty;
·Impacts of interest rate rises during 2009/10;
·The announcement that the “Elysium Noosa” development had gone into liquidation and was subsequently sold as Mortgagee in Possession mid 2010 to the AV Jennings Group;
·Other significant master planned residential resort and residential community titled developments within the Noosa locality failing with receivers and managers appointing (sic), including:
-“The Noosa Sanctuary” at Noosa Heads reportedly costing in excess of $200 Million and later selling in late 2010 for circa $65 Million fully complete;
-“Elysium Noosa” development reportedly costing in excess of $50 Million (for land) plus in excess of $50 Million for civil works, later selling for mid $30 Million price range in December 2010;
-Petrac “Noosa North Shore Beach Houses” development. This reported $200 Million development was sold on a piecemeal disposal. Completed houses previously selling in the early $1 Million price ranges are currently listed for sale through selling agents Tom Offerman Real Estate of Noosa Heads at price reductions as Mortgagee in Possession sales of up to in excess of 50-60%.
It is my opinion that based upon my experience within the Noosa locality, having particular regard to the above market factors, the appointment of receivers and managers to the balance land of “Elysium Noosa” had begun a chain of events which led to a significant drop in market appeal for the “Elysium Noosa” development. Discussions with key selling agents within the Noosa locality including selected agents who have listed properties for resale within “Elysium Noosa” reveal that the development had failed to deliver as promised, especially in terms of the standard of finish for residential dwellings and lack of communal facilities. … This degree of uncertainty coupled with very high Body Corporate charges of circa $5,500 per annum for facilities not yet delivered, has ultimately created a development of little to no appeal to incoming purchasers.
From this, it can be seen that it would be extremely difficult to separate out the effect of these subsequent events if one were to adopt a later date than the date of acquisition when fixing the value of Lot 181. I might add that these subsequent events do not include an even more recent event relied upon by Mr Savage: the agreement the new purchaser, AV Jennings Ltd, reached with the body corporate for the Elysium Noosa Community Title Scheme to build the Community Centre at the development. Thus, the continuing effect of all these subsequent events reinforces the argument for applying the common approach in this case and drawing the line at the date of Dr Bennett’s acquisition of Lot 181.
There are two other aspects of Mr Douglas’ submissions that I need to dispose of. The first is his submission that this case is different because it is a “no transaction” case. On that aspect, I respectfully agree with what Brereton J had to say in Street v Luna Park Sydney Pty Ltd [2007] NSWSC 588 (“Street”) at [9] as follows:
It makes not the slightest difference that it is the plaintiff’s case that they would never have purchased the subject property but for the conduct complained of, as distinct from that they would have purchased it only for a reduced price. In many fraud or s 52 cases a purchaser will say that he, she or it would never have purchased had they known the true position. Even so, having purchased, the asset may prove to be worth no less than what they paid for it, in which case they have suffered no loss, despite reliance on misleading and deceptive conduct and despite the fact that they would not have embarked on the purchase but for that conduct. Accordingly, I do not think that any approach other than that authorised by Potts v Miller is warranted, just because the plaintiffs say that they would not have purchased at all.
The second is Mr Douglas’ submission that: “a notional purchaser [would be] able to point to the absence of the community centre on this high end development. The very problem has tainted his asset”. This submission appears to me to be tantamount to saying that Dr Bennett should be compensated, in money terms, for what it was represented he would receive, viz a lot in a high end development with a Community Centre. If I have correctly understood this submission, it must be rejected. First, the fact that Dr Bennett’s case is, indeed, a “no transaction” case means that he is to be compensated for the effects of the transaction into which he was wrongly induced to enter, not for the benefits that contract failed to provide to him. In other words, he is, as Mr Savage correctly submitted, not to be compensated by reference to the difference between the value of the property as purchased and the value it would have had if the Burkes’ representations were true: see Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 at 514–5 and Bonett v The Barron and Dowling Property Group Pty Ltd (2006) 67 NSWLR 475; [2006] NSWSC 975 (“Bonett”) at [140].
These reasons dispose of all of Mr Douglas’ submissions, the main one being that the alternative approach outlined in HTW Valuers should be adopted in this case. Instead, I consider the common approach should be adopted and Dr Bennett’s loss should be assessed by reference to the value of Lot 181 at the date of settlement. The next question is how one is to go about applying the common approach to measure Dr Bennett’s loss in this case.
Calculating the loss
The common approach has been stated on numerous occasions in the past (see, eg HTW Valuers at [35] (above at [216]); Ackers at [444] and North East Equity at [132]), but the following exposition of it by Brereton J in Street (at [5]) will suffice:
In this case, the change of position was the purchase of the relevant property, as it normally is in a fraud or s 52 case. In those circumstances, the ordinary rule is that damages are measured by the difference between the price actually paid for the property and its true value, that true value being determined on the assumption that the transaction was not affected by the conduct complained of, and that all relevant matters relating to the value of the property were known at the time of the purchase [Potts v Miller (1940) 64 CLR 282; Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281].
It should be noted that, while this is the common approach to be applied in cases of this kind, it is only a rule of practice and it is not to be applied universally, inflexibly, or rigidly. The reason for this was explained by the High Court in HTW Valuers at [36] as follows:
One key qualification of the rule which prevents it from being inflexible is that the test depends not on the difference between price and “market value”, but price and “real value” … or “fair value” … or “fair or real value” … or “intrinsic” value … or “true value” … or “actual value” … or what the asset was “truly worth” … or “really worth” … or “what would have been a fair price to be paid … in the circumstances … at the time of the purchase”. This distinction is sometimes difficult to draw, but it is old … and fundamental.
See also North East Equity at [134].
As noted above, the parties have agreed that the value of Lot 181, as at 8 March 2008, was $1.6 million. Since this agreement was made by reference to the competing approaches to the assessment of Dr Bennett’s loss, I can only assume that the parties’ agreement also means it is agreed that this value was the “true” or “intrinsic” value of Lot 181 for the purposes of calculating his loss according to the common approach. In other words, this is the value of the benefit that has to be deducted from the loss Dr Bennett incurred by being misled into entering into the contract for Lot 181 and thereby having to pay $2.1 million in accordance with its terms.
In this respect, Mr Savage’s submission that there was no evidence that the failure to build the Community Centre building had an adverse impact on the value of Lot 181, is somewhat perplexing. There is no doubt what Dr Bennett paid for Lot 181, viz $2.1 million. If the common approach, for which Mr Savage submitted, is adopted and this agreed “true” value of $1.6 million is deducted from the purchase price Dr Bennett paid for Lot 181, the loss he suffered by entering into the contract to purchase that lot is quite clear: $500,000. As I have already observed above, that loss is not to be calculated by reference to whether or not the Community Centre building was built, or even will be built, but by reference to the loss Dr Bennett sustained by entering into the contract for Lot 181, on the misleading representation that the Community Centre would be built. So, if the evidence is lacking in any respect, it could only be as to the value of the benefit Dr Bennett obtained by entering into the contract for Lot 181. As noted above, Dr Bennett has to bring that value to account in calculating his loss. However, since that value is to be applied in reduction of Dr Bennett’s loss, it is, in my view, a matter upon which the respondents bear the onus, not him: see Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (1991) 33 FCR 1 at 17; Tyco Australia Pty Ltd v Optus Networks Pty Ltd [2004] NSWCA 333 at [255] and [264]; Ruthol Pty Ltd v Tricon (Australia) Pty Ltd [2005] NSWCA 443 at [44] and [53]; and E K Nominees Pty Ltd v Woolworths Ltd [2006] NSWSC 1172 at [194] and [195]. Thus, any lack of evidence in this regard will not avail the respondents.
In all these circumstances, I consider it is fair and just to adopt the value of $1.6 million as the true value of Lot 181 as at settlement at 8 March 2008. Accordingly, I assess Dr Bennett’s loss as a consequence of him being misled by the Burkes’ representations into entering into the contract to purchase Lot 181, at $500,000.
No apportionment is required
The tenth and final issue is the question of apportionment.
On this issue, the respondents rely upon s 87CB of the TPA and submit that Dr Bennett’s claims are apportionable under that section. Mr Savage, on behalf of the Consolo respondents, identified the following concurrent wrongdoers:
·the respondents, other than the second and fifth respondents;
·the Burkes;
·the two PRD entities who employed the Burkes;
·Virgil Power & Co, Solicitors, who advised Dr Bennett;
·Propell National Valuers and Mr Casper.
Mr McBride, on behalf of the Pearson respondents, submitted that no apportionment should be made against the third and fourth respondents and instead, full liability should be fixed on the Consolo respondents who, he submitted, had control over the financial aspects of the Elysium Noosa development throughout.
Mr Douglas submitted that s 87CB does not apply to the claims under s 87(1A) which are now made in the final amended statement of claim in the alternative to those under s 82. He also submitted it does not apply to contraventions of any of the other provisions of Pt V of the TPA, specifically s 53A(1).
Section 87CB(1) falls within Pt VIA of the TPA. It provides:
This Part applies to a claim (an apportionable claim) if the claim is a claim for damages made under section 82 for:
(a) economic loss; or
(b) damage to property;
caused by conduct that was done in a contravention of section 52.
The background to the introduction of Pt VIA of the TPA was explained by Finkelstein J in BHPB Freight Pty Ltd v Cosco Oceania Chartering (No 2) [2008] FCA 1656 (“BHPB”) at [4]–[5] as follows:
4.Proportionate liability was introduced into state and federal legislation following an inquiry into the law of joint and several liability established by the Commonwealth and the New South Wales Attorneys-General in 1994. The impetus for the inquiry was the growing number of actions against professionals, particularly auditors, who were being singled out as targets for negligence actions not because of their culpability (which might be small) but because they were insured and had the capacity to pay large damages awards. One consequence was a sharp rise in insurance premiums payable by professionals. The inquiry was conducted by Professor Davis of the Australian National University. He published stage one of his report in July 1994 and stage two in January 1995. In his report Professor Davis recommended that joint and several liability for negligence which causes property damage or economic loss be replaced by liability which is proportionate to each defendant’s degree of fault.
5.Draft model provisions that reflected the recommendation of the enquiry were published in July 1996 in the form of a part that could be inserted in appropriate legislation. The Commonwealth, State and Territory governments agreed to amend relevant legislation, based on the draft model provisions, to facilitate the introduction of a nationally consistent proportionate liability regime in respect of claims for economic loss or property damage. To implement its part of the agreement the Commonwealth amended the Australian Securities and Investments Commission Act 2001(Cth), the Corporations Act 2001 (Cth) and the Trade Practices Act so that proportionate liability applied to claims for damages for economic loss or property damage arising from misleading or deceptive conduct. By amendments to the Wrongs Act, Victoria introduced proportionate liability in respect of claims for economic loss or property damage arising from a failure to take reasonable care.
Later in his reasons, Finkelstein J observed that the provisions of Pt VIA “are confined to claims for damages under s 82 based on a contravention of s 52” (see at [7]) and a claim for relief under s 87 of the TPA is not an apportionable claim within Pt VIA “as it is not ‘a claim for damages under s 82’” (see at [9]). I respectfully agree with these observations.
The background history to the introduction of Pt VIA outlined by Finkelstein J in BHPB demonstrates that it was introduced for a particular purpose, viz professional indemnity claims where the proportionate culpability of the professionals concerned was relatively small, but their capacity to pay was relatively large. Consistent with this purpose, the language used in s 87CB is very specifically confined to particular claims for damages for particular contravening conduct. Whether or not the legislature has hit its intended target with this language is a matter that I do not need to determine in this case.
However, for present purposes, I consider it is plain that s 87CB does not apply to claims for damages made under s 87(1A), or to claims where the damages are caused by false or misleading representations in contravention of s 53A(1) of the TPA. If the legislature had intended that s 87CB was to apply to all claims for loss or damage under the TPA, it could very easily have done that by omitting the words “made under s 82” from that section. It has not chosen to do so. Similarly, if the legislature had intended s 87CB to apply to any claim for conduct in contravention of any of the provisions of Pt V of the TPA, it could very easily have done that by referring to that Part, rather than specifically referring to “a contravention of s 52”. Again, it has not chosen to do so.
Taking into account these aspects of the purpose, context and language of s 87CB, I do not therefore consider it applies in this case, insofar as it involves claims under s 87(1A) for a contravention of s 53A. In other words, neither of those components of the claims in this case is an apportionable claim under s 87CB(1) of the TPA.
In the alternative, Mr Savage submitted that Dr Bennett had been given leave to amend his statement of claim on the first day of the trial to claim relief under s 87(1A) on the basis of a contravention of s 53A to avoid his claims being apportioned under s 87CB. This circumstance, so Mr Savage submitted, should be taken into account by the Court in the exercise of its discretion under s 87(1A) as to whether to grant relief under s 87(1A) and, if so, whether to grant relief for the whole or a part of Dr Bennett’s loss or damage. In making this submission, Mr Savage relied upon the decision in Mayne Nickless Ltd v Multigroup Distribution Services Pty Ltd (2001) 114 FCR 108; [2001] FCA 1620 (“Mayne Nickless”). In that case, the applicant sought to avoid the time limit for the commencement of claims under s 82 of the TPA by making its claim under s 87(1). Of that situation, the Full Court said this:
In the exercise of [the discretion under s 87(1)], a court would be entitled to have regard to whether the sub-section had been invoked merely to overcome a time problem in proceedings that could, absent that problem, have been brought under s 82.
Mr Savage submitted that the present situation was analogous to that in Mayne Nickless because Dr Bennett had amended his statement of claim to make his claims under s 87(1A) and s 53A of the TPA merely to avoid apportionment under s 87CB.
I do not consider that this analogy is valid. Mr Savage is quite correct in observing that the provisions of s 87, including s 87(1A), are discretionary and the Court may only award a part of the claim, whereas s 82 is not discretionary and contains no provision for awarding a part of a claim. However, the analogue between the two cases ceases at that point. In Mayne Nickless, the applicant made its claim for damages under s 87(1), rather than pursuing a claim for damages under s 82. It did that to attempt to avoid the time limit in s 82. Here, Dr Bennett is seeking to pursue his claim for damages under s 87(1A) as well as a claim under s 82. There are significant differences between these two approaches. First, s 87(1) is quite different to s 87(1A). That is so because the provisions of the former are ancillary to the provisions of s 82, whereas the latter constitutes a standalone cause of action: see Mayne Nickless at [53]. Furthermore, as a standalone cause of action, s 87(1A) has its own time limit in s 87(1CA). Secondly, and perhaps more importantly on this apportionment issue, s 87CB only applies to a situation where the claim for damages is being made under s 82 and for a contravention of s 52. So, it follows, from my reasoning in [276], that any different combination of the nature of claim and contravening provision is not an apportionable claim under s 87CB. Thus, a claim under s 82 for a contravention of s 53A is not an apportionable claim, and nor is a claim under s 87(1A) for a contravention of s 52. It follows that, since Dr Bennett can structure his claims so that they are made under s 82 for a contravention of s 53A, he avoids the exercise of any discretion under s 87(1A) and any apportionment under s 87CB.
For these reasons, I do not consider that Dr Bennett’s damages fall to be apportioned under s 87CB of the TPA.
CONCLUSION
In conclusion, for the reasons expressed above, I consider that Dr Bennett is entitled to judgment in the sum of $500,000 under s 82 of the TPA because the representations the Burkes made to him that the Community Centre would be completed as a part of Stage 1 of the Elysium Noosa development were misleading in contravention of s 53A(1)(b) of the TPA.
I certify that the preceding two hundred and eighty-one (281) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves. Associate:
Dated: 9 March 2012
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