Bovino Pty Ltd v The Casey Group Holdings Pty Ltd

IN THE SUPREME COURT OF VICTORIA	Not Restricted
AT MELBOURNE COMMERCIAL AND EQUITY DIVISION COMMERCIAL COURT

No. 8493 of 2009

BOVINO PTY LTD (ACN 064 121 991)	Plaintiff
v
THE CASEY GROUP HOLDINGS PTY LTD (ACN 007 174 129)	Firstnamed Defendant
CLINTON LESLIE CASEY	Secondnamed Defendant

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JUDGE:	JUDD J
WHERE HELD:	Melbourne
DATES OF HEARING:	26-29 July, 12 August 2010
DATE OF JUDGMENT:	10 September 2010
CASE MAY BE CITED AS:	Bovino Pty Ltd v The Casey Group Holdings Pty Ltd
MEDIUM NEUTRAL CITATION:	[2010] VSC 391

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CONTRACT – Sale of land – Misleading or deceptive conduct – Estate agent – Specific performance – Impossibility of performance - Trade Practices Act 1974, s 52, s 87.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M R Pearce SC	Heinz & Partners
with Mr M J Campbell
For the Defendant	Mr P J Jopling QC	Arnold Bloch Leibler
with Mr R M Peters

_________________________________________________________________________________
HIS HONOUR:

Introduction

On 17 August 2007, the first defendant, The Casey Group Holdings Pty Ltd (then known as The Casey Group (Aust) Pty Ltd), entered into a contract to purchase from the plaintiff, Bovino Pty Ltd, a parcel of land known as 191 Gillies Street, Lake Wendouree. The Casey Group executed the contract as trustee for the SL Unit Trust. The purchase price was $8,600,000, of which a deposit of $860,000 was payable on signing.
At the time of the contract, the land was used as a caravan park operated by William Edmund Gribble and his wife Ann. They had operated a caravan park on the land since 1982. Their company, Bovino, purchased the land from the Ballarat City Council in 1996.
The second defendant, Clinton Lesley Casey, was and is the sole director of the Casey Group. He supported the obligations of the Casey Group under the contract with his personal guarantee and indemnity.
Under the contract, the balance of the purchase price was payable on 1 February 2009. This was subject to the purchaser’s right, at any time up to 1 February 2008, to extend the settlement date for a period of six months by giving to Bovino a notice exercising a right of election and a bank cheque for $100,000. The Casey Group took advantage of the special condition, and exercised its right to extend the date for completion until 1 August 2009. At the same time, the Casey Group, through its solicitors, informed Bovino’s solicitors by letter as follows:
As your client will be aware from previous discussions between the parties
and the agent, the Purchaser has identified a major issue in relation to non- disclosure of buffer zone restrictions under the Ballarat Planning Scheme which will delay the Purchaser’s program for obtaining necessary approval to develop the property and may preclude the Purchaser from developing a substantial portion of the property. The exercise of the Purchaser’s election under special condition 13.1 as outlined above is made without prejudice to these issues and discussions will continue between the parties in relation to same.
Shortly prior to the completion date of 1 August 2009, the Casey Group’s solicitors wrote to Bovino’s solicitors alleging material non-disclosures and a breach of s 32 of the Sale of Land Act 1962. The alleged non-disclosure was Bovino’s failure to give notice of a ‘Recommended Buffer Distance for Industrial Residual Air Emissions’, published by the Environment Protection Authority. The Joe White Malting Plant was located to the northwest of the land. If enforced, the recommended buffer distance would prevent development of the land as a retirement village within 300 metres of the malt house. The Ballarat Planning Scheme provided that planning approvals must be consistent with the Environment Protection Policy.
The Casey Group’s solicitors stated in their letter that as a consequence of the requirement for a buffer distance, planning approval for the proposed development may not be forthcoming. The letter continued that had disclosure been made, ‘our client would have only entered into the Contract on the basis that it would be subject to planning approval being granted or not at all’. It claimed an entitlement to rescind the contract under s 32(5) of the Sale of Land Act and to an immediate return of its deposit. The Casey Group also alleged misleading or deceptive conduct by Bovino, arising out of its failure to disclose the existence of the buffer zone, and claimed a consequential entitlement to an order terminating the contract.
The day for settlement came and went but the balance of the purchase price was not paid. On 4 August 2009, Bovino served a notice of default on the Casey Group requiring payment within 14 days. Payment was not forthcoming, and on 21 August 2009, Bovino commenced this proceeding in which it sought specific performance, damages in addition to specific performance or in substitution therefor, and an order that Mr Casey indemnify Bovino for any failure by the Casey Group to perform its obligations under the contract. At trial, Bovino elected to press for specific performance of the contract.
In their initial defence and counterclaim, filed in this proceeding on 25 September 2009, the defendants did not challenge the execution of the contract or the guarantee, and admitted that the Casey Group did not pay the balance of the purchase price on the due date under the contract, or within 14 days of service of the notice of default. They claimed that the Casey Group was not obliged to pay the balance of the purchase price. By their counterclaim, the defendants alleged contraventions by Bovino of s 52 of the Trade Practices Act 1974 (Cth), as the basis for relief under s 87. The conduct relied upon by the defendants involved two quite separate fact circumstances. The first circumstance involved Bovino’s alleged failure to disclose the existence of the buffer, or that the planning authority would be unlikely to grant a development permit by reason of the presence of the malt works. That allegation had been foreshadowed in the solicitors’ letter of 16 July 2007. The second fact circumstance had not. It involved a representation by Bovino to the Casey Group, through Bovino’s estate agent, Andrew Lewis. By paragraph 24 of their defence and counterclaim, the defendants alleged,
On or about 31 July 2007 Bovino made the representation to [the Casey Group] that there were other prospective purchasers of the Land who had made or were prepared to make an unconditional offer or a higher offer to purchase the Land, that Bovino wanted an unconditional contract and that if [the Casey Group] wanted to purchase the Land, [the Casey Group] would have to remove the Condition from any offer it made.
The ‘Condition’ referred to in the pleading was a condition precedent contained in an offer sent to Bovino by the Casey Group on 5 July 2007. A similar condition precedent was also contained in a counter-offer from Bovino to the Casey Group on 10 July 2007. The condition precedent gave the Casey Group the right to withdraw from the contract if it failed to obtain a planning permit for its proposed development within a stipulated time after the date of the contract. The representation was said to be oral, and made by Andrew Lewis to Scott Mitchell in words to the effect alleged. Mr Lewis was a director of Jens Gaunt Real Estate Pty Ltd, estate agents appointed by Bovino. Mr Mitchell was general manager of property for the Casey Group. He also had real estate experience. The men had known each other for many years and were friends.
The defendants alleged that had Bovino not engaged in the contravening conduct (non-disclosure and the representation), then either the contract and the guarantee would not have been made, or the contract would have contained the Condition. The defendants further alleged that had the contract contained the Condition, the Casey Group would have exercised its right to rescind.
By its reply and defence to counterclaim, dated 16 October 2009, Bovino denied the representation, subject to its right to apply to strike out the allegation on the basis that it did not identify specifically or with clarity the fact alleged to have been represented by Bovino to the Casey Group. Bovino did not contend that, insofar as there was a representation made by Mr Lewis to Mr Mitchell, it was not a representation made on behalf of Bovino.
At a Case Management Conference on 29 March 2010, the defendants propounded a draft amended defence and counterclaim in which they withdrew the allegation concerning the non-disclosure conduct as a basis for relief under the Trade Practices Act, but did not respond to Bovino’s criticism of the lack of particularity in paragraph 24 of the counterclaim. Bovino did not make an application to strike out paragraph 24, but instead sought further particulars. Ultimately it accepted a proposal, advanced by counsel for the defendants, that the defendants would, prior to trial, file a detailed outline of the evidence to be given in relation to the alleged representation.
Consequently, leave was granted to the defendants to file and serve an amended defence and counterclaim in the form propounded at the Case Management Conference. The defendants filed their new pleading on 1 April 2010. In addition to the amendments made to the counterclaim, by the deletion of the non-disclosure conduct allegation, the defendants also amended their defence by incorporating a contention that the court should not order specific performance and should not make an order against Mr Casey under the guarantee, because it was futile to make such orders. The basis for their contention in relation to specific performance was that the Casey Group only had paid up capital of $1000 and no assets or banking facilities available to it. They alleged that if an order for specific performance were to be made, the Casey Group would be placed into administration. In relation to the guarantee, the defendants alleged that Mr Casey had no assets and no banking facilities available to him, and that if an order were to be made he would become bankrupt.
Notwithstanding the plaintiff’s election to apply for specific performance, and thus enforce the contract and the guarantee, the defendants sought to introduce evidence from a valuer to establish the outer limit of Bovino’s loss on the assumption that the contract had been terminated and Bovino confined to a claim for damages. I refused leave to introduce that evidence at this stage of the proceeding. The utility and relevance of such evidence was contingent upon a rejection of the defendants’ claim for relief under s 87 of the Trade Practices Act, and the defendant’s failure to comply with an order for specific performance, if made.
Accordingly, the issues for determination in the trial were as follows:
(a) Did Bovino engage in misleading or deceptive conduct contrary to s 52 of the Trade Practices Act?
(b)         If so, did the Casey Group rely upon such conduct to enter into the contract and in the case of Mr Casey, execute the guarantee and indemnity?
(c) Are the defendants entitled to the relief they seek under s 87 of the Trade Practices Act so as to relieve them of their obligations under the contract, and the guarantee and indemnity, coupled with orders for the refund of the deposit and the time extension payment of $100,000.
(d)         Should specific performance be refused on the ground that such an order would be futile against the Casey Group?
(e)          Should an order against Mr Casey under the guarantee and indemnity be refused on the ground that it would be futile to make such an order.
Background and Chronology
Having regard to the issues in the proceeding, the defendants were called upon first to open their case and present their evidence. They relied upon a chronology extending back to March 2006. They said that was necessary to give context to the representation alleged to have been made by Mr Lewis to Mr Mitchell. The representation was unusual because it was an oral communication by Mr Lewis onto a message bank, accessible by Mr Mitchell through his mobile telephone service. The court was informed that there was no means of recovering the content of the message, and so it was left to the recollection of the parties. Mr Mitchell had replayed the message to Mr Casey shortly after he received it. Thus, there were three potential witnesses to the message – Mr Lewis, who made the telephone call and left the message; Mr Mitchell, who initially retrieved the message; and Mr Casey, to whom the message was replayed.
Some of the background chronology, to which the defendants drew attention, added little to the relevant context. When Bovino purchased the land from the Ballarat City Council in 1996, it entered into an agreement with the council pursuant to s 173 of the Planning and Environment Act 1987. The agreement confined the use of the land to tourist accommodation until the earlier of the council’s consent, or 30 September 2012.
The s 173 Agreement was varied on 10 October 2003. The variation allowed the rear portion of the land to be subdivided from the front portion, where the caravan park was operated. On 2 March 2006, Bovino applied for a planning permit for a 16 lot subdivision. It proposed 15 vacant allotments at the rear portion of land, being the area released from restriction under the variation made to the s 173 Agreement on 10 October 2003. The remaining allotment was the caravan park area, which remained subject to the restricted use agreement. Bovino’s application did not seek to disturb the continuing restriction on the use of the land operated as a caravan park.
The council responded to Bovino’s application on 27 March 2006. There followed numerous communications between the council and TGM Group Pty Ltd, a firm of engineers, surveyors and planners engaged by Bovino.
On 9 January 2007, the council issued a planning permit to Bovino for the 16 lot subdivision, subject to conditions. Thereafter, TGM negotiated a fee proposal with Bovino and set about the task of obtaining information to enable Bovino to satisfy the conditions. On 29 January 2007, Bovino and Jens Gaunt entered into an agency agreement for the sale of all 16 lots as part of a development project known as ‘The Hub’. A brochure was prepared by Jens Gaunt which described The Hub as situated in a prime business location, with flexible zoning which would permit a variety of uses, including retail, office and residential as outlined in the Ballarat Planning Scheme.
By about mid-June 2007, it became apparent to Bovino that before a plan of subdivision would be certified by Council, it would be necessary to set aside various easements required by the providers of essential services. As the difficulties with the requirements for the easements were unfolding, Mr Lewis contacted Mr Mitchell. On Friday 8 June 2007, Mr Lewis wrote to Mr Mitchell by email,
Scotty
Hope life is all good and the dream is unfolding well for you all
We have been speaking to Bill Gribble who owns the Wendouree Caravan
Park
The site is 66,000 square metres and is zoned mixed use and is between wendouree village shopping centre and lake wendouree
I am of the opinion that the front 15,000 square metres would go well for a retail type use including medical centre with pharmacy etc and this would then give the land a value of at least $350 per sqaure (sic) metre accounting for half the purchase price and leaving the balance of land valued at $100 per square metre
Anywho
It looks good to me and I think you should come and have a look tiger boy
The gunstar over and out
The nature of the communications between Mr Lewis and Mr Mitchell demonstrates they were well acquainted and friends. They had known each other for approximately 25 years.
On Friday 29 June 2007, Mr Lewis again wrote to Mr Mitchell providing him with some basic details of the land. He offered the entire property for sale, and said that the vendor would consider a price in the order of $10 million. On the same day, Mr Lewis wrote in similar terms to Allan Mihaljevic, a property developer in Ballarat. Both letters noted that there was currently a s 173 Agreement requiring the continuation of the caravan park until 2012, but that the restriction had been lifted for the rear portion. Mr Lewis expressed his confidence that, subject to a full development plan over the site, the council would agree to removing the restriction ahead of its expiry date. On 5 July 2007, Mr Mitchell responded to the letter with an offer from the Casey Group, dated 6 July 2007. The salient features of the offer were as follows:

1. Purchase Price of : $8,000,000

2. Non Refundable Deposit $100,000, payable upon signing of the

of: contract

3. Settlement Date: 30 June 2008
4. Condition Precedent
The purchaser obtaining a satisfactory planning permit for the development and use of a 150 independent living unit retirement village (“the Planning Permit”). If the purchaser does not obtain the Planning Permit within 18 months from the day of sale, then either party may rescind the contract with 21 days written notice to that effect to the other party. In the event the contract is terminated in accordance with this condition, the vendor shall be entitled to retain the deposit paid by the purchaser.

On 8 July 2007, Mr Mihaljevic responded with his offer.
Andrew,
Here is my offer;
$8.2 million inc. of any GST
Settlement will be due and payable at the expiry of the S.173 agreement (5 years). The S.173 agreement expires 2012. Settlement may be brought forward earlier i.e. once planning permit issued for our proposed development and S.173 agreement removed. This could be worded accordingly in the contracts.
Basically I would be prepared to enter into a put and call option for a time period of 9 months. i.e Once we can ascertain that removing the S.173 won’t be an issue and the fact that it won’t be renewed after it’s expiry date then we would be prepared to carry out the option.
As far as deposits are concerned how about the following as a suggestion:
$50k for a put and call option.
$250k payable upon option expiry and when contract is entered into (say
March 2008)
$150k payable 6 months after signing contracts (Sept 2008) $150k payable 12 months after signing contracts (Mar 2009) $100k payable 18 months after signing contracts (Sept 2009) $100k payable 24 months after signing contracts (Mar 2010) Balance payable upon settlement $7,400,000 Date to be determined.
These deposits will be made available for release to your client as well as your fees.
I will be out of the office all day on Monday so you would best catch me on the mobile. Please e-mail me your thoughts otherwise call me direct on my mobile [number].
Regards
Alan Mihaljevic.
The offer from Mr Mihaljevic was by no means straightforward. It was no surprise that Mr Gribble regarded it as unacceptable. The email was the only written communication from Mr Mihaljevic, although Mr Lewis said that he was in continuing discussion with Mr Mihaljevic, trying to improve his offer. Mr Lewis had no specific recollection of any of those discussions.
On 10 July 2007, Mr Lewis responded to the offer from the Casey Group with a counter-offer:
Dear Scott,
Purchase of Lake Wendouree Caravan Park, Ballarat
We refer to your previous correspondence and confirm the vendor is prepared to accept an offer to Sell the Property on the following terms:

Purchase Price of: $8,500,000
Deposit of: $500,000, payable upon signing of the contract,
$250,000 of which would be non refundable.
Settlement Date: 30 June 2008
Condition Precedent:
The purchaser obtaining a satisfactory planning permit for the development and use of a 150 independent living unit retirement village (“the Planning Permit”). If the purchaser does not obtain the Planning Permit within 12 months from the day of sale, then either party may rescind the contract with 21 days written notice to that effect to the other party. In the event the contract is terminated in accordance with this condition, the vendor shall be entitled to retain the 50% of the deposit paid by the purchaser.

2. Special Conditions:

(a)

The purchaser shall be entitled to reasonable access to the Property for any purpose connected with the with the (sic) purchaser’s proposed development of the Property.

(b)

The vendor must do all acts, sign all documents and provide all information that the purchaser may reasonably require in order for it to promptly obtain all necessary permits, approvals and certifications.

(c)

The purchaser may erect signage to the property in connection with its proposed development, including marketing activities upon issue of permit but not prior.

If the within is in order we will have our solicitors prepare the contracts of
sale incorporating the above.
Yours sincerely
Andrew G Lewis
Director
Jens Gaunt Commercial.

What was important about the counter-offer from Mr Lewis was that it incorporated the ‘Condition Precedent’, allowing the Casey Group to rescind the contract in the event that planning permit for the development of a retirement village was not obtained within a prescribed period of time. In his offer, dated 6 July 2007, Mr Mitchell had sought a period of 18 months. The counter-offer from Mr Lewis stipulated a period of 12 months. The terms of the Condition Precedent had also been amended by Mr Lewis, so that in the event of termination in accordance with the condition, the vendor would be entitled to retain 50 per cent of the deposit paid by the purchaser. Mr Lewis proposed a deposit of $500,000. Mr Mitchell had previously offered a non-refundable deposit of $100,000.
Bovino did not submit that Mr Lewis was acting without authority when making the counter-offer, although Mr Gribble said that he had not seen the counter-offer before the day he gave his evidence; and had not given Mr Lewis instructions to make the counter-offer. I do not accept that evidence. While the recollections of Mr Gribble and Mr Lewis were less than perfect as to the communications between them over this period, I have no doubt that Mr Gribble had been regularly consulted by Mr Lewis and had approved the offer. Mr Lewis proposed that if the offer was acceptable he would ‘have our solicitors prepare the contracts of sale incorporating the above’.
On 19 July 2007, Mr Mitchell responded to the counter-offer by proposing certain changes to Mr Lewis. He proposed a purchase price of $8,250,000 plus GST and a non-refundable deposit of $250,000, payable on signing contracts and continued,
It should be noted that if the s 173 agreement can not be removed then the
non-refundable deposit will only be $20,000 and that provided “reasonable endeavours” to obtain a permit are made, a six month extension beyond the 12 month period would be permitted.
Mr Lewis forwarded Mr Mitchell’s proposal to Mr Gribble, and asked him to ‘let me know your thoughts’. Mr Gribble responded by email to Mr Lewis, on 20 July 2007, as follows,
Thanks for your email. We have decided that we will not accept any offer below $8,500,000 for the freehold of the park and that we would want a $500,000 deposit of which we would refund $250,000 should they not be successful in removing the section 173. We are prepared however to extend the time to 18 months as originally requested. Our reason for the deposit terms are that we are holding the option open for 18 months and thus restricting ourselves from other potential deals. I must say I find it intriguing that an offer of $100,000 non refundable deposit was originally offered & now it is $20,000 should we run an advertisement in the Financial Review calling for expressions of interest. I’ll speak with you next week.
I note that Mr Gribble did not respond by asking - ‘what are you talking about?’ Those events confirm that Mr Lewis kept Mr Gribble informed about his negotiations, as might be expected, and Mr Gribble was aware of all offers, and authorised Mr Lewis to make the counter-offer.
The proposal by Mr Gribble to ‘run an advertisement in the Financial Review calling for expressions of interest’ was a desire on his part to introduce competition into the negotiating process with the Casey Group. Mr Gribble did not recall any follow up conversation with Mr Lewis, as he had foreshadowed in his email.
On Wednesday 25 July 2007, Mr Lewis, presumably on instructions from Mr Gribble, requested Heinz & Partners, Mr Gribble’s solicitors, to prepare a contract of sale in terms which were, in all material respects, the same as the counter-offer from Bovino dated 10 July 2007. The instructions to Heinz & Partners accepted a settlement date ‘18 months from signing of option to purchase’. An option to purchase was to be attached to the contract of sale and remain valid for 60 days with a non-refundable option fee of $20,000, but which amount would be deducted from the non- refundable deposit amount in the contract.
In his evidence-in-chief, Mr Mitchell said that at some stage between 25 July 2007 and AN email to Mr Lewis, sent at 12.28 pm on 31 July 2007, he had retrieved a message left by Mr Lewis on his message bank. Mr Lewis said words to the effect,
Your offer is no longer acceptable.
There is another purchaser.
You will have to make an unconditional higher or better offer.
Counsel for Bovino did not challenge the fact that a message had been left by Mr Lewis On Mr Mitchell’s message bank at about that time, or that the message contained the elements described by Mr Mitchell. That was not surprising, as counsel for Bovino informed the court that Mr Lewis would say that he had no recollection of a conversation or communication with Mr Mitchell between the dates of his email to Heinz & Partners on 25 July 2007, and the email from Mr Mitchell on 31 July 2007. When asked, in evidence-in-chief, whether he recalled any conversation or communication with Mr Mitchell during that period, Mr Lewis said, ‘Not precisely, no’. Nothing was said by Mr Lewis to challenge the version of events on that topic given by Mr Mitchell or Mr Casey.
In cross-examination, counsel for Bovino sought to confine Mr Mitchell to the three elements of the message as described by him, as if three separate and distinct propositions, incapable of translation into a statement by Mr Lewis to the effect that there was another purchaser who had made an unconditional offer. Counsel for Bovino also sought to extract from Mr Mitchell a concession that he did not expect a real estate agent to always tell the truth. Mr Mitchell, not surprisingly, responded to the latter proposition by saying that he did expect the truth from Mr Lewis who was, after all, a long time acquaintance and friend.
Mr Mitchell said that he could not recall the precise words spoken in the telephone message. I do not take the evidence of Mr Mitchell to be a recitation of the precise words spoken but, as he said, his recollection of the substance of three elements conveyed by Mr Lewis. Mr Mitchell presented as a careful and honest witness who was doing the best he could to recall the substance of a telephone message, retrieved from his message bank about three years ago.
When called upon to analyse conduct alleged to be in contravention of s 52 of the Trade Practices Act, it is first necessary to characterise the conduct. In the present case, the defendants rely on an oral representation, left as a message on a message bank. In the absence of a recording, the court is dependent on the recollections of witnesses to establish what was said. The effect or likely effect of what was said, once established, must then be analysed in context. The context was a statement made by a real estate agent to a property developer, following a written offer and counter-offer. The statement was made by the agent to a long-time acquaintance and friend. The context also included the events that followed shortly thereafter – the response of the Casey Group.
At trial each relevant witness was asked to recall an event that occurred about three years ago. The proceeding was not commenced until more than two years after the message was first recorded and replayed. A recollection of words spoken during the course of a conversation or, as in the present case, a message replayed from a message bank, will usually be confined to a recollection of the substance of what was said. The recollection and understanding by one witness of the substance of a statement will often differ from the recollection and understanding of another witness. Much will depend upon the importance each witness attaches to the statement, or to various elements of its subject-matter. Elements that are of particular importance to a witness are more likely to become fixed in the mind of the witness. Thus, two witnesses may give different versions of the substance of a statement, while giving a truthful account to the best of their recollection.
I adopt, with respect, the useful analysis undertaken by McClelland CJ in Eq, in Watson v Foxman and ors,
Where, in civil proceedings, a party alleges that the conduct of another was
misleading or deceptive, or likely to mislead or deceive (which I will compendiously described as “misleading”) within the meaning of s 52 of the Trade Practices Act 1974 (Cth) (or s 42 of the Fair Trading Act), it is ordinarily necessary for that party to prove to the reasonable satisfaction of the court: (1) what the alleged conduct was; and (2) circumstances which rendered the conduct misleading. Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not … attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712. [1]
[1] (1995) 49 NSWLR 315, 318-319.
The words spoken by Mr Lewis, and left as a message on the message bank, were not spoken in a vacuum. There was a rich context, which provided great assistance to the court when called upon to analyse the subtleties and differences between the evidence of Mr Mitchell and Mr Casey, and to reach a conclusion as to what was probably said, and whether it was misleading or deceptive conduct contrary to s 52 of the Trade Practices Act. In Butcher v Lachlan Elder Realty Pty Ltd[2] the High Court said,
It is true that the level of analysis which is appropriate might vary from case to case. A more impressionistic analysis, concentrating on the immediate impact of the conduct, might be sounder where the document was only briefly looked at before a decision was made. In other cases a more detailed examination may be more appropriate. Here, the purchasers had the brochure for twelve days before the auction. They relied on it in instructing professional advisers, and they were embarking on a very serious venture. It is not inappropriate to look closely at the contents of the brochure before deciding whether the agent had made a representation.
[2] (2004) 218 CLR 592, [76].
In his evidence, Mr Casey gave a different version of the substance of the telephone message to that given by Mr Mitchell. He also gave a more precise description of the events leading to Mr Mitchell replaying the message to him. Mr Casey said that Mr Mitchell came to his office around lunchtime, and asked if he could see him outside. Mr Mitchell told him that the agent had called, and replayed a voice message. Mr Casey went on,
The message said that he had another offer, he would keep the offer alive
until 5 o’clock tonight but we would need to go unconditional with the offer because the other offer he had was unconditional, and that was pretty much the context of the voice message and he was looking for instructions as to what to do.
Mr Casey said that, from the voice message, he understood the position to be,
That we had to go unconditional or we weren’t going to be able to buy the property and it would be sold to somebody else.
He said that he understood there was a competing purchaser. Mr Mitchell told him that he knew Mr Lewis and that,
he wouldn’t be trying to do the wrong thing by him and he was actually
trying to do the right thing by him by keeping the offer sort of exclusive for
us until 5 pm.
After hearing the message Mr Casey told Mr Mitchell that he would have to contact his joint venture partners and put to them the fact that they would need to go unconditional if they were going to proceed with the development. He said that it was his practice to purchase a development property subject to getting a permit.
When asked what he made of the recorded message, Mr Casey said,
Just that there was a deadline being given, 5 o’clock, that if we wanted the
property we had until then and just, I suppose, creating some urgency, that we needed to do it by then or we were going to miss out on it… that he was doing a favour to Scott and he was holding it until 5 o’clock and we had until then to confirm an unconditional offer.
When cross-examining Mr Casey on this topic, counsel for Bovino advanced two propositions - first, that everything a real estate agent said should not be accepted as the literal truth; and second, that Mr Casey’s evidence of the telephone message was a recent invention, a ‘tricked up misrepresentation’ to resist payment under the contract. Bovino submitted that Mr Casey’s version was contrived following the realisation that his ‘real gripe’ – Bovino’s failure to inform him of the existence of the buffer zone – would not succeed at trial. Bovino’s case strategy was to discredit the evidence of Mr Casey; segregate the elements of Mr Mitchell’s recollection, none of which, they argued, could be shown to be untrue; and challenge any claimed reliance, by advancing the proposition that a person in Mr Casey’s position would not have accepted ‘as the literal truth everything a real estate agent tells you when you deal with him’.
Mr Casey accepted that if a real estate agent told him that he had another purchaser interested in a property he would not, in every case, believe that as a literal truth. He said, however, that there was a difference on this occasion. He had been told by Mr Mitchell that Mr Lewis was a friend and could be trusted. Mr Casey was asked in cross-examination whether Mr Lewis had said in the telephone message that the other offer was unconditional. Mr Casey said that is what he understood from the message.
Bovino reformulated the misrepresentation case against it and answered what it described as ‘two simple questions’:
(a) was there another purchaser interested?
(b) was there a ‘need’ to go unconditional?
It answered both questions in the negative, identifying Mr Mihaljevic as the other interested purchaser; and relying on Mr Gribble’s instruction to Mr Lewis, that he was to seek an unconditional contract, as the basis for the ‘need’. That reformulation of the defendants’ case disregarded the evidence of Mr Casey and the events that followed.
I do not understand Bovino to challenge the fact of the message, its substance as explained by Mr Mitchell, or the fact that Mr Mitchell replayed the message to Mr Casey. The allegation of recent invention centred upon the evidence given by Mr Casey, to the effect that Mr Lewis had conveyed that there was another purchaser willing to enter into an unconditional contract for the property; and that unless the Casey Group made an unconditional offer by 5 pm that day, they would lose the opportunity to purchase the property.
The basis for the allegation of recent invention was the absence of any such allegation in the letter from the Casey Group solicitors, dated 16 July 2009, and Mr Casey’s ‘real gripe’ – the buffer zone. Mr Casey said that the significance of the message was not immediately apparent, but as the facts unfolded it became clear that there had not been any real threat from an unconditional competing offer. Mr Casey said that he became suspicious about the integrity of the vendor and its agent after discussions with the council, and that led to further enquiry resulting in his belief that he had been misled. In that regard it was not entirely clear whether Mr Casey was speaking generally or about the message.
The defendants alleged that at the time the representation was made ‘there was no other prospective purchaser of the land who had made or was prepared to make an unconditional offer to purchase the land for $8,500,000 or more’. Bovino faintly argued that the offer made by Mr Mihaljevic was an unconditional offer. Mr Mihaljevic was not called to give evidence. His offer, dated 8 July 2007, was rejected by Mr Gribble. I am satisfied that the offer made by Mr Mihaljevic on 8 July 2007 was regarded by Mr Gribble and Mr Lewis as unacceptable. On no view was it unconditional, in the sense that the expression was understood by Mr Casey, Mr Gribble, Mr Lewis or Mr Mitchell. There was no evidence of any unconditional offer available to Bovino in July 2007, except for the offer made by the Casey Group on the afternoon of 31 July 2007. Had any other offer existed, I am confident that Bovino would have enthusiastically advanced the evidence.
Having regard to the evidence given by Mr Mitchell and Mr Casey, the particularity of the defendants’ counterclaim, as pleaded, was less than adequate. The substance of what the witnesses said in evidence was, however, conveyed in witness statements filed by the defendants on behalf of Mr Casey and Mr Mitchell, on 23 June 2010. The relevant paragraphs in those witness statements were treated as if a statement of the evidence proposed to be given by each witness. Both Mr Casey and Mr Mitchell were required to give viva voce evidence on the content of the message and the surrounding events.
Bovino complained that it had been disadvantaged by the late delivery of the defendants’ witness statements and, thus, late notice of the particulars of the message and the surrounding events. It argued that it had been denied the opportunity to properly consider and respond to the evidence because the defendants’ witness statements did not precede a witness statement from Mr Lewis, as was contemplated by the trial directions. The complaint, however, was without substance. Mr Lewis said he had no specific recollection of any communication with Mr Mitchell during the relevant period.
I do not regard the different versions of events surrounding the circumstances in which the message was replayed to Mr Casey, and of the content of the message, to be so different as to impact adversely upon the credit of Mr Mitchell or Mr Casey on that topic. While their versions were different, they were complimentary. To some degree the differences between the witnesses added authenticity to the evidence of both of them. The substance of the evidence of Mr Mitchell and Mr Casey was objectively verified by the surrounding circumstances, in particular, the events that occurred shortly after Mr Casey heard the message.

I have already found that Mr Mitchell was an honest and careful witness, giving his best recollection of the substance of the recorded message. While I have reservations about some aspects of the evidence given by Mr Casey, in relation to his financial affairs, and those of the Casey Group, I am also satisfied that on this topic Mr Casey gave an honest account of his recollection of what Mr Lewis had said. Mr Casey’s version of the statement by Mr Lewis is supported by the objective evidence of events that followed. The court is not left to decide what was said, and whether it was misleading or deceptive, based on the evidence of the witnesses alone. The surrounding circumstances give their own account of the substance and effect of what Mr Lewis said in his message.
I find that a message in substantially the following terms was left by Mr Lewis on Mr Mitchell’s message bank, and that the telephone call was probably made on 31 July 2007:
Your current offer is unacceptable. There is another purchaser willing to
enter into an unconditional contract. Unless you make an improved and unconditional offer by 5 pm this afternoon you will lose the opportunity to another purchaser.
A message to that effect is the most plausible explanation for the unusual course taken by the Casey Group, to increase the vendor’s counter-offer by $100,000 and, at the same time, accept removal of a fundamental protection – the Condition Precedent. In response to the message left by Mr Lewis, Mr Casey authorised Mr Mitchell to make a further offer to Bovino. The offer was communicated by Mr Mitchell to Mr Lewis, at 12.28 pm on 31 July 2007, in the following terms:
We have reviewed the situation at hand and are now prepared to make an offer of $8.6m, based on 10% deposit on signing of contracts and the balance 18 months later. We are only prepared to leave this offer open until 4pm today and this offer becomes void if any part of the offer or even the offer itself is disclosed to any party other than the vendor.
If this is acceptable we require written confirmation of the Vendors acceptance also by 4pm today.
If this is not acceptable then we withdraw all offers and wish you all the best
with the sale.
The new offer by the Casey Group did not state that it was unconditional. That is best explained by the fact that Mr Lewis had imposed the requirement in his message, and it was unnecessary for Mr Mitchell to state the obvious. That subtle omission confirms that the removal of the condition precedent was a topic of the communication. The timing of Mr Mitchell’s email was also important, as was the requirement of confidentiality. There was a requirement of non-disclosure ‘to any party other than the vendor’. That requirement was consistent with a view held by the author of the Casey Group offer that there was a competing bidder in a ‘Dutch auction’. In addition, the improved unconditional offer by the Casey Group was to be accepted, if at all, by 4.00 pm on 31 July 2007. The concluding sentence in Mr Mitchell’s email lends further support to Mr Casey’s evidence. It presupposed that if the Casey Group offer was not accepted the property would be sold.
The absence of any recollection by Mr Lewis, of his communication with Mr Mitchell, between the time of the relevant emails, is curious. Although Mr Lewis was not cross-examined on his inability to recall the substance of what he had said, he was not completely silent. Some weeks later, during the preparation of the contract and guarantee, an issue arose in relation to a request by the Casey Group, who sought a right to elect to further extend settlement from 1 February 2008 to 1 August 2009, upon payment of a further $100,000. Bovino eventually agreed to the right. In the course of the negotiations, which at times became tense, Mr Lewis advised Mr Gribble of some background facts, in an apparent attempt to persuade him to accept the Casey Group proposal. In an email, dated 15 August 2007, to Mr Gribble and his solicitor, Mr Lewis presented some calculations to reflect the value of the proposal and concluded:
I believe this comment is generally true and the likelihood of finding another purchaser prepared to go unconditional and settle in less than 18 months at this price is remote.
At this stage the purchaser is still generally ok and I am not sure if this is actually a deal breaker however reading between the lines i suggest while they wanted the property Scott Mitchell might have gone harder than Clinton Cassey (sic) was comfortable with, to this end i did put a fair amount of pressure on them to go unconditional.
I suggest we dont try to find out if this clause is a deal breaker as it can be hard to unscramble the egg once it is broken Please let me know your response prior to Monday evening
Regards
Andrew G Lewis.
The email from Mr Lewis to Mr Gribble is significant for at least two reasons. First, it confirms, if confirmation were necessary, the absence of another purchaser willing to ‘go unconditional’. Mr Lewis went so far as to say that the prospect of finding a purchaser on like terms was remote. Second, Mr Lewis conceded that he did ‘put a fair amount of pressure on them to go unconditional’. That pressure must have been exerted during the relevant period, between the time of the emails dated 25 and 31 July 2007. The only evidence of any communication from Mr Lewis is the evidence given by Mr Mitchell and Mr Casey of the telephone message. The concession by Mr Lewis is consistent with Mr Casey’s recollection of the telephone message and Mr Casey’s response to the ‘pressure’.
I accept the evidence of Mr Casey to the effect that unless told that there was another purchaser prepared to make an unconditional offer, and a deadline of 5.00 pm that day, he would not have agreed to the unconditional offer. Having regard to the course of negotiations prior to 31 July 2007, in which the Condition Precedent was a paramount consideration for the Casey Group, and accepted as such by Bovino, Mr Casey’s stated reliance on what he claims was said in the telephone message is objectively plausible and credible.
In my opinion the statement made by Mr Lewis was misleading or deceptive. It was false and was intended to and did convey to the Casey Group a threat that there was another purchaser willing to enter into an unconditional contract, at a price equal to or better than the counter-offer; and that if a satisfactory offer was not made by the Casey Group by 5 pm that day the property would be sold to the other purchaser. There was in fact no other purchaser then willing to enter into such a contract. The property was not then at risk of being sold to another purchaser if the Casey Group did not make an unconditional offer by 5 pm that day.
The statement made by Mr Lewis and left as a message for Mr Mitchell was intended by Mr Lewis to put pressure on Mr Mitchell, and in turn the Casey Group, to remove their requirement for the Condition Precedent. Mr Lewis succeeded in his objective. He spoke on behalf of Bovino, and his conduct amounted to a breach by Bovino of s 52 of the Trade Practices Act. The Casey Group relied on what Mr Lewis had said by responding with an offer of an unconditional contract, which it would not otherwise have done. But for the offer by the Casey Group and acceptance by Bovino, it would not have entered into a contract in the terms in which it did, and Mr Casey would not have guaranteed performance under the contract. As a direct consequence, the Casey Group paid a deposit of $860,000 on 17 August 2007, and a further $100,000 on 1 February 2008 to extend the date for settlement.
In my opinion it is not to the point for Bovino to contend that the Casey Group did not invoke the representation when it refused to complete the contract. Bovino submitted, in effect, that reliance upon the telephone message was opportunistic ,because the real concern of Mr Casey and the Casey Group was Bovino’s failure to disclose the existence of the buffer zone. That submission overlooked the context in which the time for performance arose, and the default took place. I accept that at the time of the letter from the defendants’ solicitors, dated 16 July 2007, the defendants and their solicitors did not appreciate the significance of the ‘pressure’ exerted by Mr Lewis. The defendants’ subsequent investigations revealed that what Mr Lewis had said was false.
Section 87 of the Trade Practices Act authorises a range of orders, and forms of relief, available to a court in circumstances such as the present case, where the court has found that the defendants have suffered, or are likely to suffer, loss and damage by reason of contravening conduct. Relief available in the present case, includes a declaration that the contract and the guarantee are void ab initio, and an order directing Bovino to refund money in addition to an award of damages. I propose to make a declaration to the effect that the contract of sale made between Bovino and the Casey Group, dated 17 August 2007, and the guarantee and indemnity given by Mr Casey and attached thereto, are void ab initio. I also propose to order that Bovino repay to the Casey Group the deposit of $860,000 and the extension fee of $100,000, together with interest thereon since the date of payment.
Having regard to the findings I have made, and the proposed orders, it may seem unnecessary to deal with the remaining defences of the defendants, in which they sought to persuade the court not to make any order for specific performance or for payment under the guarantee. Both contentions may be disposed of briefly.
Specific Performance
The defendants’ case against specific performance became a substantive issue, occupying a considerable amount of hearing time. The defendants’ argued that any order for specific performance would be futile because the Casey Group did not have the funds necessary to complete the contract. The second defendant raised his own impecuniosity as a basis to submit that no order should be made against him.
Mr Casey gave evidence that, whilst the beneficiary under the family trust, he had no entitlement to any distribution and that his assets were confined to a small amount of cash and a motor vehicle.
The Casey Group’s case for impossibility was presented through the group accountant, Susan Jane Maxwell, who gave evidence of a complex structure of companies and trusts. She produced profit and loss statements, balance sheets, trust deeds and other material in support of the conclusion that many of the entities had no assets, and if they did, they were not available to Mr Casey. The plaintiff’s response to this material was to cross-examine Mr Casey and Ms Maxwell at length, to demonstrate the unreliability of the accounts, and that values reflected in the accounts were inaccurate or did not represent realisable value.
The business of the Casey Group was property development, and in particular the construction of retirement villages in partnership with Metricon. Mr Casey gave evidence of his group’s financial distress, as a consequence of default under banking facilities, provided by the National Australia Bank Limited. There was evidence of a facility of around $50 million, of which around $35 million remained owing to the bank. Mrs Casey gave evidence of the sale of the family home in Shakespeare Grove, Hawthorn, for a sum exceeding $20 million, of which around $15 million had been paid to the bank in reduction of the facility. She retained the balance, expressing her unwillingness to assist her husband, or the Casey Group, to meet any commitment they might have to the plaintiff.
The defendants’ case for impossibility, and impecuniosity, did not extend to an analysis of the real value of assets, or opportunities that may have been available to the Casey Group or Mr Casey to find or raise funds to meet its obligation under the contract. The plaintiff’s cross-examination did not seek to explore that issue, but was confined to a myopic analysis of the accounts presented by Ms Maxwell. While I am persuaded that the Casey Group and the Casey family are experiencing some financial distress, I am by no means satisfied that it follows that the difficulties that confront the purchaser under the contract are such as to justify a refusal to make an order for specific performance, insofar as the contract may survive the attack under s 52 of the Trade Practices Act.
While impossibility of performance is a recognised ground for refusing specific performance, it is not a remedy that should be lightly refused if a plaintiff has established the existence of a contract capable of specific performance which the defendant has refused to complete. The court has a discretion to refuse a remedy, although it is necessary for the defendant to prove that a hardship, amounting to an injustice, would be inflicted on him by holding him to his bargain and that it would not be reasonable to do so. [3] The defendants accepted the burden of establishing the necessary degree of hardship. They submitted that the facts establish that it was not possible for the purchaser to complete the contract and that an order for specific performance would expose it to the contempt sanction in the event of non- compliance. While the plaintiff had elected to seek specific performance, it claimed damages in the alternative. In practical terms, if an order for specific performance was not satisfied the plaintiff would return to court, seek an order terminating the contract and damages in lieu of specific performance.
[3] Suttor v Gumdowda Pty Ltd (1950) 81 CLR 418, 438-439.
In my opinion the defendants’ case for impossibility and hardship as a defence to an order for specific performance, if such an order were to be made in this case, is without substance. The evidence does not disclose any material difference between the financial position of the purchaser at the time it entered into the contract and its position today. Its accounts are, of course, different because they reflect its obligations under the contract as a contingent liability and the value of the contract as an asset. At the time of entering into the contract the purchaser was entirely dependent upon the ability and willingness of Mr Casey, and perhaps Metricon, to procure the necessary financial accommodation to settle the contract. The evidence advanced on this topic by the defendants provided no explanation as to what has changed in that regard, save that Mr Casey now maintained that the purchaser had no funds and that Metricon was no longer willing to proceed. No one from Metricon was called to give evidence. Thus, it would appear on the evidence as it stands, that the only material difference between the circumstances at the time the Casey Group entered into the contract and today, is that Mr Casey has indicated his unwillingness to deploy group assets to support the completion of the contract. Insofar as it may be relevant, the case for impossibility, advanced by the Casey Group, must fail.
As for the defence raised by Mr Casey to an order that he pay under the guarantee, his impecuniosity is no legal impediment to the plaintiff seeking such an order. There is no principle of law that would inhibit the court making such an order. Mr Casey entered into the guarantee in financial circumstances which, the evidence suggests, are in no material respect different to those which exist today. The guarantee is as valuable to the plaintiff as Mr Casey may choose to make it, but that is no reason to reject an order for payment, if such an order were otherwise justified.

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Purchase Price of:	$8,500,000
Deposit of:	$500,000, payable upon signing of the contract, $250,000 of which would be non refundable.
Settlement Date:	30 June 2008
Condition Precedent:

[2010] VSC 391

10 September 2010