Bowler v Hilda Pty Ltd - [1998] FCA 210

FEDERAL COURT OF AUSTRALIA

TRADE PRACTICES - sale of units in real estate development - representation by vendor’s agent as to use for home occupation - application by vendor to vary subdivision plan to allow home occupation - variation subsequently rejected - agent’s knowledge of vendor’s belief - whether relevant - representation as to future matter

Trade Practices Act 1974 (Cth) ss 51A, 52, 53A(1)(b)

Thompson v Master Touch TV Services Pty Ltd (No.2) (1977) 15 ALR 487 referred to
R v Sunair Holidays Limited [1973] 1 WLR at 1109 referred to
British Airways Board v Taylor [1976] 1 WLR 13 referred to
Stack v Coast Securities No. 9 Pty Ltd (1983) 5 TPR 130 referred to
Bill Acceptance Corporation v GWA Limited (1983) 78 FLR 171 referred to
Global Sporstman Pty Ltd v Mirror Newspaper Pty Ltd (1984) 2 FCR 82 discussed
Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 referred to
Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679
Wright v Wheeler Grace & Pierucci Pty Ltd (1989) ATPR 40-940 discussed
Cummings v Lewis (1993) 41 FCR 559 referred to
Yorke v Lucas (1985) 158 CLR 661 referred to
John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Limited (1993) ATPR 41-249 referred to
Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 referred to

BRUCE WILLIAM BOWLER and JANELLE JOY BOWLER & ORS v HILDA PTY LIMITED
ACT G 74 of 1996

CORAM:      BLACK CJ, HEEREY AND COOPER JJ
DATE:           25 FEBRUARY 1998
PLACE:         MELBOURNE (heard in Canberra)

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY ACT G 74 of 1996 No. ACT G 74 of 1996

B E T W E E N:

BRUCE WILLIAM BOWLER and JANELLE JOY BOWLER
Appellants
- and -

HILDA PTY LIMITED
  (ACN 008 556 616
  First Respondent
LEADER REAL ESTATE PTY LTD
  (ACN 059 881 597)
  Second Respondent
LEADER HOLDINGS PTY LTD
  (ACN 008 567 726)
  Third Respondent
JOHN FREDERICK McDONALD
  Fourth Respondent
JENNIFER McDONALD
  Fifth Respondent
DEREK WHITCOMBE
  Sixth Respondent

REGENCY APARTMENTS PTY LIMITED
  (ACN 061 914 029)
  Seventh Respondent
LEADER REAL ESTATE PTY LIMITED
  LEADER HOLDINGS PTY LIMITED
  and DEREK WHITCOMBE
  First Cross Claimants
HILDA PTY LIMITED
  First Cross-Respondent

REGENCY APARTMENTS PTY LIMITED

Second Cross-Respondent

CORAM: BLACK CJ, HEEREY and COOPER JJ

DATE: 25 FEBRUARY 1998

PLACE: MELBOURNE (heard in Canberra)

MINUTES OF ORDER

THE COURT ORDERS THAT:

Appeal allowed.

Orders of the trial judge set aside.

Matter remitted to trial judge for further argument on the issue of falsity and any other outstanding issues.

Respondents pay the appellants’ costs of the appeal.

The appellants’ costs of the trial and any further hearing to be reserved for the trial judge.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY

ACT G74 OF 1996

BETWEEN:

BRUCE WILLIAM BOWLER AND JANELLE JOY BOWLER
APPELLANTS

AND:

HILDA PTY LIMITED
FIRST RESPONDENT

LEADER REAL ESTATE PTY LTD
SECOND RESPONDENT

LEADER HOLDINGS PTY LTD
THIRD RESPONDENT

JOHN FREDERICK MCDONALD
FOURTH RESPONDENT

JENNIFER MCDONALD
FIFTH RESPONDENT

DEREK WHITCOMBE
SIXTH RESPONDENT

REGENCY APARTMENTS PTY LIMITED
SEVENTH RESPONDENT

LEADER REAL ESTATE PTY LIMITED, LEADER HOLDINGS PTY LIMITED AND DEREK WHITCOMBE
FIRST CROSS-CLAIMANTS

HILDA PTY LIMITED
FIRST CROSS-RESPONDENT

REGENCY APARTMENTS PTY LIMITED
SECOND CROSS-RESPONDENT

JUDGES:

BLACK CJ, HEEREY J AND COOPER J

DATE:

25 FEBRUARY 1998

PLACE:

MELBOURNE (heard in Canberra)

REASONS FOR JUDGMENT

BLACK CJ:

The nature of this case and the issues arising on the appeal are comprehensively described in the reasons for judgment of the other members of the Court.

The appellants were the purchasers under a contract for the purchase of Unit 23 in a development undertaken by the first respondent Hilda Pty Limited (“Hilda”) involving the redevelopment of buildings formerly used as the Regency Motor Inn at Griffith in the Australian Capital Territory. The second respondent Leader Real Estate Pty Ltd (“Leader Real Estate”) was retained by Hilda as its exclusive agent to effect sales of proposed units in the redevelopment. The third respondent Leader Holdings Pty Ltd (“Leader Holdings”) is the holding company of Leader Real Estate.

The relief sought by the appellants in the proceeding included an order that their purchase be set aside. They claimed that they had entered into the transaction in reliance upon representations made by Hilda’s agent, Leader Real Estate or, alternatively, by Leader Holdings, and that these representations were misleading and deceptive contrary to s 52 of the Trade Practices Act 1974 (Cth) (“the Act”) and false or misleading contrary to ss 53(g) and 53A(1)(b) of the Act.

The representation with which this appeal is concerned was referred to by the trial judge as the “unit use representation” and I adopt the same terminology. The substance of the unit use representation was that the units in the motel redevelopment, other than Units 1 to 19, “may be lived in, rented out privately, or rented to the management company which will sublet them as serviced apartments”.

The trial judge found that the representation was made in an advertising brochure given to the appellants on 22 July 1993 by Mr Singh, an employee of the Leader companies. His Honour observed that it was not seriously disputed that at a meeting between Mr Singh and the appellants, Mr Singh probably made statements of similar effect to those in the advertising brochure. The trial judge concluded that the claim based upon the unit use representation had
not been made out. The other claims also failed. His Honour accordingly ordered that the appellants’ proceeding be dismissed with costs. This is an appeal against that order.

It is evident that there was considerable argument before the trial judge about the state of the pleadings and the way in which the pleadings defined the boundaries of the appellants’ case. Some of these questions have arisen again on the appeal but on the view I take of this case it is not necessary for me to deal with them.

One of the claims considered by the learned judge in his reasons for judgment was an alternative claim made by the appellants that the unit use representation was misleading for the reason that the Leader companies did not have reasonable grounds for making it. In considering this claim his Honour proceeded upon the basis that s 51A of the Act applied. In my view he was correct in doing so notwithstanding that, in relation to the unit use representation, there was no express statement in the pleadings that s 51A would be relied upon.

The relevant provisions of s 51A are as follows:

“51A. (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
(2) For the purposes of the application of sub-section (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.

(3) Sub-section (1) shall be deemed not to limit by implication the meaning of a reference in this Division to a misleading representation, a representation that is misleading in a material particular or conduct that is misleading or is likely or liable to mislead.”

Treating the unit use representation as a representation as to a future matter, the issue then identified by his Honour for determination in this part of the case was whether the Leader companies had adduced evidence that they did have reasonable grounds for making the representation. His Honour’s approach was to ask whether the Leader companies had

adduced evidence of reasonable grounds which, in its setting, satisfied him on the balance of probabilities that they did have those reasonable grounds.

His Honour’s conclusions on this issue do not rest upon his assessment of the credibility of any of the witnesses, and indeed the only relevant oral evidence was from officers of the Department of the Environment, Land and Planning of the ACT Government (“the planning authority”) responsible for considering applications to vary the purpose clause in the lease of the land upon which the redevelopment was to take place. No witnesses were called on behalf of the respondents and the only evidence tendered on behalf of any of them comprised two documents from discovered files purporting to be the originals of facsimile messages from Mr Peter Hughes of Leader Real Estate to the solicitors for Hilda.

There was no direct evidence that these facsimiles were ever transmitted, but the trial judge inferred that they were and they played an important part in his conclusion that the Leader companies had reasonable grounds in the circumstances for making the unit use representations.

The first message was dated 17 May 1993 and was informal in nature in that it was a handwritten note addressed to a person by her given name. It read:

“Jocelyn,
This is the proposed hand out information re: serviced apartments. Can you check that it is accurate.
We need service agreement asap. Call me on 2310888 or 018-624838 with any questions.
Regards,
Peter.”

The “proposed hand out information” was a version of the brochure containing the unit use representation.

The second message, also handwritten, was dated 20 May 1993 and addressed to “Stephanie”. It read:

“Copy of information, plans, inclusions re serviced apartments to be released this Saturday.
Not 100% on some plans, as indicated by my fax to Brian Dowling also attached.
PS. Where buyers have exchanged on lower amounts, they will not be offered a rent back. Only if they pay the higher price as indicated.
Peter
cc Carl Ryman.”

The trial judge concluded that, given various contextual matters and given a known change to the development scheme that was being put into effect in late May and in which Hilda’s solicitors clearly had some involvement, it was not unreasonable for the Leader companies to have proceeded on the assumption that the unit use representation was approved by the solicitors, in the absence of any indication to the contrary. His Honour was prepared to infer that the Leader companies did so act and he concluded that the companies had reasonable grounds in the circumstances for the unit use representations that they made.

The contextual matters to which his Honour referred included the contractual obligation of Hilda to inform Leader Real Estate of any changes to plans and government approvals, such that Leader Real Estate was reasonably entitled to expect a communication from or on behalf of Hilda if, in fact, a change in the development proposal in mid-May 1993 effected a radical limitation on the residential use of more than half of the units to be sold. His Honour could not discern any matter or circumstance that would qualify that entitlement. The other contextual matter was the apparent regular facsimile communication between Mr Hughes and Hilda’s solicitors, especially in the period immediately preceding the initial marketing of the serviced apartments.

Although his Honour observed that the two facsimiles carried a significant part of the burden of the Leader case, he rejected the submission made on behalf of the appellants that the Leader companies needed to prove receipt of, and reply to, the facsimile of 17 May 1993. Overall I understand his Honour to have concluded that the obligation of Hilda to inform the Leader companies of what was going on was so important that, even in the absence of any proof of a received request for advice, the Leader companies could reasonably proceed on the assumption that the unit use representation was approved by the solicitors unless otherwise
indicated.

For reasons that I shall now state, I consider that the evidence did not justify the conclusion that the Leader companies had reasonable grounds for making the unit use representation.

In my view, a consideration of whether, on the evidence, it was correct to conclude that the Leader companies had reasonable grounds for making the unit use representation should begin with the planning limitations for which the property was subject at the time Leader Real Estate was engaged by Hilda as its exclusive sales agent. This has the logical advantage of commencing the examination at or about the time that the Leader companies’ involvement began.

At the time Leader Real Estate was engaged, the property could not lawfully be used for any purposes other than those of a residential hotel and ancillary car parking. The Commonwealth had, only days before, granted to Hilda a lease of the property containing a purpose clause by which Hilda covenanted to use the premises only for the purpose of a residential hotel and ancillary car parking. At or about the same time, an application was made by Hilda to the planning authority for a variation of the purpose clause and for a boundary realignment. It proposed:

“... remainder of site (at present Regency Motel area) to be changed to permit residential use - present motel to be refurbished, then unit titled.”

On the following day, Mr Carl Ryman, a property consultant acting on behalf of Hilda, lodged an amended application. The proposal was described as:

“Boundary re-alignment and purpose variation to include medium density residential units.”

Looking at the matter as at the time Leader Real Estate was engaged by Hilda, there is an almost inescapable inference that the Leader companies knew then, or soon thereafter, that the property could not lawfully be used for purposes other than those of a residential hotel and ancillary car parking, and that for the redevelopment to proceed there would need to be a successful application to the planning authority for an appropriate variation of the purpose clause of the lease.

Leader Real Estate held itself out to be, and no doubt was, a licensed real estate agent (see the Agents Act 1968 (ACT)) and had been appointed by Hilda as its “exclusive agent to effect sale of the proposed refurbished units”. Further its role was not confined to selling the proposed units; Leader Real Estate was also an adviser. One of the documents in evidence was a letter from Leader Commercial dated 10 March 1993, apparently a division of Leader Real Estate (see the ACN identification on the letterhead), to the Manager and Proprietor of the Regency Motor Inn, marked for the attention of Mr Carl Ryman and Mr John McDonald. The letter gave advice about “strata titling of the Regency Motor Inn into residential and serviced apartments” and contained various recommendations about the project, including the mix of apartments. The letter stated that the authors had “concluded... final research on the above project after reviewing the projected costs from both Fletchers Constructions Australia and your Quantity Surveyor, Donald Cant Watts Corke Pty Ltd.” As exclusive selling agents and as the givers of advice about the redevelopment project, Leader Real Estate would need to have had at least basic knowledge of the apparently straightforward planning restraints affecting the proposed redevelopment. Moreover, no reason emerged from the evidence to suggest that anyone, including Hilda, had anything to gain by the exclusive selling agents being kept in ignorance of the planning position. On the contrary, in the letter dated 26 February 1993 appointing Leader Real Estate as exclusive sales agent, Hilda assumed an obligation to support Leader Real Estate “with all relevant information and material” and to “keep [it] informed of any changes to marketing details as to plans, government approvals, completion times etc”.

If it be inferred, as I consider it should be, that the Leader companies knew, at or about the time of Leader Real Estate’s engagement, that the property could not lawfully be used for purposes other than a residential motel and car parking and that an appropriate variation of the purpose clause would be required, whatever precise form the redevelopment of the former motel took, that knowledge becomes a critical part of the context in which to answer the question whether the Leader companies had reasonable grounds for the unit use representation.

Clearly there was no basis in the limited evidence on the topic for concluding that the Leader companies had reasonable grounds for thinking that the necessary variation in the purpose clause was assured. But were there other matters that provided reasonable grounds for the Leader companies representing that uses that fell within what they knew were existing prohibitions would become permissible in the relevant future?

As noted, Hilda was under a contractual obligation to keep Leader Real Estate informed of any changes to plans and government approvals. There were also good practical reasons why it should keep its selling agent informed of developments. But when Hilda’s obligation is seen in the context of proposed uses that were known to be prohibited unless and until appropriate changes were made in the purpose clause of the lease, the obligation to inform does not of itself provide reasonable grounds for the making of specific representations about the use to which the property could be put in the future. The evidence does not justify treating this as a case where reasonable grounds were shown to exist at an earlier time for the making of a later representation and where a representor could reasonably act on the belief that there had been no change. In my view the evidence did not establish that the Leader companies ever had reasonable grounds for making the unit use representation.

Moreover the obligation on the part of Hilda to inform Leader Real Estate of changes as to plans and approvals does not support the inference that Hilda did in fact pass on to Leader Real Estate information of such a character and in such circumstances as to provide reasonable grounds for making the unit use representation. For one thing, such evidence as there was suggests that the information that was available to be communicated to Leader Real Estate, at least after mid-April 1993, would not have provided reasonable grounds for making the unit use representation.

To explain why this is so, it is necessary to refer to the evidence in some detail. The trial judge found that in mid-April there was a meeting between officers of the planning authority and Hilda’s agent, Mr Ryman. At that meeting the Chief Planner indicated by reference to a plan of the proposed development that if units numbered 1 to 19 were used only for residential purposes and the remaining 42 units were used as serviced apartments, he would be happy to support the application as it stood. According to one of the officers from the planning authority who gave evidence, Mr Ryman said that he would amend the application to reflect this (his Honour noted that it was in dispute between the parties as to whether such
an amendment was ever sought).

On 23 April 1993, shortly after the meeting with Mr Ryman, the Chief Planner reported to the Minister on the proposal. He stated that the use for medium density residential units was consistent with land use policy but that the specific development proposal was not consistent with the development guidelines. The deficiencies that the Chief Planner identified related to the smaller units to be converted from motel rooms which were unsuitable for long term or permanent residential use. They were detailed in a document described as “Attachment A”. The appellants’ unit was one of these smaller units.

The trial judge found that in mid-May 1993, Hilda changed the manner in which the units were to be presented to the public. Nineteen of the units were to be sold as one bedroom residential only units and the remainder as serviced apartments. The changes were consistent with what the Chief Planner had said would be acceptable and with what, according to one of the witnesses, Mr Ryman was content with.

On 7 July 1993, Mr Ryman wrote a letter to the planning authority in the following terms:

“I refer to the application currently before you in respect of the above property for a re-alignment of boundary between Blocks 5 & 6 and also a lease purpose variation in respect of the new parcels.
Following discussions with your Mr Guild, Mr Tomlins, Mr Stubbs and
Mr Nowak, I can now outline the course proposed for the application which satisfies departmental criteria.

The boundary re-alignment between Blocks 5 & 6 will only affect the boundary between the two current blocks forming new blocks 9 & 10. The external boundaries of the two blocks will remain as for Blocks 5 & 6.
The purpose clause variations to the new blocks will add the following use:
Block 9 - residential purposes to permit a maximum of 72 townhouses;
Block 10 - residential purposes to permit a maximum of 19 residential units.
The use for Block 10 will be in addition to the proposed 42 serviced apartments currently permitted under the present lease. The 19 units will replace what is presently 27 motel units and a restaurant.
Would you please proceed to process this application as a matter of some urgency as my client is now in a position to commence work on both sites.”

Block 10 was the one relevant to the present proceedings and the appellants’ unit was one of the proposed 42 serviced apartments. Thus Mr Ryman, on behalf of Hilda, was seeking to overcome the planning authority’s objections to the use of units, including Unit 23, for purposes other than serviced apartments.

On 7 August 1993, the planning authority informed Mr Ryman that the application to vary the purpose clause and realign the boundary had been approved, subject to several conditions. One of the conditions was that the lessee demonstrate that any development proposal would meet the development guidelines to the satisfaction of the planning authority, and be “in accordance with Attachment A”. This attachment was in the same terms as “Attachment A” of the Chief Planner’s report to the Minister dated 23 April 1993.

It was not suggested to any of the witnesses called from the planning authority that
Mr Ryman, or anyone else on behalf of Hilda, acted inconsistently with the position foreshadowed, if not actually taken, by Mr Ryman at the meeting in mid-April and made explicit in his letter of 7 July 1993 - a letter that of course was written prior to the making of the unit use representations. There was nothing in the evidence to suggest that Mr Ryman was acting otherwise than within the scope of his authority as Hilda’s agent. The evidence about the progress of the application to vary the purpose clause in the lease, and other relevant planning considerations, came from the best source - officers of the decision-maker. That evidence showed that in its dealings with the planning authority through its agent
Mr Ryman, Hilda had, at least by the time the unit use representations were made, adopted a position that accepted the use limitations for the smaller units that the planning authority considered necessary. Mr Ryman’s letter of 7 August 1993 was indicative of a final position having been adopted by Hilda, and there is nothing in the evidence to suggest that that final position might have changed at any material time.

In these circumstances the information that, on the evidence, it should be inferred Hilda had available to it to pass on to Leader Real Estate, did not provide reasonable grounds for a statement, unqualified as it was, that the proposed serviced apartments could be used for permanent residence.

It is now necessary to consider the effect of the two facsimile messages, accepting that the evidence did support the inference that they were sent. In my view, the evidence about the facsimile messages was not such as to provide sufficient support for a finding that the Leader companies had reasonable grounds for making the unit use representation. In the absence of any other evidence from the respondents, the matter was left in an inconclusive state. Assuming that the facsimiles were sent, there are several possibilities as to what happened next. One possibility is that they were not received or not acted upon as a request for advice. Another possibility is that advice was given in response to one or both of the facsimiles but that the advice, properly and reasonably understood, was of such a nature as not to provide reasonable grounds for the unit use representation. Indeed given the position with respect to the application to the planning authority as at the time the representation was made in late July 1993, it is hard to see how a solicitor acting competently on proper instructions would have given advice which, properly understood, did provide reasonable grounds for the representation. It should be borne in mind in this context that the informal nature of the facsimiles in question invited an informal response (and most likely a telephoned response to the first facsimile) rather than a carefully considered and precisely expressed written letter of advice.

The appellants’ primary argument on the reasonable grounds point was centred on the proposition that the trial judge should have found that the Leader companies had actual knowledge of the true situation. I am satisfied however that the alternative argument, to which the learned trial judge devoted considerable attention, was not abandoned on the appeal and was sufficiently raised in the course of argument before us.

The appeal should be allowed with costs and the matter remitted to the trial judge for further hearing on the issue of falsity and on any other outstanding issues.

I certify that this and the preceding
eleven (11) pages are a true and correct copy of
the reasons for judgment of the
Honourable Chief Justice Black

Associate:

Dated: 25 February 1998

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY  No. ACT G 74 of 1996
DISTRICT REGISTRY
GENERAL DIVISION

B E T W E E N:

BRUCE WILLIAM BOWLER and JANELLE JOY BOWLER
Appellants
- and -

HILDA PTY LIMITED
  (ACN 008 556 616
  First Respondent
LEADER REAL ESTATE PTY LTD
  (ACN 059 881 597)
  Second Respondent
LEADER HOLDINGS PTY LTD
  (ACN 008 567 726)
  Third Respondent
JOHN FREDERICK McDONALD
  Fourth Respondent
JENNIFER McDONALD
  Fifth Respondent
DEREK WHITCOMBE
  Sixth Respondent

REGENCY APARTMENTS PTY LIMITED
  (ACN 061 914 029)
  Seventh Respondent
LEADER REAL ESTATE PTY LIMITED
  LEADER HOLDINGS PTY LIMITED
  and DEREK WHITCOMBE
  First Cross Claimants
HILDA PTY LIMITED
  First Cross-Respondent

REGENCY APARTMENTS PTY LIMITED
Second Cross-Respondent

CORAM: CHIEF JUSTICE, HEEREY and COOPER JJ

DATE: 25 FEBRUARY 1998

PLACE: MELBOURNE (heard in Canberra)

REASONS FOR JUDGMENT

HEEREY J:
On 24 August 1993 the appellants entered into a contract for the purchase of Unit 23 in a development known as "Regency 90210 Apartments" in Canberra. This development had been carried out by the first respondent Hilda Pty Limited (“Hilda”) and involved the refurbishment and part reconstruction of buildings which formerly constituted the Regency Motel. The Regency development comprised three buildings, referred to as buildings A, B and C.

Hilda retained as its sales agent the second respondent Leader Real Estate Pty Ltd. That company and its holding company the third respondent Leader Holdings Pty Ltd will be collectively referred to as "Leader".

The appellants were among a number of other purchasers who had similar complaints. The present proceeding commenced as a representative proceeding brought under Part IVA of the Federal Court of Australia Act 1976 (Cth), although when final orders were made the learned trial judge made an order that the proceeding not continue as a representative proceeding. That order was not challenged on appeal.

The relief sought by the appellants under the Trade Practices Act 1974 (Cth) (“the Act”) included orders setting aside the whole of the transaction or alternatively guarantees of their obligations under their sub-lease.

The appellants complained of a number of representations but the only one with which this appeal is concerned (and which I refer to hereafter as “the representation”) is that referred to in paras 5B and 6J of the amended statement of claim, viz a representation

“that each unit may be lived in, rented out privately, or rented to the management company which will sublet them as serviced apartments.”

There could be no doubt that the making of the representation was established because those very words were found in a brochure relating to the development which was given by Leader's Sales Manager, Mr Neil Singh, to the appellants on 23 July 1993. That brochure was a typed document on the letterhead of Leader which described that company as "Leader Real Estate Pty Ltd Licensed Agents".

On 23 February 1993 the Commonwealth granted a lease to Hilda of Blocks 5 and 6 Section 84 Division of Griffith. By cl 3(a) the lessee covenanted to use the premises only for the purpose of a residential hotel and ancillary car parking. On the same day Mr Carl Ryman, a property consultant acting on behalf of Hilda, applied to the ACT Department of the Environment, Land and Planning for a lease variation which included a "purpose variation to include medium density residential units". The matter was considered by the Chief Planner of the ACT Planning Authority who on 23 April 1993 reported to the Minister as follows:

“The proposed use for medium density residential dwelling units is consistent with the land use policy contained in the variation to the Territory plan for Griffith Section 84 gazetted on 18 December 1992. However, the specific development proposal is not consistent with the Development Guidelines attached to the Variation. The extent to which the proposal is deficient is detailed in the attachment to this notice.

Accordingly, the Authority does not object to the variation provided that approval is given subject to the condition that the applicant demonstrates that any development proposal meets the Development Guidelines to the satisfaction of the Authority.”

The attachment commences with the remarks:

“The proposed conversion of the motel rooms to residential units fails to satisfy a number of the Development Guidelines for Section 84, specifically ...”

There follow five specific objections and the concluding comment:

“Although not specifically referred to in the Development Guidelines comparison of typical floor areas for each dwelling unit type shows that the proposed units are on average 25 - 50% smaller than comparable medium density developments elsewhere in the inner Canberra area. For example, the single bedroom units have an average floor area of 45 m² compared to 60 m² elsewhere and the proposed bedsitter units have an average floor area of only 20 m² compared to 54 m² elsewhere. A copy of the floor plan of the bedsitter unit is attached. This unit is little bigger than an average carport and concern is expressed about its ability to function effectively for permanent residential occupation.

It is considered that the amenity standards required for transient occupation of motel units are quite different to those required for long term or permanent residents. The Authority considers that in failing to meet the reasonable amenity standards set out in the development guidelines the proposal as submitted should not be supported.”

Some time in April and presumably after the Chief Planner’s report was written there was a meeting between officers of the Department and Mr Ryman. At that meeting the Chief Planner indicated by reference to a plan of the proposed development that if units numbered 1 to 19 were used only for residential purposes and the remaining 42 units were used as serviced apartments, he would be happy to support the application as it stood. According to one of the officers from the planning authority who gave evidence, Mr Ryman said that he would amend the application to reflect this. His Honour noted that it was in dispute between the parties as to whether such an amendment was ever sought. Mr Ryman was not called as a witness by the respondents.

On 7 July 1993 Mr Ryman wrote to the Department and amongst other things stated that the proposed lease variations would add the following use:

“Block 10 [the Regency development] - residential purposes to permit a maximum of 19 residential units.

The use for Block 10 will be in addition to the proposed 42 serviced apartments currently permitted under the present lease. The 19 units will replace what is presently 27 motel units and a restaurant.”

The 19 units referred to by Mr Ryman were contained in Building A. Buildings B and C, including the appellants' Unit 23 in Building B, contained the 42 serviced apartments.

On 7 August 1993 the Department wrote to Mr Ryman advising that the application had been approved subject to a number of conditions including the following:

“Upon registration of that lease [ie the existing lease] it shall be surrendered in favour of two new leases with realigned boundaries, for the purpose of medium density residential units and/or a residential hotel with ancillary carparking;
...
That the lessee demonstrates that any development proposal meets the Development Guidelines to the satisfaction of the Authority and in accordance with Attachment A.”

Attachment A was the document already referred to in the Chief Planner's report and includes the criticism of the proposed size of the units.

A new lease was granted on 18 November 1993. It included covenants by the lessee:

“3.(a) ...
(b)...
(c)To use the said land for residential units and serviced apartments;

(d)That the buildings on the said land shall contain a maximum of nineteen one bedroom residential units and forty-two serviced apartments.”

The Regency development was the subject of Unit plan No 1000 registered on 14 December 1993. It included a "Schedule of Provisions Covenants and Conditions subject to which Leases or Units are Held" and these include the following:

“PURPOSE

(c)To use the said parcel for residential units and serviced apartments.

SINGLE UNIT DWELLINGS

(d)That the buildings on the said land shall contain a maximum of 19 one bedroom residential units and 42 serviced apartments.”

Completion of the purchase occurred on 22 March 1994. At the time of the representations in July 1993 no building work had been commenced.

The appellants' amended statement of claim included in para 11 the allegation that the representation concerning use of the apartments quoted above

“was contrary to sections 52 and 53A(1)(b) of the [Trade Practices] Act because the Units cannot lawfully be lived in or rented out privately but can only be used as serviced apartments.”

We were told on the appeal that argument took place before the learned trial judge as to whether that allegation of falsity had been made out. It is difficult to see how the appellants' contention could be resisted. The schedule to Unit Plan No. 1000 makes it clear that the 19 one bedroom residential units (that is to say building A) can be used for that purpose and the remainder as serviced apartments. It seems at least to be accepted that a permitted use as a serviced apartment would not comprehend permanent residence. In any event, his Honour did not make any findings as to the falsity issue and the appeal was mainly taken up with arguments arising under s 52. At a late stage in the hearing of the appeal the relevance of s 53A was drawn to the attention of counsel. Counsel for the appellants sought leave to amend the notice of appeal and subsequently submitted in writing a proposed further ground:

“The learned judge further erred in not finding and holding that the first, second and third Respondents had contravened s.53A(1)(b) of the Act in that the second and third Respondents, as agents for the first Respondent had in connection with the sale or grant, or the possible sale or grant of an interest in land, and in connection with the promotion of the sale or grant of an interest in land (namely the leasehold estates in respect of Block B and Block C which were for sale) made a false or misleading representation concerning the use of which those units were capable of being put or might lawfully be put (namely as permanent residences), and ought to have so found and held.”

Since this argument was squarely raised on the pleadings and was argued before the learned trial judge, and since no case of prejudice to the respondents has been made out, the amendment in my opinion should be allowed.

The Decision Below
The learned trial judge characterised the representation in question as a representation that a particular state of affairs would exist in the future in relation to the units. Accordingly he found it to be a representation relating to a “future matter” within the meaning of s 51A of the Act. His Honour further characterised the representation, when made by Leader, as one of present belief or opinion that, in his Honour's words,

“the Leader companies were reasonably of the view that Hilda would take the steps within its power necessary to bring about the represented state of affairs.”

His Honour went on to hold that Leader needed only to have reasonable grounds for making such a representation - even if their principal Hilda in fact had no intention of bringing about the state of affairs - in order for the conduct not to be misleading and deceptive.

His Honour then proceeded to find that Leader did have such reasonable grounds, notwithstanding its unexplained failure to call evidence. Leader had, in his Honour’s view, been “deceived” into making the representation “by the failure of the principal to disclose the true state of affairs to it”.

I agree with the Chief Justice’s analysis of the evidence on this issue and agree that the appeal should be allowed for the reasons his Honour gives. However, in my view, Leader’s state of mind as to its principal’s intentions (or as to anything else for that matter) was not relevant in the circumstances of this case.

Both at trial and on appeal the issue as to Leader’s state of mind became enmeshed with the consequences said to flow from the representation being one as to a “future matter”. In my respectful opinion, the issues need to be considered separately. (i) In what way was the representation (being one as to a “future matter”) misleading and deceptive? (ii) Was Leader’s state of mind relevant?

Representations involving the Future
There has been for some time a divergence of views as to the applicability of s 52 to such representations .

The first view is that conduct can only be misleading and deceptive if it involves a false representation as to the existence or non-existence of some fact at the time the representation is made. This proposition has usually been stated in terms of the mental state of the representor. Thus it is said that a promise is only misleading or deceptive if it falsely represents that the representor has a present intention to perform the promise in the future, and a prediction is only misleading and deceptive if the representor does not presently hold an opinion that the predicted event will occur. Expressed in this way, this view has given rise to a corollary: representations involving the future can only be misleading and deceptive if they involve a statement as to the representor's state of mind.

The earliest authority in support of the first view is the decision of Franki J in Thompson v Master Touch TV Services Pty Ltd (No.2) (1977) 15 ALR 487. His Honour relied on R v Sunair Holidays Limited [1973] 1 WLR at 1109 and British Airways Board v Taylor [1976] 1 WLR 13, decisions under the United Kingdom Trade Descriptions Act 1968. In the former case McKenna J said of the offence created by the United Kingdom Act:

“... the offence is not the breaking of a promise or the failure to make a prediction come true. It is the making of a false statement of an existing fact, somebody's present state of mind or present intention.”

Franki J was concerned with a prosecution concerning a prediction as to the profitability of a business. His Honour held (15 ALR at 495)

“that it was necessary for the informant to prove that the defendant did not believe that the forecast or prediction would be satisfied or was recklessly indifferent concerning the forecast or prediction.”

A similar approach was adopted by Fitzgerald J in Stack v Coast Securities No. 9 Pty Ltd (1983) 5 TPR 130 at 134 and Lockhart J in Bill Acceptance Corporation v GWA Limited (1983) 78 FLR 171 at 176-178.

In Global Sporstman Pty Ltd v Mirror Newspaper Pty Ltd (1984) 2 FCR 82 at 88 the Full Court of this Court said:

“If a corporation is alleged to have contravened s.52(1) by making a statement of past or present fact, the corporation's state of mind is immaterial unless the statement involved the state of the corporation's mind. Whether or not s.52(1) is contravened does not depend upon the corporation's intention or its belief concerning the accuracy of such statement, but upon whether the statement in fact contains or conveys a meaning which is false; that is to say whether the statement contains or conveys a misrepresentation. Most commonly, such a statement will contain or convey a false meaning if what is stated concerning the past or present fact is not accurate; but a statement which is literally true may contain or convey a meaning which is false.

Many statements, for example, promises, predictions and opinions, do involve the state of mind of the maker of the statement at the time when the statement is made. Precisely the same principles control the operation of s.52(1) with respect to the making of such statements. A statement which involves the state of mind of the maker ordinarily conveys the meaning (expressly or by implication) that the maker of the statement had a particular state of mind when the statement was made and, commonly at least, that there was basis for that state of mind. If the meaning contained in or conveyed by the statement is false in that or in any other respect, the making of the statement will have contravened s.52(1) of the Act. Compare Lyons v. Kern Konstructions (Townsville) Pty Ltd (1983) 47 ALR. 114.

The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor's intention lacked any, or any adequate, foundation. Similarly, that a prediction proved inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate, foundation.”

The case before the Court in Global Sportsman did not concern any representation as to future matters. The applicants complained of publication in "The Australian" newspaper of an article, editorial and cartoon which were said to impute disloyalty by the second applicant to the Australian Test cricket team and its captain. The issue, which came to the Full Court by way of a special case, was whether the publication of statements of opinion in news stories in a newspaper could constitute misleading and deceptive conduct within the meaning of s 52. The statements of opinion in question were matters of past or present fact. The case is therefore not binding authority for any general proposition that liability under s 52 only applies to representations as to future matters where statements as to the representor's present intention or belief are involved.

More recently, in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 at 240, a case under the Fair Trading Act 1985 (Vic), Ormiston J was not prepared to accept that a case of misleading and deceptive conduct could be made out merely by showing promise and breach.

A second view is that expounded in "The Law of Contract" by D W Greig and J L R Davis (1987) at 811-815 and summarised at 815 where the learned authors say:

“If the respondent makes a contractual promise, the applicant may reasonably believe that it will be performed; when the promise is not performed, the applicant's belief is found to be erroneous and it may fairly be said that the respondent's original promise, together with his subsequent repudiation thereof, is conduct which has led the applicant into error.”

See also the learned authors' fifth cumulative supplement (1993) at 198-199. In Wright v TNT Management Pty Ltd (1989) 15 NSWLR 679 at 690, McHugh JA reached a similar conclusion, although with reasoning which relied essentially on s 51A. His Honour said:

“At common law a representation outside a contract would only give rise to legal consequences if it was in respect of an existing or past fact; a contractual promise as to the future did have legal consequences. But for the purposes of Pt V, s 51A must be taken to have abolished the distinction between a promise and a representation with respect to a future event. A promise to do something in the future is to be regarded as a representation that it will be performed. It will be deemed misleading, therefore, unless the corporation proves that it had reasonable grounds for making the promise.”

A third view is to be found in the judgment of Lee J when a member of the Full Court in Wright v Wheeler Grace & Pierucci Pty Ltd (1989) ATPR 40-940 at 50,251. His Honour said:

“A positive unqualified prediction by a corporation may be misleading conduct in trade or commerce if relevant circumstances show the need for some qualification to be attached to that statement or the possibility of its non-fulfilment to be disclosed as a requirement of fair trading. The fact that the corporation believed or had reasonable grounds for belief that the prediction would be fulfilled, would not answer the question as to whether the conduct was misleading or deceptive conduct in trade or commerce. The misleading or deceptive conduct may be found in the failure to qualify the statement or disclose the risk of non-fulfilment and the event of non-fulfilment of a prediction or promise may be evidence that raises an inference that such a risk of non-performance existed or that qualification of the positive statement, prediction or promise was required. Each case will depend upon its own circumstances, but the assessment of misleading or deceptive conduct is an objective test not dependent upon the proof of an intent to mislead or deceive on the part of the corporation (see Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191) and restriction of the application of s 52 in respect of promissory or predictive statements by a corporation to conduct of the corporation which involves a lack of belief on the part of the corporation or absence of grounds upon which the corporation performs such a belief would be inconsistent with the thrust of the section.”

This statement is consistent with the first view (Thompson, Stack, Bill Acceptance and Global Sporstman) and contrary to the second view (Greig and Davis and Wright) in that it looks for conduct that is misleading or deceptive in some way at the time the conduct is engaged in - albeit in a way that can only be revealed by reference to subsequent circumstances. However it differs from the first view in declining to make the representor's state of mind an essential element.

I respectfully agree with Lee J's statement of the law, which is consistent with two basic principles that have emerged in the jurisprudence of s 52: first, it is the objective nature of the alleged contravener's conduct that is ultimately determinative of liability and not his or her state of mind; secondly, the words of the statute are to be given their natural meaning and not moulded to fit the pre-existing common law. It might also be noted that this view does not depend on s 51A. It would be equally applicable to the Act in the form it took before s 51A was introduced. That this should be so is consistent with s 51A being an evidentiary rather than substantive provision: Cummings v Lewis (1993) 41 FCR 559 at 567.

Lee J's statement is particularly apposite to the application of s 52 to the present case. Leader's statement as to the use which the appellants' unit might be put was quite unqualified. It gave no hint that in truth there was at best a hopeful expectation. Still worse, Leader must be credited with knowledge of Mr Ryman’s letter of 7 July 1993 which amounts to an acceptance that most of the units, including unit 23, could not be used for residential purposes.

Leader’s State of Mind
But in any event, Leader's belief as to the intention of its principal Hilda was irrelevant. The evidence does not suggest that anything was said at the time of the representation about the intention of Leader, Hilda or anybody else. The appellants were simply told that if they bought the unit it could be lawfully used, amongst other things, for living in themselves or for private rental. Leader did not say anything as to what had transpired in the owner's camp in connection with obtaining the necessary approvals. Rather it presented to the appellants an unqualified assertion as to the lawful use to which the unit could be put. Coming from an estate agent, a professional who might reasonably be seen as having expertise as to the planning restrictions applicable to the property it was engaged to sell, the representation was not something merely passed on by Leader for what it was worth: Yorke v Lucas (1985) 158 CLR 661 at 666, John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Limited (1993) ATPR 41-249 at 41,359.

I should add that after the hearing of the appeal written submissions were invited from the parties on this issue and on the further question whether it is properly open to this Court to dispose of the appeal on this basis. (The passages from the Leader argument quoted below comes from such submissions.) Having read counsel’s submissions, I am satisfied that this Court can so act. The Wheeler Grace point was advanced by the appellants both at trial and on appeal, although it is perhaps fair to say that the point was rather overshadowed by what in my respectful view was the irrelevant issue of Leader’s belief as to Hilda’s intention. The appellants are not to blame for this.

Counsel for Leader argued that cl 18(1) of the contract stipulated that the carrying out of the refurbishment and renovation was

“... subject to the Seller’s obtaining all necessary approvals under the Planning Acts ..”

Further it was said that the risk of failing to obtain all necessary approvals which would permit the unit to be used in accordance with the statement made in the brochure was

“obvious to the whole world, including the appellants, because they must be taken to have understood that there was always a possibility that the appropriate and necessary approvals would not be obtained. That much is revealed by the contract itself.”

The Leader argument however runs counter to what is now a substantial body of authority in this Court which holds that exclusionary and disclaimer clauses cannot override the statutory prohibition against misleading and deceptive conduct or prevent the grant of appropriate statutory relief where loss or damage is, as a matter of fact, caused by contravention of the statute: see the review by Burchett J in Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 at 556-558.

Section 53A(1)(b)
But in any case the appellants in my view had made out a case under s 53A(1)(b), subject only to resolution of the issue of falsity. That section was inserted in the Act in 1977 consequent upon the recommendations of the Swanson Committee. It preceded s 51A, which did not appear in the Act until 1986, although at the same time (1986) s 53A was amended by replacing "statement" with "representation".

Section 53A is concerned with the sale or grant of interests in land. Almost invariably, such transactions involve a sequential process with negotiations and representations followed by contract, which in turn is followed by settlement and conveyance of title. The purchaser's only concern is with what he or she obtains on settlement. Very commonly some attribute of the land important to the purchaser is not in existence at the stage of negotiation or contract but is provided at settlement, for example the discharge of a mortgage so as to give an unencumbered title to the purchaser. Thus it is of the essence of s 53A that it is concerned with representations (the provision explicitly refers to representations rather than conduct) concerning something which often will only be shown to be true or false in the light of future circumstances. In the words of Mr J D Heydon QC in "Trade Practices Law" at 6175, referring to representations as to use in s 53A(1)(b):

“This part of s 53A(1)(b) is drafted in terms of promise or prediction, not in terms simply of present statements.”

Therefore the test is simply whether the representation was false or misleading as to the use to which the land could be lawfully put at the time of settlement. No question of the representor's intention or belief at the time of making the representation arises. As mentioned, s 51A is only evidentiary: Cummings v Lewis (1993) 41 FCR 559 at 567. It does not have the effect, in a claim under s 53A(1)(b) relating to use, that if the corporation does have reasonable grounds there is no contravention; note particularly s 51A(3).

In the present case the representation complained of concerned a matter fundamental to any real estate purchase, viz the use to which the property can lawfully be put. Moreover the intended use in the present case was as a home for the appellants themselves. It would be surprising if s 53A did not provide a remedy where such a representation is shown to be misleading and deceptive.

The appeal should be allowed and the matter should be remitted to the trial judge for further hearing on the issue as to whether the use represented was one to which the unit could be lawfully put at settlement, and any other outstanding issues.

The respondents should pay the appellants' costs of the appeal. The appellants' costs of the trial and any further hearing should be reserved for the trial judge.

I certify that this and the preceding fourteen (14) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey

Associate:

Dated: 25 February 1998

Counsel for the Applicant: R Garrett QC and W Arthur

Solicitor for the Applicant: Bernard Collaery & Associates

Counsel for the Second, Third, and Sixth Respondents: JV Nicholas

Solicitor for the Second, Third and Sixth Respondents: Abbott Tout Harper & Blain

Counsel for the Fourth and Fifth Respondents S Blake

Solicitor for the Fourth and Fifth Respondents
Clayton Utz

Date of Hearing: 15 April 1997

Date of Judgment: 25 February 1998

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY

ACT G74 of 1996

BETWEEN:

BRUCE WILLIAM BOWLER AND JANELLE JOY BOWLER
APPELLANTS

AND:

HILDA PTY LIMITED
FIRST RESPONDENT

LEADER REAL ESTATE PTY LTD
SECOND RESPONDENT

LEADER HOLDINGS PTY LTD
THIRD RESPONDENT

JOHN FREDERICK MCDONALD
FOURTH RESPONDENT

JENNIFER MCDONALD
FIFTH RESPONDENT

DEREK WHITCOMBE
SIXTH RESPONDENT

REGENCY APARTMENTS PTY LIMITED
SEVENTH RESPONDENT

JUDGES:

BLACK CJ, HEEREY J AND COOPER J

DATE:

25 FEBRUARY 1998

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

COOPER J
Introduction
The appellants, Mr and Mrs Bowler, executed a written agreement for sale of a unit lease from the first respondent on 24 August 1993 (“the agreement for sale”). The unit in respect of which the lease was to issue was to be produced out of a redevelopment of the Regency Motor Inn at Griffith, an inner Canberra suburb. The unit to be purchased was the proposed Unit 23. On 22 March 1994 the sale of Unit 23 on Units Plan No 1000 registered under the Real Property (Units Titles) Act 1970 (ACT) (“the Units Titles Act”) was completed and the appellants became the registered proprietors of the land contained in Certificate of Title volume 1368 folio 33.

On 20 February 1995 the appellants filed an application and statement of claim as a representative party under Part IVA of the Federal Court of Australia Act 1976 (Cth). The other twenty-eight parties are purchasers of units in the redevelopment from the first respondent. On 21 March 1995 the appellants filed an amended application and amended statement of claim. The proceedings were against the first respondent as vendor of the units, against the second and/or third respondents as marketing agent of the first respondent, against the fourth and fifth respondents as directors of the first respondent, against the sixth respondent as director of the second and third respondents and against the seventh respondent as lessee of the units in question from the original purchasers. The appellants alleged contravention of the Trade Practices Act 1974 (Cth) (“the Act”) which they contended entitled them to the relief claimed in the amended application.

After a trial of the appellants’ case the trial judge (Finn J) ordered :-

“1.Pursuant to section 33N(1) of the Federal Court of Australia Act 1976 the proceeding not continue as a representative proceeding under Part IVA of the Act.

2.Proceeding No ACT G13 of 1995 brought by Bruce William Bowler and Janelle Joy Bowler solely in their own right be dismissed.

3.Bruce William Bowler and Janelle Joy Bowler pay the costs of the respondents of and incidental to the proceeding.”

On 10 December 1996 the appellants filed a notice of appeal against the whole of the judgment seeking that the matter be remitted for determination in accordance with law and seeking an order for the costs of the appeal.

The grounds relied on in the notice of appeal were :-

“The learned judge erred in law in holding that an agent, who with authority of his principal disseminates a statement as to a future matter on behalf of the principal, in circumstances where the principal does not have the means or intention to bring about the future matter, will not be guilty of engaging in misleading and deceptive conduct in contravention of Part V of the Trade Practices Act 1974 (‘the Act’), if the agent believes reasonably that the principal would take the steps within its power to bring about the represented matter.”
“The learned judge erred in law in not holding that an agent who within the scope of his authority disseminates a statement as to a future matter on behalf of his principal, which if disseminated by the principal would constitute engaging in misleading and deceptive conduct in contravention of the Act, thereby contravenes the Act, and in further not holding that the principal also thereby contravenes the Act.”

“In any event the learned judge ought to have found, on the documents of the Leader companies comprised within exhibit 31, that the Leader companies knew or were sufficiently on notice that Hilda did not intend or was not able to bring about the represented lease purpose variation in respect of the units in Block B and C, such that the Leader companies did not hold, or could not reasonably hold, the view that Hilda intended or was able to bring about the represented lease purpose variation in respect of those units.”

On the hearing of the appeal, the appellants sought leave to amend the notice of appeal to add an additional ground of appeal in the following terms :-

“The learned judge further erred in not finding and holding that the first, second and third Respondents had contravened s 53A(1)(b) of the Act in that the second and third Respondents, as agents for the first Respondent had in connexion with the sale or grant, or the possible sale or grant of an interest in land, and in connexion with the promotion of the sale or grant of an interest in land (namely the leasehold estates in respect of Block B and Block C which were for sale) made a false or misleading representation concerning the use of which those units were capable of being put or might lawfully be put (namely as permanent residences), and ought to have so found and held.”

The application for an amendment was opposed. The appellants also sought leave to proceed against the first respondent, it having been placed in liquidation during the course of the proceedings. The grant of that leave was not opposed by the liquidator.

The issues on trial
Before addressing the arguments on the appeal and the new ground of appeal which the appellants sought to argue, it is necessary to identify the issues litigated at trial.

The pleader of the amended statement of claim adopted the pleading style of alleging that the second and/or third respondents made “the Primary Representations” pleaded in paragraph 5 of the amended statement of claim. The Primary Representation relevant to this appeal is that contained in paragraph 5(b), namely :-

“each unit could be lived in by the purchaser, rented out privately, or rented as serviced apartments [sic] and were [sic] therefore an attractive re-sale proposition.”

It was then pleaded that the Primary Representations were constituted by or inferred from one or more representations which were called “the Secondary Representations” (paragraph 6 of the amended statement of claim). The relevant Secondary Representation for the purpose of the appeal is that pleaded in paragraph 6(j), namely :-

“That each Unit may be lived in, rented out privately, or rented to the management company which will sublet them [sic] as serviced apartments [sic].”

It was alleged in paragraph 7 of the amended statement of claim that in making the Primary and Secondary Representations the second and/or third respondents engaged in conduct that was :-

(a)misleading or deceptive contrary to s 52 of the Act;
(b)false or misleading contrary to s 53(g) of the Act;
(c)false or misleading contrary to s 53A(1)(b) of the Act.

Paragraphs 8, 9, 10, 11, 12 and 13 pleaded specifically in respect of each Primary or Secondary Representation, the making of which constituted the impugned conduct, the section of the Act contravened and the reason for the contravention. The only allegation relevant to the appeal is that pleaded as Primary Representation (b), which is that contained in paragraph 5(b). There is no allegation that the Secondary Representation pleaded in paragraph 6(j) contravened any section of the Act.

By paragraph 11 of the amended statement of claim it was alleged that :-

“Primary Representation (b) was contrary to sections 52 and 53A(1)(b) of the Act because the Units cannot lawfully be lived in or rented out privately but can only be used as serviced apartments.”

By paragraph 14 of the amended statement of claim it was alleged that in reliance upon the Primary Representations the group members, being persons who had purchased a unit in the development from the first respondent, borrowed money to purchase a unit, entered into an agreement to purchase a unit and a sublease agreement with the seventh respondent. As to the appellants, it was alleged in paragraph 18 that the second and/or third respondents by its, or their, agent, Neil Singh, made the Primary Representations set out in paragraph 5 and the Secondary Representations specified, including that contained in paragraph 6(j). It was further alleged in paragraph 20 that, in reliance upon the Primary Representations, the appellants, on 24 August 1993, entered into the agreement for sale of unit 23, borrowed $110,000 for that purpose, completed the purchase on 22 March 1994 and sublet the unit to the seventh respondent.

The loss or damage alleged to have been suffered in consequence of the appellants relying on the Primary Representations was pleaded in paragraph 21 and included, in (b) thereof :-

“The applicants are not lawfully able to live in Unit 23 or to rent it out, and its value to them and its re-sale value are thereby reduced.”

The case against Mr and Mrs McDonald, the fourth and fifth respondents, was that they were “involved in the contraventions of the Act referred to in paragraph 7” of the amended statement of claim. That is, they were involved in the contraventions alleged against the second and/or third respondents. The basis of their involvement was alleged to have been that they were directors of the first respondent and involved in its day to day management, were aware the representations were made and condoned them. It was further alleged that the fourth and fifth respondents knew that the representations, to the extent that they were concerned with future matters or expressed an opinion, were not based on reasonable grounds, to the extent that they expressed an intention, that intention was not held, and that the representations were otherwise false. Such involvement, it was alleged, thereby aided, abetted, counselled or procured the contraventions and caused the fourth and fifth respondents to be directly or indirectly knowingly concerned in the contraventions (paragraph 15). It is important to recall that the contravention alleged was that of the second and/or third respondents, not the first respondent, and the state of knowledge pleaded was that of the fourth and fifth respondents, not that of the second and/or third respondents.

The case against the sixth respondent was that he was a director of the second and/or third respondents and had control of the day to day management of those respondents. The involvement alleged against the sixth respondent was pleaded in identical terms to that pleaded against the fourth and fifth respondents with the like consequence (see also paragraph 15).

It is important to the resolution of the appeal that the following observations be made :-

(a)there was no allegation of conduct on the part of the first respondent which constituted a contravention of the Act;
(b)the only allegations pleaded in the amended statement of claim directly touching the first respondent were :-
(i)it was a trading corporation (paragraph 1);
(ii)it was the owner and developer of the Regency Units for sale to the public (paragraph 2);
(iii)it engaged the second and/or third respondents as its agent for the purpose of promoting the sale of the Regency Units to the public (paragraph 3);
(iv)pursuant to the engagement the second and/or third respondents promoted the sale of the units (paragraph 4);

(c)there was no pleading that the first respondent was vicariously liable for the conduct of the second and/or third respondents or that by virtue of the conduct of the second and/or third respondents, the first respondent had itself committed a contravention of the Act;
(d)although in paragraph 7 of the amended statement of claim it was alleged that both the making of the Primary Representations and the Secondary Representations constituted conduct in contravention of the Act, the only conduct pleaded as relied upon by the appellants and as causative of their loss was the making of the Primary Representations;
(e)the making of the Secondary Representation pleaded in paragraph 6(j) was not specifically alleged in paragraphs 8, 9, 10, 11, 12 or 13 of the amended statement of claim to be a contravention of any section of the Act;
(f)the only representation which is presently relevant is that contained in paragraph 5(b) of the amended statement of claim. That representation contained two elements, namely :-
(i)each unit could be lived in by the purchaser, rented out privately, or rented as a serviced apartment; and
(ii)was therefore an attractive re-sale proposition;

(g)the conduct complained of, being the making of the representation in (f) above, was contrary to s 52 and s 53A(1)(b) of the Act because it was alleged that unit 23 cannot lawfully be lived in or rented out privately (paragraphs 11 and 19) and it was the absence of these features which diminished the value of the unit and thereby caused loss to the appellants (paragraph 21(b)).

The second, third and sixth respondents, by their amended defence, admitted that the second respondent prepared a brochure entitled “Regency Apartments” and made “certain representations on behalf of Hilda [the first respondent] in connection with whether the serviced apartments may be lived in, rented out privately or rented to a management company which would sublet them as serviced apartments but deny any such representations were false and misleading” (paragraph 6 of the amended defence). Additionally, they pleaded that, insofar as the Primary Representation pleaded in paragraph 5(b) was a representation with respect to a future matter, if any of them made the representation, they had reasonable grounds for making it (paragraph 7 of the amended defence). The reasonable grounds particularised were that the representation was made upon the express instructions and authority of the first respondent and was made after the terms of the brochure entitled “Regency Apartments” had been approved by the solicitors for the first respondent.

The trial was conducted on these pleadings. No oral evidence was called by the respondents.

It is unclear from the learned trial judge’s reasons as to the point in time at which the appellants made clear that their claim against the first respondent was solely based on s 84(2) of the Act, so that it was alleged against the first respondent that the conduct of the second and/or third respondents was deemed to be conduct of the first respondent. Nevertheless, the trial was conducted on that basis and there was no separate conduct alleged against the first respondent which was said to be in contravention of the Act. Thus, it was only where the pleaded conduct of the second and/or third respondents constituted conduct in contravention of the Act that the first respondent could be held liable. Similarly, the case against the fourth, fifth and sixth respondents was based on s 75B of the Act and therefore, no liability could attach to the fourth, fifth and sixth respondents absent a finding that the second and/or third respondents had contravened the Act.

It is also apparent from the trial judge’s reasons that advertisements appearing in the Canberra Times newspaper between 26 March 1993 and 21 August 1993, and admitted over objection as Exhibits 2, 3 and 7, were not pleaded or relied upon by the appellants as conduct in contravention of the Act. The trial was conducted on that basis.

The grounds of appeal
On the appeal, the appellants submitted that the trial judge had found that the representation as to the future use of the unit, made by the second and/or third respondents, was a representation that a particular state of affairs would exist in the future and that, when made, it was coupled with an implied representation as to the present belief that the first respondent would take the necessary steps within its power to bring about the represented state of affairs. It was then submitted that the trial judge held that the second and/or third respondents needed only to have reasonable grounds for making the representation in order for the conduct of the agents not to be misleading or deceptive, even if the principal had no intention of bringing about the represented state of affairs.

The appellants submitted that the approach taken by the trial judge was in error because :-

(a)from the standpoint of the consumer (Brown v The Jam Factory (1981) 35 ALR 79 at 86), the representation made was not one of an agent’s prediction of a principal’s intention but a statement by an agent of the principal’s actual intention;
(b)the statement of actual intention was made by the agent standing in the place of the principal;
(c)unless the agent makes clear that the agent is simply passing on the statement for what it is worth without endorsement, to make the statement may constitute misleading or deceptive conduct on the part of the agent (Yorke v Lucas (1985) 158 CLR 661 at 666);
(d)the second and/or third respondents had lent their credibility to the first respondent’s undertaking so as to invite reliance;
(e)there was no reason to treat statements of intention, opinion, or prediction when made by an agent on behalf of a principal any differently to statements of fact made by an agent on behalf of a principal (Wheeler Grace & Pierucci Pty Ltd v Wright (1989) ATPR 40-940 at 50,251).

This ground as formulated and argued does not concern itself with the belief, opinion or prediction of the agent. The only relevant intention, so the argument goes, is that of the principal. The misleading or deceptive conduct is the making of the statement as the principal’s statement of present intention. If, for whatever reason, it would be misleading or deceptive for the principal to make the statement, then the agent could be in no better position than the principal unless the agent disavowed any belief in or endorsement of the statement. These submissions misstate or misunderstand what the trial judge found.

The trial judge, in his reasons, stated that, although it would, in a case such as the present, be open to hold that an implied representation had been made by the agent that it reasonably held a present belief or opinion that the principal would take the steps within its power necessary to bring about the represented state of affairs, no such representation had been pleaded against the second and/or third respondents. Consequently, there was no issue at the trial as to whether such a representation had been made and, if it had, whether it was misleading and deceptive because it was a belief or opinion not in fact held or not reasonably held. At trial the appellants did not seek at any time to make out a case that the second and/or third respondents represented that they, or either of them, held a particular view of their principal’s intention. As a result, the trial judge did not go on to deal with such a case as if it had been pleaded and made out. Rather, his Honour returned to the representation actually alleged against the second and/or third respondents and defined the issues thus :-

“... As I earlier noted, the unit use representation itself must be taken as relating to a future matter - notwithstanding that, as formulated, it seemingly refers to a present state of affairs: cf para 11 of the Amended Statement of Claim with paras 8, 12 and 13. In either case (ie opinion or future matter) one necessarily is concerned in circumstances such as these with the grounds of, or basis for, the opinion or representation.
If then, the matter is looked at simply from the standpoint of the Leader companies, one is confronted with a quite separate question from that which would have been raised were the unit use representation made by Hilda directly. That question is whether the Leader companies had reasonable grounds for making the unit use representation they did: see Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1988) 78 ALR 193 at 242.
I should add that, despite the difficulties they had with the pleadings, the respondents seem to have accepted that this issue did arise in relation to the unit use representations.”

It was not part of the case pleaded against the second and/or third respondents that they made a statement of the actual intention of the first respondent at the time the second and/or third respondents are alleged to have made Primary Representation (b). Nor has it been articulated as to what the actual intention was represented as and why, if made by the first respondent, it would be misleading or deceptive. In this respect it is important to draw a clear distinction between a statement of the principal’s intention on 22 July 1993 and the representation as to user pleaded in paragraph 5(b) of the amended statement of claim.

Whether or not the appellants’ submission of principle is correct, the present case was not one concerning statements of intention and the application of any such principle does not arise.

For completeness it should be said that the formulation of the first ground of the notice of appeal assumes that it was part of the case pleaded against the respondents that the first respondent did not have the means or intention to bring about the future matter, namely the permitted use at the time for completion of the sales of units. No such case was pleaded. Nor did the trial judge make any such finding. In fact, his Honour declined to make such a finding.

It was further submitted by the appellants that, irrespective of the state of the second and/or third respondents’ knowledge, it was misleading or deceptive to make the pleaded Primary Representation (b) as to the future use of the units upon completion because there was no basis in objective fact for making such an unqualified representation. It was submitted that there was no objective basis in fact on 22 July 1993 because :-

(a)the Department of the Environment and Land Planning of the Australian Capital Territory (“the Department”) had told the first respondent and the first respondent had agreed that the area of unit 23 was such that it failed to meet the criteria for residential (as opposed to transient) accommodation;
(b)irrespective of the belief or intention of the first respondent, without the approval of the Department, the representation as to user would not be made good and the Department would not grant the relevant approval; and
(c)the first respondent had acknowledged and acquiesced in the Department’s position.

A case of misleading or deceptive conduct based on the need to qualify the representation as to user has not previously been pleaded or alleged against the respondents. Nor has it previously been alleged that it was the fact of making the statement without qualification which rendered the making of the statement misleading or deceptive conduct. Should such a case be permitted to be advanced on appeal?

The relevant principles to be applied in determining whether or not an appellant will be permitted to depart from the case pleaded at trial are contained in the decisions of the High Court in Banque Commerciale SA (In liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 284, 286 - 287 and Water Board v Moustakas (1988) 62 ALJR 209 at 211 - 212. They are set out and discussed in Cummings v Lewis (1993) 41 FCR 559 at 577 - 578.

Applying those principles to the instant case, the case now articulated by the appellants is not one which is or was apparent from a fair reading of the pleadings. Therefore, it does not meet the requirement of procedural fairness that the respondents know from the pleadings the case made against them, have the opportunity to meet that case and have the issues arising in that case defined for decision.

The case pleaded against the second and/or third respondents was that to make the Primary Representation in paragraph 5(b) of the amended statement of claim was misleading or deceptive because upon the issue of the title to unit 23 under the Unit Plan the land and improvements comprising the unit could not lawfully be used by the appellants for their own use or be let by them as a residential unit. No specific circumstances were pleaded by the appellants whereby it was asserted that to make the representation was misleading or deceptive conduct in contravention of s 52 of the Act. Contrary to the submission of counsel for the appellants on the appeal, paragraph 9 of the amended statement of claim does not raise a general allegation that the opinion expressed in the user representation was not held by the second and/or third respondents or that no reasonable grounds existed on which to base the opinion. Paragraph 9, in terms, relates to other specific representations alleged against the second and/or third respondents but does not relate to the Primary Representation pleaded in paragraph 5(b), nor to the Secondary Representation pleaded in paragraph 6(j).

In the absence of any specific case pleaded by the appellants, the plea of a representation with respect to a future matter, in this case that the unit upon its creation would have a particular lawful use, entitled the appellants to rely upon s 51A of the Act to prove up the allegations pleaded in paragraphs 7 and 11 of the amended statement of claim that the making of the representation was misleading or deceptive conduct in contravention of s 52 of the Act. Section 51A is a deeming provision designed to facilitate proof that the conduct pleaded had the requisite character of misleading conduct. Section 51A is an evidentiary deeming provision which reverses the onus of proof. It is not a substantive defence (Lake Koala Pty Ltd v Walker [1991] 2 Qd R 49 at 58). In my opinion, the provisional view expressed by the Full Court in Cummings v Lewis at 567 - 568 to this effect ought to be affirmed.

The consequence of a representor making out the requirements of reasonable grounds is to deny the benefit of the deeming provision. Section 51A(1) and s 51A(2) do not operate to prevent an applicant for relief seeking to prove up conduct in contravention of s 52 of the Act. However, if an applicant is not intending to rely solely on the operation of s 51A to prove up its case, then the positive case to be advanced must be specifically pleaded in order that the respondent knows the case which the applicant will seek to make out on trial.

Once the fact of the representation as to a future matter had been made out by the appellants, s 51A(2) placed the onus of proof to establish reasonable grounds, and to so displace the operation of the deeming provision, on the second and/or third respondents as the representors. The second, third and sixth respondents clearly understood this to be the position, as paragraph 7 of their amended defence demonstrates.

If the appellants failed in their reliance on s 51A of the Act it cannot now be said that the parties deliberately chose some different basis from the pleaded case as the basis for determination of the appellants’ claim. Nor can it be said that the respondents, if the case made in these submissions had been pleaded, would not have called any further evidence to answer it. This difficulty is highlighted by the fact that the objective circumstances relied upon by the appellants to negative reasonable grounds require findings of fact as to the knowledge, intention and state of mind of the first respondent on 22 July 1993 in its dealings with the Department. No findings were made by the trial judge in respect of these matters, which involve mixed questions of fact and law. In my opinion, this Court is not in a position to make those findings of fact on what is incomplete material.

The third ground raised in the notice of appeal repeats the appellant’s position at trial as to why the second and/or third respondents had no reasonable grounds for making the representation as to user.

The trial judge summarised the appellants’ position before him on this issue as follows :-

“The kernel of the applicants’ case was that there was no intention on the part of Hilda [the first respondent] that two of the three buildings housing the Regency Apartments were to be used for ‘residential apartments’ when the representation was made to the Bowlers in July 1993, their unit being in one of those two buildings. The applicants go on to submit that the Leader companies [the second and third respondents] were then cognisant of Hilda’s intention and hence were without reasonable grounds for making the representation.”

This argument was first put by the appellants in final submissions on the trial; it was not an issue raised and particularised on the pleadings.

The allegation contained in the submission to the trial judge was that the first respondent allowed a knowingly false representation to be made as to unit use and that the second and/or third respondents made such representation knowing that it was false and intending that it be relied upon. It was further submitted that the motive for such conduct was financial desperation on the part of the first respondent and the opportunity to earn a commission on sale on the part of the second and/or third respondents. If these allegations are not allegations of fraud because they do not allege any wilfully false representation as to a present fact, they are allegations of conduct akin to fraud. In the way in which the allegations were put by the appellants, and having regard to the motives attributed to the first, second and/or third respondents by the appellants in the making and allowing of the representations, the conduct alleged of the first, second and/or third respondents, if made out, could not be characterised as innocent misrepresentation. If such a case is to be advanced, it must be specifically pleaded. In Castlemaine Perkins Limited v Queen Street Hotels Pty Ltd [1968] Qd R 501, WB Campbell J said (at 511) :-

“If a party imputes fraud, negligence or misconduct to his opponent, the facts must be stated with special particularity. In Wootton v Sievier [1913] 3 KB 499 (CA), Kennedy LJ, delivering the judgment of the Court, said at p 503 - ‘In every case in which the defence raises an imputation of misconduct against him, a plaintiff ought to be enabled to go to trial with knowledge not merely of the general case he has to meet, but also of the acts which it is alleged that he has committed and upon which the defendant intends to rely as justifying the imputation.’”

That requirement applies, in my view, to allegations of misconduct under s 52 of the Act and in particular where it is sought to allege, as in the present case, conduct akin to fraud.

Having failed to plead such a case it is too late now to advance it on appeal.

Absent the findings of fact which the appellants now seek be made to deny to the second and/or third respondent a basis to contend that reasonable grounds existed for making the pleaded representation as to user, the appellants do not plead as a ground of appeal any other basis on which it was contended that the trial judge erred in finding that reasonable grounds existed. However, on the hearing of the appeal the appellants advanced an alternative argument that the two facsimiles sent by the second and/or third respondents did not support the inferences that the trial judge drew from them. Notwithstanding that the ground was not pleaded, I am of the view that there is no substance to the submission.

The trial judge dealt with the issue of reasonable grounds as follows :-

“The two facsimiles sent by the Leader companies carry a significant part of the burden of the Leader case. The context in which they were sent was of some real importance in my view. First, given the contractual obligation of Hilda to inform Leader Real Estate of ‘any changes to marketing details as to plans, government approvals ... etc’, Leader was reasonably entitled to expect communication from or on behalf of, Hilda if in fact the mid-May scheme change effected a radical limitation on the residential use of about two thirds of the units to be sold. I cannot discern in the evidence before me any matter or circumstance affecting the relationship of Hilda and the Leader companies that would qualify or nullify that entitlement.
Secondly, there was apparently regular facsimile communication between Mr Hughes and Hilda’s solicitors especially in the period immediately preceding the initial marketing of the serviced apartments: see Exhibit 31, A13, A16, A17, A18 tendered by the applicants.
Given these contextual matters, and given the known change to the redevelopment scheme that was being put into effect in late May and in which Hilda’s solicitors clearly had some involvement: see Exhibit 31, A16 and A18; it was not unreasonable in my view for the Leader companies to have proceeded on the assumption that the unit use representation was approved by the solicitors in the absence of any indication to the contrary. I am prepared to infer that they so acted. I conclude, then, that the Leader companies had reasonable grounds in the circumstances for the unit use representations they made. In saying this I necessarily reject the applicants’ submission in response that the Leader companies needed to prove receipt of, and reply to, the facsimile of 17 May. It is, in my view, inconsistent with the expectations the Leader companies could properly have, and the obligations Hilda owed, in the matter.”

It is reasonable to assume that the trial judge had in his mind, in drawing the inferences he drew, the principle stated by Dixon CJ in Holloway v McFeeters (1956) 94 CLR 470 at 477 to the effect that, where a fact is to be proved by inference from evidence, the only inference which may properly be drawn or made is “the most probable deduction from the established facts.”

The established facts to which the trial judge had recourse were :-

(a)The contractual obligation of the first respondent to keep the second and/or third respondents advised of material changes to the redevelopment proposal;
(b)That a change in the proposal which radically limited the residential use to which two-thirds of the units to be sold could be put was a change which would fall within the contractual obligation;
(c)There was nothing in the relationship between the first respondent and the second and/or third respondents which would make reliance by the second and/or third respondents on discharge of the obligation by the first respondent unreasonable;
(d)That with the change in marketing in May the second and/or third respondents sought approval from the solicitors acting for the first respondent in the carrying into effect of the redevelopment proposal;
(e)That the contractual obligation and the nature of the enquiry were such that anything incorrect in the proposed marketing material would have been identified by the solicitors and communicated to the second and/or third respondents.

The representation as to lawful use involved either a representation of law or one of mixed fact and law: Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41,043 at 51,589; Inn Leisure Industries Pty Ltd v D F McCloy Pty Ltd (1991) 28 FCR 151 at 166. It involved the determination of what legal restrictions, if any, were imposed on the use of the subject land or conversely, what uses were by law permitted on the land. Although real estate agents may be better informed than other members of the public as to land use and concepts of town planning, it cannot be unreasonable for a person to seek legal advice as to the accuracy of a representation from a competent lawyer conversant with the particular proposal to redevelop the complex as a mixture of residential apartments and serviced apartments. The decision in Lake Koala Pty Ltd v Walker [1991] 2 Qd R 49 at 54 is an example of recourse to expert advice being a circumstance which makes a representation in accordance with such advice one made on reasonable grounds for the purposes of s 51A of the Act. Ultimately, it is a question of fact in each case whether reasonable grounds for making a representation as to a future event have been made out.

Absent a finding that the second and/or third respondents had knowledge of the circumstances which the appellants wished to argue made the making of representation unreasonable, I do not consider that the trial judge erred in drawing the inference which he drew from the established facts as he found them.

For the above reasons I would dismiss the first, second and third grounds of appeal.

Application to amend notice of appeal to add a ground
The ground sought to be added by amendment raises an alleged contravention of s 53A of the Act. That section, so far as is relevant, provides :-

“53A (1) A corporation shall not, in trade or commerce, in connexion with the sale or grant, or the possible sale or grant, of an interest in land or in connexion with the promotion by any means of the sale or grant of an interest in land -
...
(b)make a false or misleading representation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land; or

...
(2A) Nothing in this section shall be taken as implying that other provisions of this Division do not apply in relation to the supply or acquisition, or the possible supply or acquisition, of interests in land.
(3) In this section, ‘interest’, in relation to land, means -
(a)a legal or equitable estate or interest in the land;
(b)a right of occupancy of the land, or of a building or part of a building erected on the land, arising by virtue of the holding of shares, or by virtue of a contract to purchase shares, in an incorporated company that owns the land or building; or
(c)a right, power or privilege over, or in connexion with, the land.”

To establish a contravention of this section the appellants must establish :-

(a)that in connection with the sale ... or possible sale ... of an interest in land ...;
(b)the second and/or third respondents made the representation pleaded in paragraph 5(b) of the amended statement of claim;
(c)that the pleaded representation was concerning the use to which the land referred to in (a) above may lawfully be put; and
(d)that the pleaded representation was false or misleading.

In opposing leave to amend, the respondents submitted amongst other things that s 53A(1) only operates in respect of land which exists in specie at the time of the impugned representation and does not operate in respect of land which is to be created at some future time. Further, they submitted that the section only deals with the present use of land and not future use.

As the trial judge found, the representation made by Mr Singh, as servant of the second and/or third respondents, was made on 22 July 1993. At that stage there were not in existence at the Griffith location any strata title units of the type provided for under the Units Titles Act; there was a proposal to redevelop existing land and buildings and to subdivide in strata the completed development. When completed, the redevelopment would yield units being land having individual certificates of title registered under the Real Property Act 1925 (ACT) (“the Real Property Act”), originally in the name of the first respondent and thereafter in the name of the registered proprietor from time to time.

The agreement for sale makes clear that the sale is conditional upon the registration of the unit lease the subject of the agreement under the Real Property Act (clauses 3 and 5). The first respondent, under the agreement for sale, agreed to sell the unit lease (as defined by the agreement) to the appellants on the terms and conditions contained in the agreement for sale. The “unit lease” is defined in the agreement for sale as “the lease described in Item 4 of the Reference Schedule”. The term “unit” is defined as :-

“The unit to be completed as part of the renovated and refurbished Motel Building being the unit specified in Item 3 of the Reference Schedule and includes, where a unit subsidiary is appurtenant to the unit, both the unit and the unit subsidiary.”

Item 3 of the Reference Schedule provides :-

“Item 3Unit: Unit No 23 as shown on the Draft Plan together with a carparking space (as designated by the Seller) in the ground floor carparking area (also shown on the Draft Plan) as a unit subsidiary.”

Item 4 of the Reference Schedule provides :-

“Item 4Unit Lease: All the residue unexpired of a Lease to be registered in respect of the Unit.”

The subject matter of the agreement for sale was a future interest in land to be created upon registration of the unit lease under the Real Property Act.

The nature of a contract for the sale of a unit in a building to be constructed on existing land was considered by the High Court in Chan v Dainford Ltd (1985) 155 CLR 533. The question in that case was whether a contract, substantially the same as the contract in the present case, was an instalment contract as defined in s 71(2)(b) of the Property Law Act 1974 - 1978 (Qld). That Act defined an instalment contract as “an executory contract for the sale of land in terms of which the purchaser is bound to make a payment or payments (other than a deposit) without becoming entitled to receive a conveyance in exchange therefor.” The Court (Gibbs CJ, Mason, Wilson, Brennan and Dawson JJ) said (at 537 - 538) :-

“The respective contracts were not contracts for the sale of the spaces in which it was proposed to construct the respective home units; they were contracts for the sale of lots. Although the lots were not in existence when the contracts were made, they were to be in existence at the time stipulated for their sale. The primary meaning of sale is an exchange of property, the subject of the sale, for money. A sale occurs at the time when the title to the subject of the sale is conveyed or transferred. A ‘contract for the sale of land’ within the meaning of those words in the definition of ‘instalment contract’, is a contract pursuant to which a sale is to occur in the future - a contract whereby the purchaser will become ‘entitled to receive a conveyance’ of the land sold at a time subsequent to the making of the ‘payment or payments (other than a deposit)’ mentioned in the definition. A contract for the sale of land is an agreement to sell land, but it is not a sale. A stipulation that the time for conveyance be deferred until after a sum greater than a deposit has been paid is critical to the definition of ‘instalment contract’. The risk to which a purchaser is exposed by such a stipulation is the risk against which the substantive measures contained in Div 4 of the Property Law Act are intended to provide protection. The ‘land’, for the sale of which an instalment contract provides, is the ‘land’ to be conveyed by the conveyance mentioned in the definition. If a contract falls within the definition, it is unnecessary to inquire whether or not the purchaser acquired an equitable interest in land when he entered into the contract.
In the present cases, the lots for which separate certificates of title were to be issued constituted the ‘land’ which was to be the subject of each sale. The contracts made by the parties were, at the time when they were made, executory contracts for the sale of the respective lots to be completed after issue of the certificates of title. The sales for which the contracts provide were sales of the respective lots after registration of the building units plan - indeed, sales in which a ‘separate freehold title to the said unit is to be conveyed to the purchaser’. The contracts were ‘instalment contracts’ within the ordinary meaning of the terms used in the definition.”

A similar approach was taken by the Privy Council in Coast Securities No 9 Pty Ltd v Bondoukou Pty Ltd (1986) 61 ALJR 285 at 288.

In my view, the analysis of the nature and effect of the contract in Chan v Dainford is applicable to the agreement for sale in the present case. At the time the contract was made it was an executory contract for sale of the unit lease to be completed once the certificate of title issued after registration of the unit plan and the grant of the unit lease. Such a contract falls within the description of “sale ... or possible sale ... of an interest in land ...” in s 53A(1) of the Act. It follows that the relevant interest in land for present purposes is the interest in land constituted by the “residue unexpired of a lease to be registered in respect of [unit 23 as shown on the Draft Plan etc]”.

The Primary Representation (b) as to user was, on the trial judge’s findings, made by Mr Singh as servant or agent of the second and/or third respondents in connection with the sale or proposed sale of Unit 23.

There is nothing in the context of s 53A which would limit the representation as to lawful use to a present use. The section may operate sensibly in either situation and representations which are false or misleading as to future use of land have the same potential to cause loss or damage to consumers who rely upon them as do representations as to present use.

The prohibition contained in s 53A(1)(b) is upon the making of a false or misleading representation. At the latest, the representation is made when it is communicated to the representee. It is at that point in time that the falsity or the misleading nature of the representation must exist for the purposes of s 53A(1)(b).

The question of the falsity or misleading nature of a representation as to user has to be determined in the context in which the representation is made and by the application of some objective criteria. A statement as to the lawful user of land, being a question of law or of mixed fact and law requires that the question be answered by reference to the nature of the interest in the land, and the regime for land use applicable to the subject land.

In the Australian Capital Territory (“the ACT”), the predominant land tenure is leasehold. The system for the regulation of land use generally in the ACT is provided for by the Territory Plan established under the Interim Planning Act 1990 (ACT) and continued by the Land (Planning and Environment) Act 1991 (ACT) (“the Land Act”) and by the operation of the Land Act itself. Control of user in respect of a particular leasehold interest is achieved by the user clause in the actual leasehold grant from the Crown which, at all times relevant to this proceeding, was made under the Land Act. The user clause operates for so long as the lease remains on foot or until the clause is varied by the grantor. Additionally, in the case of strata development of leasehold land, the Units Titles Act has a relevant operation as to covenants as to user in respect of the unit lease which issues. The scheme of land use control in the ACT operates in respect of existing leasehold interests. A change in an existing use is achieved, if it is a permitted use under the Territory Plan, by a variation of the lease purpose clause of an existing lease or the issue of a new lease with the different use being specified in the lease purpose clause.

In the present case, the land in respect of which the representation was pleaded is the unit lease to issue upon registration of the Units Plan under the Units Titles Act. The lawful use to which that land could be put on its creation would be determined by the contents of a document to issue under the Units Titles Act, namely, the schedule of provisions, covenants and conditions subject to which leases of units are held, which document forms part of the registered Units Plan (Form 4, Units Titles Act). Upon registration of the Units Plan, the previous leasehold interest held by the first respondent under a lease granted under the Land Act would be, and was in fact, cancelled. It is not the lawful user under the ultimately cancelled lease with which the representation pleaded in paragraph 5(b) of the amended statement of claim or s 53A(1)(b) of the Act are concerned.

The parcel of land on which the proposed development was to occur, as Exhibit 15 shows, had a Land Use Policy under the Territory Plan of “Residential (including Medium Density Dwelling, Multiple Unit Dwelling and Aged Persons Accommodation); Community Facilities; Commercial Accommodation; National Association Offices and Office/ Professional Suites.” Therefore, it cannot be said that any strata titled multiple unit dwelling development for residential purposes was a prohibited user of the site.

The appellants, in paragraph 11 of their amended statement of claim, pleaded that Primary Representation (b) was contrary to s 53A(1)(b) because the units cannot lawfully be lived in or rented out privately but can only be used as serviced apartments. The criteria by which the falsity of the representation is sought to be established is by reference to clause 3(c) and (d) of the Form 4 of Units Plan No 1000 (sheet 16) which issued on 24 February 1994. Does the mere non-fulfilment on 24 February 1994 of the representation as to the lawful use of the land make that representation, when made on 22 July 1993, false or misleading? In my view it does not and there must be pleaded and proved some other material fact which makes the representation misleading when made.

The Primary Representation (b) is, when analysed and taken as a whole, nothing more than a prediction and/or a statement of opinion. It involves a prediction or statement of opinion as to the future use to which the unit could be put and the beneficial effect of that use on the attractiveness of the unit as a re-sale proposition.

The making of a prediction or the expression of an opinion, however erroneous, misrepresents nothing (Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 at 88; Tobacco Institute of Australia Limited v Australian Federation of Consumer OrganisationsInc (1992) 38 FCR 1 at 25, 36, 45 - 46).

For the making of a prediction or the expression of an opinion to become misleading and deceptive conduct under s 52 of the Act, it is necessary that the making of the statement contain or convey some misrepresentation (Taco Company of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177 at 202; Global Sportsman at 88; Tobacco Institute at 36, 45 - 46) or that the making of the statement, when examined in the context and relevant circumstances in which the statement was made and having regard to the form and content of the statement, is likely to mislead or deceive (Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 12 FCR 477 at 488, 504; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 at 93; Wheeler Grace & Pierucci Pty Ltd v Wright at 50,251; Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 40 - 41).

I am unaware of any suggestion previously that s 53A of the Act has a wider operation than s 52. Gummow J in Elders Trustee and Executor Co Ltd v E G Reeves Pty Ltd (1987) 78 ALR 193 at 249 - 250 drew no distinction between the two sections in requiring something more than the mere making of a statement of opinion or prediction to constitute the making of the statement false or misleading. French J in Inn Leisure Industries Pty Ltd v D F McCloy at 166 expressed the view that s 53A had a narrower operation than s 52. In my view there is no relevant difference between s 53A and s 52 in the test as to what constitutes the making of a statement of opinion or prediction a false or misleading representation or misleading or deceptive conduct. Section 53A(1)(b) requires, as a minimum, that any statement as to use of land which is to be created out of a future strata subdivision of existing land, either contain within it, or convey, some misrepresentation which falsifies or makes the statement misleading at the time when it is made, or that the statement be made in circumstances where material facts and circumstances exist which make the form or contents of the representation false or misleading.

It is important to note that the statutory cause of action provided for by s 82(1) of the Act is not complete unless and until actual loss or damage is suffered by the applicant for relief (Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525, 536, 539, 551). That is to say, a contravention of s 52 of the Act, and for that matter s 53A(1)(b), does not give rise to any liability on the part of the contravener unless and until loss or damage is occasioned by the relevant contravention.

Once the statutory cause of action is so understood, it is clear that the truth or falsity of the unit use representation at the time of settlement goes not to the question of whether there was a contravention of s 52 or s 53A(1)(b) of the Act, but rather to the question of whether the appellants suffered any loss or damage as a result of such a contravention. Assuming a contravention of s 52 or s 53A(1)(b) to be made out on the basis that there were no reasonable grounds for making the unit use representation, the appellants could not succeed on the statutory cause of action without proving to the satisfaction of the trial judge that they suffered loss or damage because the unit use representation, false, misleading or deceptive when made, and which caused them to enter into the relevant contract, was false at the date of settlement. Consequently, if the unit use representation was true at the date of settlement, but still false, misleading or deceptive when made because there were no reasonable grounds to make it, the appellants would have suffered no relevant loss or damage.

Thus, there were two questions before the trial judge with respect to the unit use representation. The first was whether the unit use representation was, at the time when it was made, false, misleading or deceptive. The second was whether, if the first question was answered affirmatively, the appellants suffered loss or damage caused by the false, misleading or deceptive conduct. In order to satisfy the trial judge on the first question, the appellants were entitled to rely upon s 51A of the Act. Otherwise, they were required to plead and prove some specific misrepresentation to be found in the content or form of the unit use representation or arising from the context or circumstances in which it was made, or to plead and prove material facts and circumstances, which rendered the unit use representation false, misleading or deceptive, when it was made.

In the instant case, the appellants went no further than to plead non-fulfilment of the representation, a fact, as I have said, which was not relevant to the question of contravention. The appellants, therefore, relied solely upon s 51A of the Act for an affirmative answer to the first question. The trial judge found that, because there were reasonable grounds for the making of the unit use representation by the second and/or third respondents, s 51A of the Act did not operate to deem the unit use representation to be misleading within s 52 or s 53A(1)(b). The trial judge having so found and no other basis having been properly advanced for an affirmative answer to the first question, the second question, involving the truth or falsity of the unit use representation, simply did not and does not arise.

The appellants, in their written submissions in support of the amendment, sought to overcome the problem of there being no particularised case of a breach of s 53A(1)(b) :-

“7 The absence of any application to vary the lease purpose at 23 July 1993 to permit permanent residential accommodation in Block B and Block C, and the vendor’s acceptance of the Department’s opposition if any such application were to be made, means that to solicit sales on the footing that the units for sale could be used for that purpose was misleading.”

This submission has the same problems adverted to earlier in that it alleges conduct on the part of the respondents akin to fraud or serious misconduct. Those allegations were not pleaded and particularised and should not be permitted to be advanced on appeal.

Further, the necessary factual foundation for a conclusion that the conduct referred to in the submission amounted to a contravention of s 53A(1)(b) does not exist. To give effect to the submission in this Court would require the following findings :-

(a)that an application to vary the lease purpose of Blocks B and C was required to enable permanent residence by the owner of a unit in Block B or Block C or a tenant of the owner after completion of the redevelopment;
(b)that if such a lease purpose variation was required it was necessary to have made it on or before 23 July 1993;
(c)that if such a lease purpose variation was required it had not been applied for prior to 23 July 1993;
(d)that if such a lease purpose variation had not been made by 23 July 1993 the Department had by that date nevertheless determined to oppose any such application for a lease purpose variation;
(e)that if the Department had by 23 July 1993 determined to oppose any such application for lease purpose variation made thereafter, the first respondent had accepted the Department’s determination.

The trial judge did not make any of the above findings. Nor was his Honour asked to make any such findings. This Court is not in a position to make, nor should it make, those findings because I am not satisfied that the whole of the evidence in relation to the first respondent’s dealings with the ACT authorities is before the Court. The original application for lease purpose clause variation dated 18 February 1993 is not before this court and it is impossible to say whether that application related to the proposed units in Blocks B and C or not. Had such a case as is now sought to be advanced been pleaded and particularised at trial, the respondents may have elected to go to evidence on these issues.

There is a further reason why this Court should not allow the amendment. The appellants again seek a finding against the first respondent that, by 23 July 1993, it had determined not to apply for the issue of the unit leases to the strata units in Blocks B and C with a residential purposes use clause. That allegation was not pleaded against the respondents. Such a finding was sought from the trial judge and was, correctly in my view, refused.

In my view, the trial judge was correct in his conclusion that, on the case pleaded and tried before him, there was no contravention of s 53A(1)(b) of the Act.

Conclusion on the appeal
For the above reasons I would refuse the application to amend the notice of appeal. I would grant leave to the appellants to proceed against the first respondent in liquidation. Otherwise, I would dismiss the appeal with costs.

I certify that this and the preceding twenty-four (24) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Cooper

Associate:

Dated: 25 February 1998

Counsel for the Applicant: R Garrett QC and W Arthur

Solicitor for the Appellant: Bernard Collaery & Associates

Counsel for the Second, Third and Sixth Respondents:
J V Nicholas

Solicitor for the Second, Third and Sixth Respondents:
Abbott Tout Harper & Blain

Counsel for the Fourth and Fifth Respondents:
S Blake

Solicitor for the Fourth and Fifth Respondents:

Clayton Utz

Date of Hearing:
15 April 1997

Date of Judgment: 25 February 1998

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	ACT G74 OF 1996

BETWEEN:	BRUCE WILLIAM BOWLER AND JANELLE JOY BOWLER APPELLANTS
AND:	HILDA PTY LIMITED FIRST RESPONDENT LEADER REAL ESTATE PTY LTD SECOND RESPONDENT LEADER HOLDINGS PTY LTD THIRD RESPONDENT JOHN FREDERICK MCDONALD FOURTH RESPONDENT JENNIFER MCDONALD FIFTH RESPONDENT DEREK WHITCOMBE SIXTH RESPONDENT REGENCY APARTMENTS PTY LIMITED SEVENTH RESPONDENT LEADER REAL ESTATE PTY LIMITED, LEADER HOLDINGS PTY LIMITED AND DEREK WHITCOMBE FIRST CROSS-CLAIMANTS HILDA PTY LIMITED FIRST CROSS-RESPONDENT REGENCY APARTMENTS PTY LIMITED SECOND CROSS-RESPONDENT
JUDGES:	BLACK CJ, HEEREY J AND COOPER J
DATE:	25 FEBRUARY 1998
PLACE:	MELBOURNE (heard in Canberra)

Counsel for the Applicant:	R Garrett QC and W Arthur
Solicitor for the Applicant:	Bernard Collaery & Associates
Counsel for the Second, Third, and Sixth Respondents:	JV Nicholas
Solicitor for the Second, Third and Sixth Respondents:	Abbott Tout Harper & Blain
Counsel for the Fourth and Fifth Respondents	S Blake
Solicitor for the Fourth and Fifth Respondents	Clayton Utz
Date of Hearing:	15 April 1997
Date of Judgment:	25 February 1998

Counsel for the Applicant:	R Garrett QC and W Arthur
Solicitor for the Appellant:	Bernard Collaery & Associates
Counsel for the Second, Third and Sixth Respondents:	J V Nicholas
Solicitor for the Second, Third and Sixth Respondents:	Abbott Tout Harper & Blain
Counsel for the Fourth and Fifth Respondents:	S Blake
Solicitor for the Fourth and Fifth Respondents:	Clayton Utz
Date of Hearing:	15 April 1997
Date of Judgment:	25 February 1998