JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: BERNHARD -v- ELLIS [2016] WADC 10
CORAM: BOWDEN DCJ
HEARD: 24-27 NOVEMBER 2015
DELIVERED : 29 JANUARY 2016
FILE NO/S: CIV 3731 of 2012
BETWEEN: LESTER ROY BERNHARD
First plaintiff
PAMELA KATHLEEN BERNHARD
Second plaintiffAND
PAUL ELLIS
First defendantGRAHAM FILES
Second defendantDREAM MONEY PTY LTD
Third defendant
Catchwords:
Sale of rent roll - Misleading or deceptive conduct - Turns on its own facts
Legislation:
Competition and Consumer Act 2010 (Cth)
Fair Trading Act 1987 (WA)
Income Tax Assessment Act 1997 (Cth)
Result:
Judgment for the plaintiff
Representation:
Counsel:
First plaintiff : Mr J Healy
Second plaintiff : Mr J Healy
First defendant : Mr S Standing
Second defendant : No appearance
Third defendant : Mr S Standing
Solicitors:
First plaintiff : Cullen Macleod
Second plaintiff : Cullen Macleod
First defendant : Galic & Co
Second defendant : Not applicable
Third defendant : Galic & Co
Case(s) referred to in judgment(s):
Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112
Clambake Pty Ltd v Tipperary Projects Pty Ltd [No 5] [2009] WASC 141
Commonwealth v Amann Aviation (1991) 174 CLR 64
Embelton Motor Co Pty Ltd v St Kilda Beach Taxi School and Staffing Pty Ltd [2014] WASCA 183
Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 57 ALR 167
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82
Gould v Vaggelas (1985) 157 CLR 215
Henville v Walker [2001] HCA 52; (2001) 206 CLR 459
HTW Valuers (Central Qld) v Astonland [2004] HCA 54; (2004) 217 CLR 640
Johnson v Perez (1988) 166 CLR 351
Jones v Schiffmann [1971] HCA 52; (1971) 124 CLR 303
Kizbeau Pty Ltd v WG & B Pty Ltd (1995) 184 CLR 281
Marks v GIO Australia Holdings Ltd [1998] HCA 69
Merost Pty Ltd v CPT Custodian Pty Ltd [2014] FCA 97
Miller and Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd [2010] HCA 31
Newmarket Corporation Pty Ltd v Kee-Vee Properties Pty Ltd [2003] WASC 157
Owston Nominees No 2 Pty Ltd v Clambake Pty Ltd (2011) 248 FLR 193; [2011] WASCA 76
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd [1982] HCA 44; (1982) 149 CLR 191
Pennington v Norris (1956) 96 CLR 10
Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALR 529
Professional Services of Australia Pty Ltd v Computer Accounting and Tax Pty Ltd [No 2] [2009] WASCA 183
R v Godinho (1911) 7 Cr App Rep 12
R v Noble [2000] QCA 523, (2000) 117 A Crim R 541
Reiffel v ACN 075 839 226 Ltd [2003] FCA 194
St Kilda Beach Taxi School and Staffing Pty Ltd v Central Taxi Management Pty Ltd [2012] WADC 114
Zorom Enterprises Pty Ltd v Zabow [2007] NSWCA 106; (2007) 71 NSWLR 354
BOWDEN DCJ: From late 2002 the plaintiffs operated a real estate…
Continue reading Bernhard v Ellis
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- AGLC
- Bernhard v Ellis [2016] WADC 10
- Case
- [2016] WADC 10
- Decision Date
CaseChat Overview and Summary
The court considered whether there was an agreement in principle or formal agreement in place prior to the alleged misleading conduct. It was determined that while an agreement in principle may have existed, it did not constitute a formal agreement until July 2012. The court also assessed the reliance placed by Mr Ellis on Mr Bernhard’s representations, noting that despite Mr Ellis’s industry experience, he trusted Mr Bernhard and believed him to be trustworthy. The court rejected the argument that Mr Ellis would not have relied on the alleged misleading conduct due to his experience, finding instead that Mr Ellis’s trust in Mr Bernhard was significant.
In its reasoning, the court found that Mr Ellis and his co-purchaser relied on Mr Bernhard’s implied representations in entering into the sale agreements and settling on the agreed prices. It was determined that had Mr Ellis known the true state of the rent roll, he likely would not have purchased at the price he did. Consequently, the court held that Mr Bernhard's conduct was indeed misleading or deceptive and that Mr Ellis was entitled to damages for the misrepresentation.
The final orders of the court were not explicitly detailed in the provided text, but it can be inferred that the court would have awarded damages to Mr Ellis for the misleading or deceptive conduct by Mr Bernhard.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Mr Bernhard knew the March valuation was necessary for Mr Ellis to obtain bank finance. The sale agreements (exhibits 1 ‑ 3) were subject to bank finance. Notwithstanding exhibit 13, I find there was no formal agreement until the various agreements were signed in July 2012. Even if an agreement in principle had been reached that is no agreement. A representation made prior to the execution of formal agreements can induce reliance notwithstanding an agreement in principle to proceed had been reached: Newmarket Corporation Pty Ltd v Kee-Vee Properties Pty Ltd [296] (McLure J). Mr Bernhard also submits that as Mr Ellis was a director working in the business with considerable experience in the real estate industry and had access to the business records and the opportunity to undertake due diligence, he did not rely on the implied representation but relied on his own business acumen. I reject this submission. I accept Mr Ellis' evidence that they had known each other for a considerable period of time, he considered Mr Bernhard to be a mentor and it would appear based on the length of the parties' relationships that there had not been any major difficulties between them over many years and they had worked successfully together for a lengthy period of time. I accept Mr Ellis' evidence that he considered Mr Bernhard to be trustworthy and a mate (ts 47, 105, 106, 195, 54, 106, 170, 178, 194). Mr Bernhard's evidence essentially supported Mr Ellis in this regard. I accept Mr Ellis' evidence that Mr Bernhard kept the accounts to himself (ts 36, 165, 166, 174, 199) including the Gee Dee account (ts 174, 175) and the PMAs (ts 175). It is inherently probable that this occurred. Mr Bernhard had every right to do so. In effect it was his business. Mr Ellis was a director but in circumstances where he had one share out of 100, both parties effectively treated the business as Mr Bernhard's. Mr Ellis may have been somewhat naïve and inexperienced in the sale and purchase of a business but I do not find that there was any carelessness or extreme carelessness where it could be said that Mr Bernhard's conduct was not a real inducement to DM and Mr Ellis entering into the various agreements. Mr Bernhard then says that Mr Ellis has failed to prove he would not have entered into the transaction if he knew the truth of the representation or what he would have done had he known the truth of the representation and therefore is not entitled to damages. I reject this submission. I agree with Mr Ellis' submission that as a matter of common sense it can be inferred that the effect of Mr Ellis' evidence is that had he known the true state of the rent roll he would not have purchased at the price he did. I find that Mr Ellis and DM relied on Mr Bernhard's implied representation as the basis for entering into the various sale agreements at the agreed prices and entering into the vendor finance agreements (exhibits 1 ‑ 3) and the guarantee agreements (exhibit 4) and in proceeding to settle on those agreements.