Brockway v Pando
[2000] WASCA 192
•7 AUGUST 2000
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE FULL COURT (WA)
CITATION: BROCKWAY & ANOR -v- PANDO & ANOR [2000] WASCA 192
CORAM: MALCOLM CJ
KENNEDY J
MURRAY J
HEARD: 18-19 OCTOBER 1999
DELIVERED : 7 AUGUST 2000
FILE NO/S: FUL 139 of 1998
BETWEEN: JEFFERIS ST CLAIR BROCKWAY
JOYCE MARILYN BROCKWAY
Appellants (First Defendants)AND
CATHERINA PANDO
First Respondent (Plaintiff)VINCENZO MADAFFARI
Second Respondent (Second Defendant)
Catchwords:
Contract and Tort - Real estate agency's direct and vicarious liability for fraud of sales representative - Sales representative fraudulently induced sale of property to himself - Breach of contract, fraudulent misrepresentation, negligence and deceptive conduct - Section 10 and s 82(4) Fair Trading Act 1987
Contract - Breach of "Authority to Sell" - Whether employee's breach of warranty of authority had consequence that there was no contract between vendor and employer - Turns on scope of authority and or ratification
Negligence - Failure to adequately supervise employee - Whether employee's breach of authority broke the nexus between the employer and vendor - Turns on scope of authority and or ratification
Vicarious Liability - Whether employer liable for sales representative's fraudulently inducing sale of property to himself - Breach of office policy - Concealed personal involvement and offer by another purchaser from vendor and employer - Whether real estate agency liable for fraud of sales representative - Scope of authority - Employer on notice - Employer participated in meeting with vendor's nephew at which vendor dissatisfaction about sale price was discussed and documents prepared to resolve the dissatisfaction - Ratification - Estate agency liable for vendor's loss
Fresh evidence - Magazine article published after trial to the effect that vendor knew sales representative was purchaser before involvement of employer - Evidence did not affect the finding that the fraud continued and that employer ratified the fraud
Evidence - Cross-examination - Whether rule in Browne v Dunn breached by failure to cross-examine - Whether party already on notice
Damages - Challenge to assessment based on evidence of another prospective buyer - Evidence not "glaringly improbable"
Claim for indemnity and contribution - Refused because fraud occurred within sales representative's authority and employer ratified conduct of employee
Natural justice - Sufficiency of Judge's reasons - Whether relevant findings of fact were open on the evidence - Whether findings and reasons sufficiently elucidated - While less than perfectly set out, read as a whole the reasons are sufficient to preserve and facilitate any rights of appeal
Legislation:
Fair Trading Act 1987, s 10, s 82(4)
Law Reform (Contributory Negligence) Act 1947, s 7(1)(c)
Real Estate and Business Agents' Act 1984, s 64
Result:
Appeal dismissed
Representation:
Counsel:
Appellants (First Defendants) : Mr C J L Pullin QC & Mrs D M Templeman
First Respondent (Plaintiff) : Mr D H Solomon
Second Respondent (Second Defendant) : No appearance
Solicitors:
Appellants (First Defendants) : Minter Ellison
First Respondent (Plaintiff) : Solomon Brothers
Second Respondent (Second Defendant) : No appearance
Case(s) referred to in judgment(s):
AL Underwood Ltd v Bank of Liverpool [1924] 1 KB 775
Armagas Ltd v Mundogas SA, The Ocean Frost [1986] AC 717
Australia Blue Metal v Hughes [1962] NSWR 904
Baldwin v Casella (1872) LR 7 Ex 325
Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279
Barwick v English Joint Stock Bank (1867) LR 2 Ex 259
Bawden v London, Edinburgh & Glasgow Assurance Co [1892] 2 QB 534
Behrendorff v Soblusky (1957) 98 CLR 619
Browne v Dunn (1894) 6 R 67
Canadian Pacific Railway Co v Lockhart [1942] AC 591
Capricorn Financial Planners Pty Ltd v Australian Securities & Investment Commission (1999) 31 ACSR 46
CDJ v VAJ (1998) 197 CLR 172
Chappuis v Filo (1990) 19 NSWLR 490
City Bank of Sydney v McLaughlin (1909) 9 CLR 615
Collen v Wright (1857) 8 El&Bl 647; 120 ER 241
Colonial Mutual Life Assurance Society Ltd v Producers & Citizens Co‑operative Assurance Co of Australia Ltd (1931) 46 CLR 41
Commercial Union Assurance Co of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389
Cooper v Director of Liquor Licencing, unreported; FCt SCt of WA; Library No 990109; 16 March 1999
Dare v Pulham (1982) 148 CLR 658
Davison v Vickery's Motors Ltd (in Liq) (1925) 37 CLR 1
Deatons Pty Ltd v Flew (1949) 79 CLR 370
Effem Foods Pty Ltd v Lake Cumberline Pty Ltd [1999] HCA 15; (1999) 161 ALR 599
Farrell v National Mutual Life Association of Australasia Ltd [1991] 2 Qd R 624
Flower & Hart v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 163 ALR 744
Gould v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490
Gray v Motor Accident Commission [1998] HCA 70; (1998) 73 ALJR 45
Gunn v Roberts (1874) LR 9 CP 331
Jacobs v Morris [1902] 1 Ch 816
Kelner v Baxter (1866) LR 2 CP 174
Knight v Anderson (1997) 17 WAR 85
Kooragang Investments Pty Ltd v Richardson & Wrench Ltd (1982) AC 462
Lapraik v Burrows (The "Australia") (1859) 13 Moo PC 132; 15 ER 50
Lloyd v Grace Smith & Co [1912] AC 716
Lythgoe v Vernon (1860) 5 H & N 180; 157 ER 1148
Maclean v Dunn (1828) 1 Moo & P 761; 4 Bing 722; 130 ER 947
Marsh v Joseph [1897] 1 Ch 213
McLaughlin v City Bank of Sydney (1912) 14 CLR 684
Milliman v Rochester Railway Co 3 App Div 109; 39 NYS 274 (1896)
Morris v CW Martin & Sons Ltd [1966] 1 QB 716
Newborne v Sensolid (Great Britain) Ltd [1954] 1 QB 45
Newsholme Bros v Road Transport & General Insurance Co Ltd [1929] 2 KB 356
Nosic v Zurich Australian Life Insurance Ltd [1997] 1 Qd R 67
Perre v Apand Pty Ltd [1999] HCA 36; (1999) 73 ALJR 1190
Phoenix Assurance Co Ltd v Berechree (1906) 3 CLR 946
Polkinghorne v Holland (1934) 51 CLR 143
Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589
Rutherford v Richardson [1923] AC 1
Sargent v ASL Developments Ltd (1974) 131 CLR 634
State Railway Authority NSW v Earthline Constructions Pty Ltd [1999] HCA 3; (1999) 73 ALJR 306
Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332
Taylor v Smith (1926) 38 CLR 48
Tesco Supermarkets Ltd v Nattras [1972] AC 153
Tobin v Broadbent (1947) 75 CLR 378
Trade Practices Commission v Queensland Aggregates Pty Ltd (No 3) (1982) 61 FLR 52
Trade Practices Commission v Tubemakers of Australia Ltd (1983) 76 FLR 455
Walsh v Law Society of NSW [1999] HCA 33; 73 ALJR 1138
Walter v James (1871) LR 6 Ex 124
Water Board v Moustakas (1988) 180 CLR 491
Western Australia v Watson [1990] WAR 248
White Industries (Qld) Pty Ltd v Flower and Hart (1998) 156 ALR 169
Wilson v Creek (1930) 33 WALR 26
Case(s) also cited:
Astley v Austrust Ltd [1999] HCA 6
Beach Petroleum NL v Johnson (1993) 43 FCR 1
Briess v Woolley [1954] AC 333
Como Investments Pty Ltd (In Liq) v Yenald Nominees Pty Ltd (1997) 19 ATPR 43,617
Darling Island Stevedoring and Lighterage Company v Long (1957) 97 CLR 36
Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158
FAI v Griffiths (1997) 71 ALJR 651
Krakowski v Trenorth (1996) Aust Torts Reports 81-401
Lister v Romford Ice Co [1957] AC 555
Maguire v Makaronis (1997) 188 CLR 449
Medlin v SGIC (1995) CLR 1
O'Halloran v RT Thomas & Family Pty Ltd (1998) NSWLR 262
Pettit v Dunkley [1971] 1 NSWLR 376
Ramsay v Pigram (1968) 118 CLR 271
Sheffield Corporation v Barclay [1905] AC 392
Smith New Court Ltd v Scrimgeour Vickers [1997] AC 254
Stoneman v Lyons (1975) 133 CLR 550
Tweedvale Investments Pty Ltd v Thiran Pty Ltd (1995) 14 WAR 109
Yeung Kai Yung v Hong Kong and Shanghai Banking Corporation [1981] AC 787
Yorke v Lucas (1985) 158 CLR 661
MALCOLM CJ: This is an appeal by the appellants against a judgment of Viol DCJ in the District Court dated 17 August 1998 by which the learned Judge ordered that:
1.the appellants pay to the first respondent ("Mrs Pando") damages in the sum of $28,300 plus interest on that sum of $6,452, a total of $34,752;
2.the second respondent ("Mr Madaffari") pay to Mrs Pando exemplary damages of $30,000;
3.the claim for contribution by the appellants against Mr Madaffari be dismissed with no order as to costs;
4.the appellants and Mr Madaffari pay Mrs Pando's costs of the action to be taxed including any costs reserved; and
5.there be liberty to apply.
Mr Madaffari played no part in the appeal.
The appellants carried on business as Brockway Real Estate ("Brockways") and were the first defendants in an action brought by Mrs Pando in which Mr Madaffari was the second defendant. Mr Madaffari was a real estate sales representative employed by Brockways. The damages were awarded against the appellants for negligence, breach of contract and breaches of the Fair Trading Act 1987 (WA) and The Trade Practices Act 1974 (Cth) on the basis that they were vicariously liable for the actions of Mr Madaffari.
Facts
The following is an outline of the facts, parts of which will be referred to in greater detail in the context of the particular issues in the appeal. Mrs Pando is an elderly widow. She was the owner of a property at 80 Holland Street, East Fremantle ("the house"), and had been since her husband died in 1989. She lived there with her son, Antonius Hofman. Her native language was Dutch. She could converse reasonably well in English and understood most uncomplicated questions put to her about everyday matters. However, she had no business acumen and was inexperienced in business matters, particularly those relating to real estate. She was born in Holland, where she was educated to primary school level. She came to Australia in 1954 when she was 14. She had worked as a dressmaker. Later she worked in a macaroni factory and then in a factory packaging lollies. She had no vocational or technical qualifications and had never been in any kind of business. The learned trial Judge concluded that she found it difficult, if not impossible, to read and understand "even the simplest legal documentation without careful and conscientious assistance". His Honour had the impression that she was naïve and trusting, and found that Mr Madaffari was aware of these "various characteristics of Mrs Pando".
In the middle of 1994 Mrs Pando wished to sell her house and buy a less expensive one. She noticed a house for sale in Montreal Street that was near to her house. The house had a Brockways sign on it with a telephone number and the name "Jim Madaffari". Mrs Pando telephoned Mr Madaffari, who visited her the same day. He gave her a business card of Brockways which showed his name as "Jim Madaffari – Area Manager". Mr Madaffari told Mrs Pando he thought the Montreal Street house was beyond her means. They discussed selling her house. Mr Madaffari asked how much Mrs Pando wanted for it. She said she had no idea. Mr Madaffari then said to her, "Oh well, let's put $249,000 on it". That figure and other information were placed on an "Exclusive Authority to Sell" form dated 16 June 1994 ("the Exclusive Authority" or "listing form") in favour of Brockways. Mr Madaffari told Mrs Pando that she needed to sign that document in order to be able to sell the property. Mrs Pando signed.
His Honour expressly found that Mr Madaffari had advised Mrs Pando that $249,000 was an appropriate asking price for her house, and that he did not discuss with her the concept of a price by negotiation.
The Exclusive Authority appointed Brockways as agent for the sale with an exclusive authority for 120 days to sell the house at the stipulated price of $249,000. Mrs Pando requested that Mr Madaffari advertise the property in newspapers, put up "For Sale" signs and arrange for prospective purchasers to inspect the property. Mr Madaffari never carried out the first two instructions, but the learned Judge found "he may have shown" the house to Mr Brockway and other Brockways colleagues. His Honour found that Mr Madaffari's general lack of action was intentional because he desired to purchase the property himself at a price "far less than its actual value".
In the meantime, Mrs Pando asked Mr Madaffari to help her to find a bigger house with a smaller garden, possibly in the Kardinya area. Mr Madaffari said he had "just the property for her", "a very nice place". On 20 June 1994 Mr Madaffari took Mrs Pando to see the Kardinya property which was listed with Brockways. They met the owners, Mr and Mrs Cox. Mrs Pando was pleased with the property. Mr Madaffari suggested making an offer of $170,000. She agreed. Mr Madaffari wrote up the offer and acceptance on a Brockways form and took it to Mr and Mrs Cox, who were in another room. Mr Madaffari returned, saying that the Coxes wanted a further $3,000. Mrs Pando agreed. The offer was then amended and the price increased to $173,000, which the Coxes accepted. The time period in the offer in connection with the Kardinya property was originally 60 days, but Mr Madaffari claimed that he had crossed it out at the request of the vendor and put in 10 days. The offer was expressed, in one of the special conditions, to be:
"… subject to the sale of 80 Holland Street, Fremantle within a period of 10 days …"
This was in Mr Madaffari's handwriting, which was difficult to read. Nevertheless, Mr Madaffari told Mrs Pando that this condition meant that if her house did not sell within the 10 days, she would lose the chance of buying the Kardinya house. She said she thought that the clause was normal and relied on Mr Madaffari's advice. The trial Judge observed:
"Madaffari denied that having been put in, he knew the property could not sell within 10 days unless he bought it himself. He did admit, however, that during the 10 day period the house would not be able to be advertised or opened."
A statement by the vendor Mr Cox, admitted into evidence under the Evidence Act 1906 because Mr Cox was deceased, said:
"The condition was amended following Madaffaris' [sic] assurance that Holland Street would be under offer or sold by Wednesday of that week ... If necessary we would have been prepared to give an extension of time for Mrs Pando to sell her property, but the subject never arose."
On Sunday 26 June 1994 a Mrs Catherine Bahen and her husband, Mr Dixon, came to Mrs Pando's house. The house was not open for inspection. Mrs Pando knew Ms Bahen as the sister of one of her neighbours. Ms Bahen asked if the house was on the market. Mrs Pando said that it was and that the agent was Mr Jim Madaffari of Brockways. Mrs Pando also told Ms Bahen that the asking price was $249,000.
Ms Bahen gave evidence at the trial that she wanted to put in an offer of $220,000 for the Holland Street property. On Monday 27 June 1994 she telephoned Brockways. Mr Madaffari telephoned her back. As the learned Judge described her evidence:
"Madaffari rang her back on her mobile phone - she believed it was early in the afternoon. Madaffari confirmed that he had listed the property and Bahen told him that 'they had had a look at it yesterday' (being Sunday) and that her husband and she were interested in putting in an offer on the property. Madaffari's response to that, she said, was 'Catherine, you shouldn't have gone through it without me taking you through it', 'You know how it is, Catherine. I've actually promised that property to friends of mine but they will be turning it over quickly and then I'll give you the first opportunity for the property then'. He did not tell her who the friends were. Nor were any figures mentioned at that point. She did not take the matter any further with Madaffari because she felt that if they were unable to proceed with an offer with him as listing agent she didn't think it was worthwhile pursuing. She and her husband had discussed putting in an offer of $220,000 in their joint names. She thought that was a fair price based on information she had from her sister and other friends who lived in the street. She thought the property was actually worth $220,000. They intended to put in a cash offer."
The significance of this evidence is that Ms Bahen told Mr Madaffari that she and her husband would like to make an offer, but Mr Madaffari not only failed to communicate this to Mrs Pando, but also lied to Ms Bahen about promising the property to friends.
On the same day that Ms Bahen had the telephone conversation with Mr Madaffari, namely 27 June 1994, Mr Madaffari visited and told Mrs Pando that he had two offers for her house. He said one was for $185,000 and the other for $175,000. The latter was apparently the offer of a Mr Williams. Mr Madaffari told her that the offer for $185,000 was a good offer and, "Since it's a close relative … it's only fair that I don't take any commission." He did not say who the close relative was. He told her she was not to tell anyone the price. She said that she had been made to believe by Mr Madaffari that she would not get more than $185,000 for the property and that the offer was fair. Mrs Pando signed her acceptance of that offer on a blank Offer and Acceptance form produced by Mr Madaffari (i.e. not on a Brockways form) on which the purchasers' names were stated to be Vincenzo and Annunziata Madaffari. The Offer and Acceptance for Mrs Pando's property was addressed:
"TO:
As Agent for the Vendor(s)."
There are other references to "the Agent" in the form, for example condition 1.2(b), condition 1.3, condition 1.4, condition 1.5 and condition 1.7. Just above the vendor's signature is an acknowledgement that the selling fee payable to the vendor's agent is her responsibility. This was the subject of special condition 7 which stated:
"No commission for agents to be charged. Treated as private sale contract between the Madaffari's and the Pando's [sic]." [emphasis added]
The handwriting is not clearly legible and Mrs Pando denied being aware that it was a private sale between her and Mr Madaffari. Mrs Pando did not discover that the purchasers were in fact Mr Madaffari and his wife until much later. These references to "agents" are significant for they give the appearance that the sale was going through Brockways as agents.
There were differences in the evidence regarding the dates, sequence and substance of the relevant events. This required the trial Judge to make findings about the credit of the various witnesses. It was found that a day or so after signing the Agreement, Mr Madaffari brought to Mrs Pando a "Disclosure of Interest Form". It said the nature of the interest disclosed was: "Intended part beneficial owner; Registered sales representative." It had been prepared by Ms Hogg, the Brockways office administrator, at the instruction of Mr Madaffari. Although the form was dated 26 June 1994 (which was a Sunday), Mrs Pando said that it was brought to her after 27 June, the date she signed the contract of sale. She said it might have been before she learned about the offer by Ms Bahen, but she did not think so, because she would not have signed it if she knew of Bahen's offer. It was found that, having included a wrong date 26 June 1994, Mr Madaffari nonetheless asked Mrs Pando to sign it "several days after 27 June 1994". His Honour said:
"I am quite satisfied that Pando signed the Exhibit E (the Disclosure of Interest Form) after 27 June 1994 and on the basis that the sale of Holland Street would not proceed until she did so. I consider that she did not understand the true import of [the disclosure] and that Madaffari was well aware of this lack of understanding."
Mrs Pando said she remained of the belief that the sale was "going through" Brockways. She knew it was a private sale, but denied being aware at that stage that the purchasers were Mr Madaffari and his wife. The trial Judge said:
"There seems to be no inconsistency between Pando believing that the sale was still a matter which would be dealt with through Brockways but because it was a private sale, believed by Pando to be to close relatives of Madaffari, that no commission was going to be charged."
Subsequently, Mrs Pando was told by Ms Margaret Black, a neighbour, that Ms Bahen had wanted to put in an offer for $220,000 cash. Mrs Pando said that if someone had made her a cash offer of $220,000 she would certainly not have signed the offer and acceptance in relation to the Madaffari's offer. She thought it was towards the end of the week following Monday 27 July 1994 that she heard of Bahen's offer. Although his evidence was somewhat equivocal, at least partly on account of the fact that he was intellectually impaired, Mrs Pando's son, Mr Hofman, also thought that the Bahen offer was discovered after the Disclosure form was signed.
On about 3 July, Mrs Pando had a visit from her nephew Mr Frank Benz. Mrs Pando was excited about having sold the property and showed him the papers. Mr Benz read her copy of the Exclusive Authority which showed the figure of $249,000 on it. He expressed surprise at the discrepancy between the $185,000 sale price and the $249,000 asking price on the Exclusive Authority. He was told by Mrs Pando that Mr Madaffari had sold the house to "a close relative". Mr Benz telephoned Mr Madaffari and complained about the price. Mr Madaffari came to see him with some printouts of property values in the area and attempted to convince him that the price was in order. Mr Benz also expressed concern about his aunt buying a house with a swimming pool, so they went to inspect the Kardinya property and Mr Benz ended up being satisfied about the purchase. However, as they walked up the driveway from the Kardinya house to Mr Madaffari's car, Mr Benz said:
"Well, I still have a problem with the money situation. I'm still not happy with the money side of it."
Mr Madaffari said, "Well, what can we do to fix this?" He suggested a possible further $5,000. Mr Benz said, "Well, I'd have to speak to my aunty about that." He also said, "Well, wouldn't you have to speak to your clients?" Mr Madaffari replied, "That's okay because I speak for them." He was told by Mr Madaffari that the purchasers were "close family".
On or about 6 July, Mr Benz attended the Brockways Office to discuss his concerns about the sale price. The trial Judge found it was 6 July 1994 and no doubt he based that, at least in part, on the dates of the relevant documents. There were, however, contradictory accounts of what events occurred and when and where they occurred. On balance, however, there was sufficient evidence to find that a meeting took place between Mr Brockway and Mr Benz, at which Ms Hogg, the Brockways office administrator, and Mr Madaffari were present. Mr Benz expressed Mrs Pando's dissatisfaction with the sale price and there was some discussion. A proposal was made to resolve the matter. Mr Brockway, with a little input from Mr Madaffari and Mr Benz, dictated to Ms Hogg two further documents. The first (Exhibit G1 and 2) related to the offer and acceptance between Mrs Pando and Mr and Mrs Madaffari. It stated:
"We, Vincenzo and Annunziata Madaffari, the abovementioned purchaser of 80 Holland Street Fremantle hereby confirm that we will pay to … Pando … the sum of $5,000 within 60 days of settlement of the sale at 80 Holland Street, Fremantle".
This was dated 6 July 1994 and was later signed by Mr and Mrs Madaffari. The second, exhibit 1, was subsequently taken by Mr Benz to be signed by Mrs Pando, Mr Hofman and himself. This document stated:
"We Catharina Maria Pando (the Vendor), Antonius Hofman (her Son) and Franz Benz (her nephew) hereby state that having satisfied ourselves in relation to values in the area of 80 Holland Street and surrounds we believe that the offer to purchase of $185,000 is a fair offer and that we are all happy with the outcome, this being free of any selling commission, the contract of sale being a private sale between the parties.
It must be noted that Mrs Pando was in a situation of having offered to purchase another property subject to the sale of her home and this offer was subject to an offer being made on her property within 10 days of her offer to purchase being accepted.
It is understood that the purchaser may subdivide and develop the property at 80 Holland Street, we were aware that the property has the potential with Council bonuses to subdivide and have no objection to any development of the property."
Mr Benz took this form to Mrs Pando and stated that if she and her son signed it, she would receive an extra $5,000 for the Holland Street property within 60 days of the settlement date. Mr Madaffari did not discuss with or explain to Mrs Pando the Disclosure of Interest Form, or the document relating to the extra $5,000. Mrs Pando was not sure whether the document relating to the further $5,000 was given to her for signature before or after she heard about the offer from Ms Bahen. However, she said she would not have signed that document if she had known that Ms Bahen was thinking of putting in an offer of $220,000.
On 9 August 1994 Mr Madaffari presented to Mrs Pando for signature two documents relating to the settlement. She understood that the documents were for "the settlement agent". Indeed the documents were an "Authority to Appoint" LJW Settlements in these terms:
"Whereas you have indicated your intention to appoint LJW Settlement Services to represent you on the settlement of the transaction... now take notice that there is a relationship between that settlement agent and Brockway Estate Agency ‑ Fremantle that could possibly give rise in the future to some conflict of interest." (Emphasis added.)
According to Mrs Pando it was some time later in August 1994 that she found out that Jim Madaffari was the Vincenzo Madaffari to whom she had sold her house. Later Mr Madaffari brought her a cheque for a further $5,000. She then consulted her lawyer and took that cheque to his office.
The learned Judge found that at all material times Mrs Pando thought she was dealing with Brockways, through Mr Madaffari as her agent. Mrs Pando was "totally reliant" on Mr Madaffari and he in turn was well aware of this. He was very experienced in real estate matters and a good salesman. It was found that he was also aware of the potential value of Holland Street due to the changing nature of the surrounding area and the possibility of sub‑division, although he did not inform Mrs Pando of this. Mrs Pando was never shown property value comparisons (although Mr Benz apparently was shown property value printouts by Mr Madaffari) and she did not understand much about subdivision.
Brockways
In mid‑1994 the appellants were the principals conducting the real estate agency called Brockways Real Estate. Brockways had been carrying on business since the late 1960s. At the relevant time, they employed six sales representatives, one of whom was Mr Madaffari. In the two months of June and July 1994 the agency negotiated some 26 sales. Mr Brockway gave evidence that it was not possible for him personally to meet the clients or vendors, in relation to each transaction. Weekly sales meetings were held at which Mr Brockway would meet with his sales team and information was exchanged. The procedure was that if a listing was obtained from a client, the listing form would be brought into the office and a file would be opened. When a new listing came in, an auctioneer's bell would be rung in the office to let everybody know about it. Everyone in the office could become acquainted with the transaction by reference to the file. There was a photograph board on which photographs of the new listing would be displayed. There was also the evidence of Ms Fairman, another sales representative of Brockways, that the sales representatives would be taken to a new property on a "caravanning" exercise.
Mr Brockway said that he did not like sales representatives purchasing properties. He preferred that they went through another agency, but if a representative was to make an offer it should not be made until after there had been full advertising, the house had been open for inspection and the vendor fully understood what was going on. Mr Madaffari denied the existence of this policy, but his denial was not accepted by his Honour.
Mr Brockway said that there were blank forms kept in the office which did not show "Brockway Real Estate" as the agent. He said these were not issued to representatives to use, but were kept for clients who might ask for a form for a private sale within the family.
Mr Madaffari did not take the listing form (Exclusive Authority) to Brockways and Mr Brockway said he had never seen it. The form was still in Mr Madaffari's possession at the time of the trial. It was called for and produced by him at the trial. Mr Madaffari said he gave the Exclusive Authority to Ms Hogg, an employee of Brockways and asked her to hold on to it while repairs were done. Ms Hogg contradicted that, saying no form was received in the office. At the same time, however, Ms Hogg had prepared the Disclosure of Interest Form at Mr Madaffari's request which, as has been seen, was dated 26 June 1994. Mr Madaffari said he got the form (which he produced at trial) back from Consumer Affairs. He said he did not know whether there was a Brockways file, but "there was a file there with all the information on 80 Holland Street". He said it must have been from that file that Consumer Affairs got the Exclusive Authority. Mr Madaffari also said that all the office staff and agents who were working for Brockways were aware that the Holland Street property was for sale. A number of the agents were expressly mentioned, but Mr Brockway was not mentioned. On the other hand, there were never any photographs of Mrs Pando's house put on the photograph board, even though Mr Madaffari had photographs.
At the same time, Mr Brockway said in evidence: "It was, I suppose, a sale on file but I didn't know who the people were involved." It was not clear what he meant by this because it was said no office file had been opened. In any event, none of this evidence served to contradict Mrs Pando's understanding throughout that Brockways was acting as her agents.
Mrs Pando's Claims
The statement of claim was some 77 pages long and fairly complex. The following is the gist of the pleaded case. Mrs Pando pleaded the written agreement constituted by the Exclusive Authority dated 16 June 1994, by which she appointed Brockways the exclusive agents for the sale of Holland Street, and by which Brockways agreed to endeavour to secure a purchaser for the property, at the price stated in the valuation representation, for a period of 120 days. It was also pleaded that on or about 16 June 1994 Mrs Pando orally instructed Brockways, as represented by Mr Madaffari, to find her a property suitable for her to purchase following the sale of the Holland Street property.
It was alleged that Brockways were in breach of an implied term of the agreement that they would act in good faith and use reasonable skill, care and diligence in securing the sale of her property and the purchase of a replacement property. It was alleged that Mr Madaffari failed to disclose his interest in the offer made by him and his wife, as required by s 64 of the Real Estate and Business Agents Act 1984, by making false representations which misled the plaintiff regarding his identity as the purchaser. These representations were said to be conducted by Mr Madaffari in trade and commerce which was misleading and deceptive in contravention of s 10 of the Fair Trading Act 1987. Alternatively, it was said, the representations were fraudulent.
Mrs Pando also pleaded the contract for the sale of the Kardinya property constituted by the offer and acceptance dated 20 June 1994 by which she agreed to purchase the Kardinya property for the sum of $173,000, subject to the sale of the Holland Street property within 10 days. It was pleaded that Brockways and Mr Madaffari knew that there was no reasonable prospect of procuring a purchaser within that period.
It was also alleged that on or about 20 June 1994 and prior to Mrs Pando's acceptance of the offer from Mr and Mrs Madaffari, Mr Madaffari received an expression of interest to purchase the Holland Street property from an independent buyer (Ms Bahen and her husband), but this was not disclosed to Mrs Pando. It was pleaded that this conduct was misleading and deceptive, in breach of the implied terms of the agency contract, Brockway's fiduciary obligations and fraudulent or negligent. It was also alleged that such conduct was in breach of Mr Madaffari's warranty of authority.
Agreed Findings
The learned Judge described the evidence given by the various witnesses in great detail before making a number of findings. The following findings were not disputed by Mr and Mrs Brockway:
(a)Mr Madaffari deliberately avoided informing Mr Brockway of the contract between him and Mrs Pando;
(b)Mr Brockway was ignorant of the actual sale of the property until Mr Benz spoke to him on 6 July 1994;
(c)the sale of the property resulted from a series of acts on the part of Mr Madaffari intended to deceive Mr Brockway;
(d)there was an intentional failure by Mr Madaffari to comply with Brockways' policies regarding sales generally and the purchase by employees of property for which Brockways had been appointed agency for sale;
(e)there was no evidence that Mr Brockway had reason to suspect any misconduct on the part of Mr Madaffari, at least prior to 6 July 1994;
(f)Mr Madaffari intended and had by positive action taken steps to avoid Mr Brockway having knowledge of his misconduct;
(g)Mr Madaffari's conduct in relation to the authority to sell amounted to a breach of warranty of authority on his part.
It was said that this last finding was one of the foundations for the judgment in favour of Mrs Pando against Mr Madaffari. It certainly constituted a substantial focus of the appeal.
Grounds of Appeal
The grounds of appeal challenge the findings by the learned Judge that Mr and Mrs Brockway:
(a)had been guilty of breach of contract (grounds 1 and 2);
(b)had been negligent (grounds 3 and 4);
(c)were vicariously liable for, or had ratified, Mr Madaffari's conduct (grounds 5 to 17);
(d)were liable to Mrs Pando under the Fair Trading Act 1987 and the Trade Practices Act 1974 (Cth) (ground 18)
(e)were liable to pay Mrs Pando $28,300 in damages (ground 19);
(f)were not entitled to be indemnified by Mr Madaffari for the damages for which they were liable (ground 20).
Grounds 1 to 4: Brockways' Direct Liability in Contract and Negligence
At trial Mrs Pando contended that the appellants were directly liable on two bases. The first was Brockways' breach of the contract of agency constituted by the Exclusive Authority by failing to advertise, open for inspection and place signs on Mrs Pando's property. The second was that Brockways had been negligent in failing to adequately supervise Mr Madaffari to prevent him from concealing the Bahen offer from Mrs Pando.
The gist of grounds 1 to 4 was that the learned trial Judge erred in law and in fact in finding that Brockways were directly liable to Mrs Pando for breach of contract or in negligence, because such findings were inconsistent with his Honour's finding that Mr Madaffari breached his warranty of authority.
Breach of Contract
At trial, the appellants answered the claim in contract in two ways. First, it was said that the house was not put on the market and advertised because Mrs Pando had asked for that to be delayed pending repairs to the house. Mr Madaffari's evidence was that the house was "an absolute dump", "something out of the backyard in the farming community where pigs live" and needed "heaps and heaps of work". Having seen photographs and heard the descriptions of the property by other witnesses, the trial Judge rejected that evidence, finding that "some repairs were needed, but [the house] was, I consider, in a marketable condition".
Secondly, the appellants said that the finding of liability for breach of contract was flawed because Mr Madaffari's breach of warranty in respect of his authority had the consequence that there was no contract between Brockways and Mrs Pando. The appellants relied on Collen v Wright (1857) 8 El&Bl 647 at [657] ‑ [658]; 120 ER 241 at 245 which is authority for the proposition that where an agent contracts outside the scope of his or her authority the principal is not bound. The question whether or not Mr Madaffari was acting within his authority is dealt with below.
Counsel for Mrs Pando submitted that the trial Judge could not have based his orders on a finding of breach of contract because exemplary damages are not available for breach of contract, but only for tort: Gray v Motor Accident Commission [1998] HCA 70; (1998) 73 ALJR 45 at [13]. In fact the trial Judge concluded his consideration of the breach of contract claim saying:
"Leaving aside the question of damages which may flow from breach of contract, it is clear that Brockway can be liable for such breach." (Emphasis added.)
In these circumstances I put aside the claim in contract for the present and deal with the issue of liability in negligence.
Negligence
After making findings about Madaffari's intentional deceit upon Mrs Pando and Brockways, the trial Judge dealt with the allegation of negligence against Brockways. This was based on Brockways' failure to adequately supervise Mr Madaffari so as to prevent him from concealing Ms Bahen's offer from Mrs Pando. His Honour referred to Armagas Ltd v Mundogas SA, The Ocean Frost [1986] AC 717 at 782 - 783 per Lord Keith, who said:
"At the end of the day the question is whether the circumstance under which a servant has made the fraudulent misrepresentation which has caused loss to an innocent party contracting with him are such as to make it just for the employer to bear the loss. Such circumstances exist where the employer by words or conduct has induced the injured party to believe that the servant was acting in the lawful course of the employer's business. They do not exist where such belief, although it is present, has been brought about through misguided reliance on the servant himself, when the servant is not authorised to do what he is purporting to do, when what he is purporting to do is not within the class of acts that an employee in his position is usually authorised to do and when the employer has done nothing to represent that he is authorised to do it."
Mr Brockway gave evidence that it was impossible to supervise each sale of each sales representative. He described the procedures in place and the policies concerning private sales. The trial Judge said:
"There is merit in the submissions on behalf of Brockway that the extent of supervision required of an employee who works largely outside the office and who acts dishonestly is far beyond what a reasonable employer could be expected to do. There was also no evidence that Brockway had from previous conduct on the part of Madaffari reason to suspect his likely misconduct. In this case, however, Brockway, by visiting Holland Street, was alerted to a possible sale and there must (or should) have been some concern as to Holland Street and Madaffari's position relating to it. In my view there is a basis, on the evidence, to find Brockways negligent … " (emphasis added)
Somewhat more ambivalently, prior to making the above comment, the trial Judge said, "I have reason to believe that Brockway was also at the property." (Emphasis added.) This was a reference to Mrs Pando's property and the visit by the "caravan" to the property. The phraseology adopted might reflect his Honour's uncertainty in making such a finding on the balance of probability. The next sentence is:
"The evidence suggests that from that visit until early July 1994 Brockway knew little, if anything, of Madaffari's intentions and actions relating to the property."
The appellants said these findings were inconsistent with each other. I am not convinced that they are. Mr Brockway may have visited the property, but remained ignorant of the extent of Mr Madaffari's personal involvement. What the trial Judge says, in effect, is that Mr Brockway should have been on notice that Brockways were involved with the sale of Mrs Pando's property.
The appellants also contended that the finding that Mr Brockway visited the property with the consequence that Brockways had notice of the agency was not based on sufficient evidence. It was submitted the allegation upon which this finding was based was:
(a)not in the pleadings;
(b)not put to Mr Brockway in cross‑examination; and
(c)inconsistent with the finding that:
(i)Mr Madaffari may have shown the property to a colleague called Mrs Fairman and to other colleagues at Brockways, but there was not sufficient evidence that Mr Brockway himself went to the property;
(ii)Mr Madaffari breached office policy intending to deceive Brockways; and
(iii)Mr Brockway did not know about the sale until early July 1994.
The only evidence that Mr Brockway visited the house was that of Mrs Fairman, who said she was taken with other Brockways colleagues to the property by Mr Madaffari to show them the new listing. She referred to this exercise as "caravanning", which she explained as:
"a term where all the representatives go on the same day, the listing representative takes you through the property and tells you a little bit about the new property and you have a look at it so that you know about it if you have, you know, a prospective purchaser."
She also said: "From what I can recall, Jeff Brockway was with us on the day." In cross‑examination she said she was sure Mr Brockway was there because she distinctly remembered speaking to Mr Brockway in the back garden of the house, which, she recalled, backed on to a laneway. She said her recollection was clear because she was new in the job and enthusiastic.
As to the appellants' complaint that the allegation was not pleaded, counsel for Mrs Pando said it did not need to be pleaded because it was not a breach, but a fact giving rise to a duty of care, and that was the use to which the trial Judge put the evidence. Counsel referred to Water Board v Moustakas (1988) 180 CLR 491 for the principle that "no narrow or technical view should be taken" with respect to pleadings and particulars. The matter was to be determined on the way the parties fought the case at trial: Gould v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 at 517 ‑ 518 per Isaacs and Rich JJ, applied in Dare v Pulham (1982) 148 CLR 658 at 664 per Murphy, Wilson, Brennan, Deane and Dawson JJ; and Banque Commerciale SA, En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 at 286 ‑ 7 per Mason CJ and Gaudron J, 288 per Brennan J, and 293 per Dawson J. No objection was raised by the defendant at trial that the case went beyond the pleadings.
It was contended on behalf of the appellants that the failure to cross‑examine Mr Brockway on Ms Fairman's evidence and the reliance by Mrs Pando on that evidence was in breach of the rule in Browne v Dunn (1894) 6 R 67. Reference was also made to Walsh v Law Society of NSW [1999] HCA 33; 73 ALJR 1138, in support of the contention that his Honour erred in relying on evidence not put to Mr Brockway. In my view, Walsh is not relevant. It concerned an appeal by a solicitor against whom the New South Wales Court of Appeal made adverse findings on matters for which he had been exonerated by, and which went beyond the findings of, the Tribunal. The basis of that error was an error by the Court of Appeal in determining that it could determine the Law Society's appeal by hearing the matter de novo rather than on the evidence before the Tribunal.
Counsel for Mrs Pando responded to the Browne v Dunn objection by submitting that Brockways were not ambushed and Mr Brockway could have been recalled to contradict the evidence: White Industries (Qld) Pty Ltd v Flower and Hart (1998) 156 ALR 169 at 216 ‑ 219; affirmed on appeal to the Full Court of the Federal Court in Flower & Hart v White Industries (Qld) Pty Ltd [1999] FCA 773; (1999) 163 ALR 744 at 757 [51]-[52]. That case is authority for the proposition that the rule in Browne v Dunn is not broken, even if a material matter or allegation is not put to a party, if that party can fairly and objectively be said to be on notice of it, where, for example, it is sufficiently apparent from the materials and evidence that it will be relied on. In White Industries (Qld) Pty Ltd v Flower & Hart at first instance Goldberg J said at 217:
"The significance of the rule is that it requires notice to be given of a proposed attack on a witness or on the witness' evidence where that attack is not otherwise apparent to the witness. The rule does not require that there be put to the witness every point upon which his or her evidence might be used against him or her or against the party who calls the witness.
At 218 – 219 his Honour referred to the fact that letters of advice from senior counsel and the solicitors were to the effect that the client should initiate hopeless proceedings so as to obtain a better bargaining position. This was alleged to be evidence of unreasonably instituted proceedings, which evidence was known to those practitioners, who were witnesses, to be evidence before the court. Consequently, it was not necessary to cross‑examine them on it. On appeal Lee, Hill and Sundberg JJ said at par 51:
"As a general rule, before an adverse finding is made against a witness in contradiction of sworn testimony given by that witness, a matter in issue, the subject of that finding, must be put to the witness in cross‑examination to enable him or her to give an explanation. However there can be no need to put such an issue to a witness who has notice that there is other material in the proceedings that will be relied upon to contradict the evidence of the witness: see Allied Pastoral Holdings Pty Ltd v FCT [1983] 1 NSWLR 1 at 16; 44 ALR 607; R Cross, Cross on Evidence, 4th Aust ed, Butterworths, Sydney, 1991, para 17445."
At first instance Goldberg J said at 220:
"There are two aspects to the rule in Browne v Dunn, the first being the rule of practice that it is necessary for a party to put another party on notice of the matters on which it proposes to rely in contradiction of the evidence of the other party on its witnesses. The second aspect is what are the consequences if that rule is not observed. That aspect is not inflexible (Ghazal v Government Insurance Office of New South Wales (1992) 29 NSWLR 336 at 345) and it does not inexorably follow that if the rule is not observed the party in default is precluded from relying on evidence not put to the other party or its witness or from relying on inferences to be drawn from evidence which inferences have not been put to the other party or its witnesses … The second aspect of the rule relates to the manner in which, and the extent to which, the evidence or inferences said to be relied upon in breach of the rule may be used: Allied Pastoral Holdings [supra]. This aspect of the rule relates to the weight to be given to the evidence and its cogency: Bulstrode v Trimble [1970] VR 840 at 846. The second aspect does not require the rejection of evidence or an inference to be drawn from it if it is sought to use it to contradict evidence not the subject of cross‑examination. Putting the matter another way a failure to observe the rule in Browne v Dunn does not mean that where evidence of a witness is not the subject of cross‑examination and where evidence is led in contradiction of that evidence the court is required to accept the former evidence … It is a matter of weight for the court to take into account: R v McDowell [1997] 1 VR 473 at 482."
Counsel for Mrs Pando pointed to the following questions and answers in cross‑examination to suggest that Mr Brockway did have the evidence put to him and was evasive on the issue:
"You go on to say, 'I would present it at $249,000.' Was that on the basis of visiting it or on the basis of something that Mr Madaffari told you? --- I would present it at $249,000 and allow something around 10% less…
No. No, Mr Brockway, that's not --- ? The figure of ---
Mr Brockway, that's not the question? --- All right. I'm sorry.
'I would present it at $249,000.' Was that on the basis of something that Mr Madaffari told you?--- It's what I would have presented the property for and its not what Mr Madaffari told me." (Emphasis added.)
That does not strike me as an attempt to avoid answering the question whether he had been to Mrs Pando's house. The question was not put to him directly but indirectly and ambiguously. It was incorporated as part of the question as to how Mr Brockway arrived at the $249,000 figure, which he had said in his letter to his insurer dated 9 November 1994 was what he would have presented the house for.
In the submissions on behalf of Mrs Pando other portions of the transcript were referred to to suggest that Mr Brockway was cross‑examined about this evidence. I have not been able to find such cross‑examination. One reference was to cross‑examination of an entry in Madaffari's phone message book at Brockways to the effect that Mrs Pando had phoned on 21 June 1994 about roof repairs. Another reference was to cross‑examination about whether Mrs Pando was a client of Brockways. Mr Brockway said she was a client with regards to the purchase of the Kardinya property, but not in relation to the sale of her property.
Without more, this evidence of a single witness that Mr Brockway visited Mrs Pando's house, which was not put to Mr Brockway in cross‑examination, would be a slender basis for a finding of negligence.
There was, however, additional evidence of the meeting Mr Brockway had with Mr Benz at the Brockways office. The trial Judge said, albeit while dealing with the vicarious liability claim, that Mr Brockway must at that point have been put on notice about the property, that Mr Madaffari was buying it and that Mrs Pando was concerned about the price.
There was also evidence upon which a contention could be based that Brockways had constructive notice prior to the 6 July 1994 meeting, regardless of whether Mr Brockway went to the house. This evidence was sufficiently before the Court and known to the defendants to be material evidence. First, there was evidence that Ms Hogg prepared the Disclosure of Interest Form. Secondly, Mr Madaffari gave evidence that he gave the Exclusive Authority to Ms Hogg. She contradicted that, saying no file was opened. Mr Madaffari said that was because he told her to wait until Mrs Pando had organised some repairs to the house. Thirdly, in his further and better particulars dated 28 October 1996 Mr Madaffari claimed he had notified people in the Brockways office about one week after receiving instructions from Mrs Pando. He said notice was given orally to Ms Susan Grove and two or three other real estate representatives. Fourthly, there are the entries in the Brockways' message book kept for Mr Madaffari of both Mrs Pando's and Ms Bahen's phone calls regarding the sale of the house. Fifthly, Mr Madaffari said there was a file relating to the Holland Street house in the Brockways office and Mr Brockway said at one point in cross‑examination, "It was, I suppose, a sale on file." As already observed, it is unclear what he meant by this because Ms Hogg said that no file had been opened. Sixthly, and most importantly, putting aside the questionable evidence of Mr Madaffari, where an agent, in the course of a transaction in which he or she is engaged on his or her principal's behalf, receives notice or knowledge of facts material to the transaction, and has a duty to communicate such facts to the principal, the principal cannot rely on lack of notice or knowledge. Accordingly, I consider that Brockways was deemed to have notice or knowledge of those matters which Mr Madaffari had a duty to communicate to Brockways, including the Exclusive Authority obtained from Mrs Pando, the sale of her house, and perhaps also her special vulnerability: Western Australia v Watson [1990] WAR 248 at 281; Baldwin v Casella (1872) LR 7 Ex 325; Sargent v ASL Developments Ltd (1974) 131 CLR 634 at 649 per Stephen J, at 658 ‑ 659 per Mason J; Bawden v London, Edinburgh & Glasgow Assurance Co [1892] 2 QB 534; Nosic v Zurich Australian Life Insurance Ltd [1997] 1 Qd R 67 at 80 ‑ 81 per McPherson JA; Newsholme Bros v Road Transport & General Insurance Co Ltd [1929] 2 KB 356. A contrary view is expressed by Moynihan J in Farrell v National Mutual Life Association of Australasia Ltd [1991] 2 Qd R 624 at 634 who said that this principle only applies where the agent is not acting for his or her own ends in fraud of the principal. However, Byrne J at 639 said that the principal is taken to know a fact known to his agent which is material to the agency and which the agent has a duty to communicate.
Referring to Perre v Apand Pty Ltd [1999] HCA 36; (1999) 73 ALJR 1190, counsel for Mrs Pando submitted that all the indicia of negligence existed in this case. The loss was foreseeable; Mrs Pando was vulnerable to the conduct engaged in by Mr Madaffari on Brockways' behalf and the type of loss she sustained: Perre at 611 per Gleeson CJ; at 636 - 637 and at 645 - 647 per McHugh J. There was sufficient proximity in the relationship between Brockways and Mrs Pando: Perre at 660 and 664 per Gummow J. Brockways should have appreciated the risk, whereas Mrs Pando could not be expected to have done so. Hence there was no indeterminate liability here: Perre at 633 - 635 per McHugh J; and at 699 ‑ 701 per Hayne J. Finally, it was said that this was not an extension of the duty of care to a new class.
So much can be accepted as a statement of the law of negligence, but the result is that a finding of negligence against Brockways can only be made if it can be said that Mr Madaffari was acting within his scope of authority or that Brockways ratified his conduct, so that the requisite relationship of proximity existed between Brockways and Mrs Pando. Those issues are dealt with in the discussion of vicarious liability which follows.
Grounds 5 to 17: Brockways' Vicarious Liability
The case at trial was that Brockways' vicarious liability rested on two bases, namely the Exclusive Authority which provided the requisite nexus between Mrs Pando and Brockways, and, secondly, the principle in Lloyd v Grace Smith & Co [1912] AC 716 that a principal or employer is vicariously liable for the fraud of an employee which is committed within the scope of his authority, or within the course of his employment duties, even if it was not for the benefit of the employer. It was said that Mr Madaffari's fraud did not fall outside the parameters of his authority, but was an unauthorised mode of performing authorised tasks.
His Honour's conclusions, while not clearly articulated, were in substance that Mr Madaffari procured the agency contract with Mrs Pando to sell her house by representing himself as having authority to act on behalf of Brockways as a sales representative for Mrs Pando. In performing that role he breached his warranty of authority and fraudulently induced the sale. Because Mr Brockway participated in the 6 July 1994 meeting and thereby gave Mr Madaffari the appearance of authority and/or ratified his conduct, Brockways was liable for the harm suffered by Mrs Pando.
The gist of grounds 5 to 17 was that the trial Judge erred in law and in fact in finding Brockways vicariously liable because that finding was inconsistent with the finding that Mr Madaffari breached his warranty of authority in making the purchase. The appellants argued that the finding of breach of warranty of authority on the part of Mr Madaffari meant that his making of the fraudulent offer on Mrs Pando's house went beyond his express or ostensible authority, and so Brockways' liability must depend on ratification. It was argued that his Honour erred in finding that Mr Brockway had ratified and/or acquiesced in Mr Madaffari's conduct, because his Honour rejected the evidence of Mr Madaffari and Mr Brockway about the meeting of 6 July 1994 in Mr Brockway's office, in favour of Mr Benz's evidence. Mr Benz's evidence was that a meeting did not take place in Mr Brockway's office, and there was no discussion with Mr Brockway about the true nature of the sale. The appellants said that, the trial Judge having rejected the evidence that such a meeting took place, there was no evidence of inducement by Mr Brockway to Mrs Pando to continue in the sale and no evidence of ratification.
It was contended in ground 6 that ratification:
(a)was not pleaded;
(b)was not based on law or fact; and
(c)there was no acquiescence by Mr Brockway.
It was submitted that the appellants had been denied natural justice because the trial Judge did not identify the conduct ratified, or what conduct of Mr Brockway constituted ratification. Grounds 8 and 9 of the appeal contended that the finding of ratification was inconsistent with the finding of acquiescence, and that it was an error in law to hold that acquiescence would be sufficient to ratify a breach. Ground 10 was to the effect that the finding that Mr Brockway knew more than he was prepared to say in Court was speculative, not based on any or any sufficient evidence, and not put to Mr Brockway in cross‑examination. This was said to amount to a denial of natural justice in so far as the trial Judge did not state clearly in his reasons what it was Mr Brockway was found to know.
Ground 11 was that the trial Judge erred in finding that Mr Brockway knew about Mr Madaffari's representations to Mrs Pando, because this was also not put to Mr Brockway in cross‑examination and there was no or no sufficient evidence for that finding. The same denial of natural justice point was made in respect of grounds 10 and 11.
Grounds 12 and 13 also contended that there was no or no sufficient evidence to find that Mr Brockway determined not to disclose to Mr Benz that Mr Madaffari was the purchaser, nor for the finding that Mr Brockway set out to induce Mrs Pando, through Mr Benz, to enter the arrangement confirming the contract of sale.
In particular, ground 14 challenged the findings that Mr Brockway:
(a)set out to induce Mrs Pando to accept and took active part in the discussions leading to the confirmation document dated 6 July 1994 signed by Mrs Pando (exhibit 1) and the acceptance of the arrangement for payment of a further $5,000 (exhibit G1and 2),
(b)acquiesced in and ratified Mr Madaffari's conduct, and
(c)represented to Mrs Pando, through Mr Benz, that Mr Madaffari was acting with authority.
These were all said to be inconsistent with the evidence of Mr Benz that the meeting did not occur in Mr Brockway's office. Alternatively, it was argued that, if the meeting did take place, the trial Judge should have found that Mr Brockway gave Mrs Pando, through Mr Benz, the option of withdrawing from the sale, and exerted no pressure on Mr Benz or Mrs Pando to induce continuation of the sale.
Ground 15 was that the trial Judge erred in finding that Mr Brockway should have seen that Mr Benz was not capable of acting efficaciously on behalf of Mrs Pando. That finding was said to be inconsistent with the finding that Mr Benz made more of his ability to Mr Brockway than he actually possessed.
Ground 16 repeated that it was an error to find Mr Brockway represented that Mr Madaffari was acting with authority. There was said to be an absence of reasons for this finding which constituted a denial of natural justice by the trial Judge.
Ground 17 challenged the finding of vicarious liability as inconsistent with the findings that:
(a)Mr Madaffari did not follow office policy because he did not want Brockways to know what he was doing;
(b)it was not until early July 1994 that Mr Brockway knew of Mr Madaffari's actions; and
(c)Mr Madaffari inserted the 10‑day clause in the Kardinya property sale contract intending to make an offer himself.
The determination of the points raised in grounds 5 to 17 depends very much on the evidence of what occurred when Mr Benz met with Mr Brockway in the context of the applicable law.
The evidence regarding the 6 July 1994 meeting at Brockways' office
As the trial Judge said, "The events at the office of Brockways on 6 July 1994 are difficult to determine with any certainty." It is necessary to set out the different accounts of the witnesses given in evidence.
According to Mr Benz, when he visited the office of Brockways on 6 July 1994, there was a brief conversation in the hallway of the office when Mr Brockway said to him:
"Oh, by the way, do you realise that because it's close family and that, that Jim cannot charge commission."
Mr Benz denied that Mr Brockway had told Mr Madaffari and him that they had two options, namely, that either Mr Madaffari could pay the extra $5,000 or Mrs Pando could choose to be released from the deal. The only part of the conversation which Mr Benz was prepared to concede was that there was an offer of $5,000 extra so that the deal could proceed.
The following passage appears in the judgment:
"Benz denied that Brockway met him in his office and said that he met him in the corridor. He also denied that he sat opposite Brockway at his desk. He did not show Brockway a contract for the sale of land by offer and acceptance and did not have a contract with him at the time. He did not tell Brockway that he thought that Pando had received poor value from the house. He did not raise any complaint about the price of the house to Brockway. He did not discuss the price of the house with Brockway. The only discussion with Brockway concerned an explanation from Brockway to the effect that Pando was not going to pay any commission. Benz denied that Madaffari was asked in his presence by Brockway whether Madaffari had bought the property because there was no record of the sale in Brockway's office. He also denied that Madaffari replied he had bought the land privately. He confirmed there was no conversation in which Brockway advised Madaffari that he had two options as to how he could proceed. He did not receive a list of properties and values on that occasion at the office. Brockway was not present when he was given Exhibit 1".
The learned Judge said of Mr Benz:
"My impression of Benz was that he was a straightforward witness who was, at the time of his evidence, having a lot of pain and physical difficulties but appeared to be attempting to give his evidence truthfully and did so firmly, particularly in the course of cross‑examination. I did not get any impression that he was a witness who was attempting to give other than honest answers. Although he may have had some dealings in the property, he was not particularly adept in commercial matters. He certainly had more business acumen than Pando or Hofman, however, theirs was severely limited. Because of this, Benz was attempting to assist Pando, although in these attempts Benz was also in a vulnerable position in view of his lack of real commercial experience. Madaffari and Brockway had far more experience in real estate matters and business generally, than Benz".
Mr Brockway's evidence was that he was not aware by the end of June 1994 that Mr Madaffari had accepted a listing for Holland Street. He said he was still unaware after Mr Benz had come to see him that there had been in fact a listing on the property. The first time he was aware of the listing was "when the trade practices people actually came into the office". That was after Mr Benz had been to see him. As to this, the learned Judge said:
"This statement should be examined in the light of Brockway's later evidence as to what he told Benz in the office meeting. Before Benz came in to see him Madaffari spoke to him. He was unsure of the exact date. Madaffari told him he had bought a property and that the woman who was selling it was buying another property through the firm. He was not sure whether he was advised of the name of the vendor. Brockway said he told Madaffari that if he was buying the property privately he had to make sure the price was a fair price and asked him whether he had arranged for a disclosure to be signed so that the vendors would know that he was the real estate agent involved."
Mr Brockway said before he saw Mr Benz on 6 July 1994 Mr Madaffari told him that he was buying the house privately and that the vendor was buying another property through Brockways. He agreed with Mr Benz that they had met in the hallway after he was told that Mr Benz wished to see him concerning his aunt who had sold a property through his office. According to Mr Brockway, Mr Benz said that his aunt had sold her property to "Jim Madaffari" and that he (Benz) was not satisfied she had got a fair price for it. Mr Brockway asked Mr Madaffari to come in and told him that Mr Benz did not feel that Mrs Pando had received adequate money for her house. According to Mr Brockway, contrary to the evidence of Mr Benz, at that stage Mr Benz was not on crutches, but "was standing tall" and appeared to be a man very much in command of himself. Mr Brockway said he told Mr Benz that Mrs Pando had the option of withdrawing from the deal. However, he conceded that such an offer would not affect her loss of opportunity of accepting Ms Bahen's higher offer. It is clear that it would also not have assisted Mrs Pando in meeting her purchase of the Kardinya House. There was some discussion about an adjustment to the price. Mr Madaffari suggested a further $5,000 and Mr Benz said he would talk to Mrs Pando. Mr Brockway then arranged for the receptionist to prepare a document explaining "the intentions of the meeting". These documents were a document to be signed by Mrs Pando, her son and Mr Benz and a confirmation of Mr Madaffari's promise of a further $5,000, both dated 6 July 1994. According to Mr Brockway, Mr Benz was present while he dictated the former document. While it was being typed, Mr Brockway asked Mr Madaffari to arrange for property value comparisons to be given to Mrs Pando, and asked Mr Benz to take the document to be signed to his aunt, make sure the property was "a fair value", discuss the details of it with her and arrange for her to sign it. He said he heard later that the document had been returned to his office.
So far as Mr Brockway's evidence was concerned, the learned trial Judge commented that:
"Although Brockway was attempting to convince me that he knew nothing of the possible sale of Holland Street and the actions of Madaffari until he (Brockway) met Benz, the evidence suggests that Brockway knew more details of the matter than he was prepared to volunteer and/or admit in evidence. Further, his evidence suggests that Madaffari had more to do with the drafting of Exhibit 1 than was suggested in cross‑examination of the various witnesses on behalf of Madaffari. Brockway accepted that the document would be difficult for people like Pando and Hofman (he having heard them give evidence) to understand in the absence of a clear explanation, but he thought Benz was quite capable of giving such explanation to Pando."
Mr Brockway said that Mr Madaffari did not make a contribution to the drafting of exhibits 1 and G1&2. This gave rise to a question by the trial Judge how Mr Brockway knew about the issue of subdivision of the house, if Mr Madaffari had not given him an account of his conduct and intentions prior to the meeting with Mr Benz. His Honour said:
"He was asked how the clause as to subdivision was included in the document and I found his answers … unsatisfactory. For example, as he was not aware of the particular block, was unaware of the knowledge and ability of the vendors as to subdivision, it was difficult to understand why that clause was included. Ultimately he said that it was possible that he believed that Madaffari 'probably would have intended to subdivide it'."
This was the basis for his Honour's comment in his reasons that Mr Brockway knew more at the time than he admitted in evidence.
The paragraph in exhibit 1 relating to the 10‑day clause in the Kardinya property is of similar import. It should also have alerted Mr Brockway to some matter of concern. His Honour noted that in a letter dated 9 November 1994 from Brockways to their insurer, Mr Brockway stated, inter alia, "I would present [80 Holland Street] at $249,000". In evidence, he said that that estimated price had nothing to do with any price Mr Madaffari had told him and that it was a mere coincidence that the prices were identical. In this respect, the learned Judge said:
"I am not able to accept that the figures of $249,000 as mentioned by Madaffari in Exhibit A [Exclusive Authority] and in the end by Brockway were entirely coincidental ‑ there was a clear possibility that Brockway knew of the figure of $249,000 even though he explained that he would have a price of some $220,000 as the ultimate selling price, but the asking price would be 10 per cent above that, ie, something 'close to' $249,000. He persisted with his evidence that he had a meeting with Benz in his room. He denied that Benz had only two brief conversations with him and said that Benz had a long conversation with him in his office …"
As to Mr Brockway's evidence, the learned Judge commented that:
"A review of the evidence of Brockway and of his demeanour during his evidence presents a rather complex picture. He was obviously very concerned to ensure that Brockways was not seen to be involved in any way with any misconduct on the part of Madaffari and that the name of the firm could be impeached in any way, and that Brockway should avoid any liability for its or Madaffari's actions. He was thus on the one hand clearly anxious to fix any blame on Madaffari, but to avoid any possible criticism of his own conduct or that of Brockways generally. He prevaricated on occasions in his evidence and sometimes he used various means of delaying his answers or avoiding answering some questions. Contrary to the impression of Pando and the various witnesses called on her behalf I did not gain the positive impression that Brockway was an honest witness. There were some examples of Brockway's evidence which suggested that his memory was not absolutely accurate and this may well have something to do with the condition which he suffers, namely chronic fatigue syndrome ‑ on a number of occasions during his evidence it was clear that he was physically in difficulty and had difficulty remembering various aspects of the matter. There are a number of areas of his evidence which could be said to be unreliable. Two examples of this are the extent of his prior knowledge of the Holland Street transaction and the circumstances surrounding his meeting with Benz and the events which occurred at that time. This will be commented on in due course."
Ms Hogg's evidence of the meeting was that Mr Brockway conducted the discussion and dictated the documents with Mr Benz contributing to spelling of names. She had worked in the past for a solicitor and so contributed to the wording.
Mr Madaffari's evidence regarding the 6 July 1994 meeting was that during the meeting Mr Brockway put the alternative of Mrs Pando being able to withdraw from the deal. Mr Madaffari said he was not particularly concerned about this because it was "an absolute headache for the purchase of what was a very small house on a very small block, and it had a lot of problems." He said he was not particularly happy with paying the extra $5,000, but was prepared to do that to finalise the matter. He spoke to his wife who agreed to do so. Mr Madaffari said the two documents signed were dictated by "both Benz and Brockway" with little input from him.
The learned Judge commented on Mr Madaffari's evidence as follows:
"My observations as to Madaffari, including his demeanour and his answering of questions during examination and cross‑examination are that of a person who was evasive on many occasions, prevaricated on other occasions and attempted to rationalise his own position. The content of his evidence and his demeanour in court led me to the firm conclusion that he was an unreliable witness and probably also untruthful. This latter impression was confirmed by review of the evidence generally."
So far as Mr Madaffari was concerned, the learned Judge found that:
"Pando accepted Madaffari's offer - she was also concerned with the necessity of selling her property within 10 days in order to secure the Kardinya property. I have already commented on the use of the blank offer and acceptance form Exhibit B. This was intentional on the part of Madaffari as part of a scheme to avoid any knowledge of the sale to himself and his wife on the part of his employer."
It was also found that:
"Madaffari had deliberately avoided advising Brockway of the contract between him and Pando. Although there may have been some incidental knowledge of the listing of Holland Street by Brockway and certain of his employees, I am satisfied that Madaffari deliberately disobeyed instructions and procedures known to him and made clear to him by Brockway and enforced at staff meetings and in conversation from time to time. Benz was relatively inexperienced in property matters ‑ certainly his experience and technical knowledge was far outweighed by that of Brockway and Madaffari. Benz assumed the role of his aunt's protector. In doing so I expect that he made more of his ability to Brockway, Madaffari and Hogg than he actually possessed. The events at the office of Brockways on 6 July 1994 are difficult to determine with any great certainty. I am satisfied however that Brockway was ignorant of the actual sale of the property until Benz spoke to him on that date. I am also satisfied that upon Brockway confronting Madaffari, the latter told Brockway more of the history of the matter than Brockway was prepared to admit in court."
It was submitted on behalf of the appellants that there was no evidence to support the final sentence of that passage. I have referred above to the basis of this finding by the trial Judge.
The learned Judge continued:
"What is clear, however, is that having realised what Madaffari had done and the difficult position Brockways may have been in as a result, Brockway determined, as is colloquially said, to go into 'damage control'. Pando through Benz, I am satisfied was offered a further $5,000. I am satisfied that the figure did not come from Benz although whether it was Brockway or Madaffari who first mentioned $5,000 I am not able to find. It is clear, however, that the offer of a further $5,000 was an attempt by Brockway and/or Madaffari to induce Pando to complete the sale and to placate Pando and Benz. Exhibit 1 was prepared at the time Benz was there as were Exhibits G1 and G2 [the document promising a further $5,000 signed by Mr and Mrs Madaffari]. Although Benz apparently read the documents I doubt that he understood them completely. Generally, I prefer the evidence of Benz, to that of Brockway, Madaffari and Hogg, as to the office meeting. I note that Brockway and Madaffari had a considerable interest in misleading me as to the meeting; both of them were of far greater intelligence and business acumen than Benz, and Brockway and Madaffari (unlike Benz) had an ability to tailor their evidence to their case. I am satisfied that Pando could not have understood the documents and in particular G1 and G2. The documents were prepared with at least some input from Madaffari.
At no time was it explained to Pando, as the actual vendor, by Brockway and/or Madaffari of [sic: what] the full import of the documents or that the sale was other than to 'close family'. Her state of mind was not changed by the documents and their execution thereof [sic]. Having reviewed the evidence I am not satisfied that Benz was advised as Madaffari and indeed Brockway suggested, that it was made clear at the meeting that Madaffari himself was buying Holland Street. Madaffari's deception in this regard was allowed to carry on."
I do not accept the appellants' contention that his Honour found, based on Mr Benz's evidence, that there was only a brief discussion between Mr Brockway and Mr Benz in the corridor, and that this finding was inconsistent with the findings his Honour then made against Mr Brockway that there was also a long discussion with Mr Brockway and Mr Madaffari in Mr Brockway's office. The trial Judge found Mr Benz's evidence was preferable "in general". He did make reference to the difficulty of determining matters with certainty, and referred to the less than solid evidence of Mr Benz, who was affected by medication. However, his Honour did find that a meeting took place in Mr Brockway's office.
It may be that the trial Judge put it too strongly when his Honour found Mr Brockway set out to continue the deceit and/or induce Mrs Pando to continue the deal in ignorance of the true state of affairs. However, in my opinion, notwithstanding the conflicts in the evidence of the various witnesses and the general preference of the trial Judge for the evidence of Mr Benz, there was sufficient evidence that:
(a)the meeting took place on 6 July 1994 in the Brockways office in which Mr Brockway sought to resolve Mrs Pando's dissatisfaction with Mr Madaffari's conduct;
(b)whether or not the option of Mrs Pando withdrawing was put, the original fraud was not overcome because when Mrs Pando was induced to sign the Offer and Acceptance she was not told (i) Madaffari was the purchaser and (ii) another person wanted to make an offer; and;
(c)Mr Brockway gave Mr Benz to understand that Mr Madaffari had authority; or
(d)Mr Brockway, having notice of Mrs Pando's dissatisfaction, did not dissociate Brockways from the transaction or ensure Mrs Pando was fully, properly and independently advised.
Significantly, Mr Brockway's evidence about his involvement was, "It was my problem because Jim Madaffari works for me".
The Central Issue
The questions to be determined concerning the issue of vicarious liability at the heart of this appeal are:
(a)Did the fraudulent conduct come within, or objectively appear to come within Mr Madaffari's scope of authority, or put another way, was it in the course of Brockways' business, as opposed to being an independent venture or frolic of Mr Madaffari's own unrelated to Brockways' business?
(b)If the answer to (a) is "No", did Brockways or Mr Brockway know about and ratify or acquiesce to Mr Madaffari's fraud?
If the answer to either question is in the affirmative, Brockways' vicarious liability will be established. The learned trial Judge did not explicitly say he was prepared to base Brockways' vicarious liability on a finding that Mr Madaffari acted within his authority. On the contrary, his Honour made an express finding that Mr Madaffari breached his "warranty of authority". He then went on to find liability based on Mr Brockway's ratification. Counsel for the respondents submitted, however, that the finding of liability did not depend on a finding of ratification, but rather that finding was merely an "add on". This is less than clear, but in my view it is a correct reading of his Honour's reasons having regard to the following. His Honour referred to Lloyd v Grace Smith & Co [1912] AC 716; Deatons Pty Ltd v Flew(1949) 79 CLR 370; and Kooragang Investments Pty Ltd v Richardson & Wrench Ltd [1982] AC 462 at 475 per Lord Wilberforce as authority for the proposition that "an employer will not be liable for the acts of an employee without authority, not being an act on behalf of his employer's own interests without any connection with the employer's business."
His Honour continued:
"There is an additional factor, however, in this case. I have found that in early July 1994, and in particular 6 July 1994, Brockway became aware that Madaffari was purchasing the property from Pando and that Pando was concerned about the price. Brockway must have been concerned about the propriety of his employee's conduct, vis a vis Pando. In the light of Madaffari's considerable ability to produce business and therefore commissions for Brockways, Brockway would undoubtedly have been concerned to ensure that this position continued. Brockway took, therefore, an active part in brokering [sic: broking] an arrangement by which Pando was persuaded to continue the contract with Madaffari." (Emphasis added.)
As I have already said, the fraud was committed within Mr Madaffari's scope of authority and so the question of ratification does not arise. But, even if it was not within authority, the involvement of Mr Brockway in the offer of the further $5,000 and the drafting of exhibit 1 constitutes ratification of Mr Madaffari's actions.
In my opinion, the material published in the magazine and the transcript of the hearing before the Real Estate and Business Agents Supervisory Board do not in any way displace or call into question the fraud consisting of Mr Madaffari's failure to disclose his own involvement as purchaser and his failure to communicate Ms Bahen's offer to Mrs Pando. It does not overcome the fact that in the meeting with Mr Benz on 6 July 1994 Mr Brockway impliedly accepted or at least gave the impression that Mr Madaffari had authority to enter the contract, notwithstanding that he confirmed that no commission would be payable to Brockways, and assisted in preparing the documents to be signed by Mrs Pando. Consequently, the nexus between Mrs Pando and Brockways was maintained.
Consequently, the magazine and transcript evidence does not affect my view of the whole of the evidence before the trial Judge and the general finding of liability upon which it is based: cf Knight v Anderson (1997) 17 WAR 85 at 87 per Malcolm CJ (with whom Murray and Heenan JJ agreed). In my opinion, the comments of McHugh, Gummow and Callinan JJ, in CDJ v VAJ (1998) 197 CLR 172 at 203, in the different context of s 93A of the Family Law Act 1975 (Cth) and the powers of the Full Court of the Family Court of Australia, do not require any modification of the approach in Knight v Anderson.
For these reasons, grounds 5 to 17 fail.
Ground 18: Fair Trading Act
It is clear that his Honour was in error to the extent that he found that Brockways was a corporation and therefore the Trade Practices Act 1974 ("the TPA") applied. His Honour also referred to s 10 of the Fair Trading Act 1987 ("the FTA") which is the equivalent in the context of State law of the TPA in its application to natural persons as distinct from corporations. Section 10 of the FTA provides that:
"A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."
By virtue of s 82(4) of the FTA:
"Conduct engaged in on behalf of a person other than a body corporate (a) by an employee or agent of the person, within the scope of the actual or apparent authority of the employee or agent … shall be deemed, for the purposes of this Act, to have been engaged in also by the first‑mentioned person."
The equivalent section in the TPA is s 84(2), which has been held to apply the conventional principles of agency to corporations: TescoSupermarkets Ltd v Nattras [1972] AC 153; Trade Practices Commission v Tubemakers of Australia Ltd (1983) 76 FLR 455 at 474 ‑ 6 per Toohey J; and see also Trade Practices Commission v Queensland Aggregates Pty Ltd (No 3) (1982) 61 FLR 52 at 66. Those authorities are of less relevance here as the appellants are not a corporation and the question of their corporate mind and will does not arise. In the case of both the TPA and FTA provisions, the same questions arise about the nature and scope of the actual or apparent authority of the representative. The fact that the act was not for the principal's benefit is irrelevant: Trade Practices Commission v Tubemakers of Australia Ltd, supra, at 474 ‑ 6 per Toohey J; see also Trade Practices Commission v Queensland Aggregates Pty Ltd, supra, at 66. It follows that, although the learned Judge was in error regarding the applicability of the TPA, the same result follows by virtue of the application of the FTA s 82(4), and the result may be upheld on that basis. It follows that ground 18 fails.
Ground 19: Damages
Ground 19 challenged the amount of damages awarded on the basis that the finding that Ms Bahen was prepared to make an offer on Mrs Pando's house of $220,000 was against the weight of the evidence, unreasonable and glaringly improbable. It was conceded by the appellant that Ms Bahen's evidence had to be displaced before regard could be had to the agreed value of the house, namely $200,000. In the absence of such displacement, even the price of $205,000 that Mr Madaffari sold the house for in 1998 was irrelevant.
It was submitted that the amount of damages should be $3,750, based on the value of the house agreed upon at trial, namely $200,000. The sum of $3,750, which it was argued was the appropriate sum of damages, was calculated as follows:
Agreed value: $200,000
Less commission not charged: $6,250
Less sum actually received by Mrs Pando: $185,000
Less further $5,000 offered on 6 July 1994: $5,000
Damages:$3,750
It was argued that the trial Judge focused on the demeanour of the witnesses and Ms Bahen in particular, in a manner which was unjustified in the light of the objective material in the evidence and the inherent commercial probabilities.
In Effem Foods Pty Ltd v Lake Cumberline Pty Ltd [1999] HCA 15; (1999) 161 ALR 599, concerning an appeal against factual findings by the trial Judge, Gleeson CJ, Gaudron, Kirby and Hayne JJ at 603; [16] say:
"Tamberlin J then went on, assigning detailed reasons, to express his views on the reliability of the four witnesses concerned. In each case those views were based in part upon observations made, and impressions formed, concerning the demeanour of the witness, but they also turned in part upon reasoning as to the plausibility of certain parts of the evidence of the witnesses, considered in the light of what Tamberlin J had referred to as 'the objective factual surrounding material and the inherent commercial probabilities, together with documentation tendered in evidence' ."
Gleeson CJ et al described this approach by Tamberlin J as an "orthodox and sensible approach". Their Honours referred to State Railway Authority NSW v Earthline Constructions Pty Ltd [1999] HCA 3; (1999) 73 ALJR 306 for the proposition that a trial Judge's findings of fact could be rejected by an appellate court where the findings were based on too fragile an evidentiary base, or were contradicted by "the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence". It was held in that case that the trial Judge was heavily swayed by his impression of the unreliability of the principal witness for the State Rail Authority when she gave her evidence. Nonetheless, it was held that the Court of Appeal was not precluded from concluding, in the light of other evidence, that the primary Judge had too fragile a base to support a finding that the witness was unreliable. There was considerable support for her allegations in the documentary evidence. In their joint judgment at 321; [64] Gaudron, Gummow and Hayne JJ, having reviewed the documentary evidence, said:
"As Kirby J and Callinan J point out in their reasons for judgment, these were matters to which weight was not given by the trial Judge or the Court of Appeal."
At 322 - 331; [72] - [92] Kirby J surveyed the history and modern principles of the role of appeal courts in dealing with or revisiting factual findings or findings of witness credit at first instance. At 331 - 332; [93] ‑ [95] his Honour provided several instances where findings of credibility by a trial Judge will be far from conclusive of the proper outcome of the entire trial, and hence of the appeal. Callinan J, at 630 ‑ 636; [138] ‑ [152] set out how, notwithstanding the advantages of the trial Judge, in that case his Honour had fallen into appealable error which in turn had not been acted on by the Court of Appeal.
In this appeal, four reasons were advanced to challenge the finding by the learned trial Judge that Ms Bahen and her husband would have offered $220,000. First, it was said Ms Bahen's claimed determination to make that cash offer was inconsistent with Ms Bahen's:
•lack of clear memory of the house (yet she recalled it in general terms even though the trial was over three and a half years later);
•failure to discuss any sale figures with Mr Madaffari;
•lack of persistence in pursuing the matter after Mr Madaffari told her the house had been promised to friends; and
•lack of serious enquiries with her bank about finance.
In my view, these factors do not in themselves indicate anything which would render the finding improbable. They can be explained by the fact that Mr Madaffari told Ms Bahen the house was already promised to friends.
Secondly, reference was made to a purchase Ms Bahen and her husband did actually make of a West Leederville house. The Offer and Acceptance form for that sale shows that some negotiation over the sale price had occurred before final agreement on a price of $195,000. The appellants said this contradicted Ms Bahen's evidence that she wanted to make a first and final cash offer of $220,000 for Mrs Pando's house. I do not accept that proposition. It cannot be deduced from conduct in relation to a different property purchase how she would have dealt with this one.
Thirdly, it was said that the evidence in a Brockways phone message book, to the effect that Ms Bahen phoned Brockways seeking to speak to Mr Madaffari and, when told that he was unavailable, said she would phone him on his mobile phone, contradicted Ms Bahen's evidence that it was Mr Madaffari who phoned her. I do not see that this point makes any difference one way or the other. The relevant point of Ms Bahen's evidence was that Mr Madaffari told her that the property was not available because it had already been promised to others.
Fourthly, the appellant pointed to the absence of corroboration by Ms Bahen's husband, Mr Dixon. Reference was made to Commercial Union Assurance Co of Australia v Ferrcom Pty Ltd (1991) 22 NSWLR 389 for the proposition that where, as here, a witness is not questioned on a matter, it can be assumed that that witness' evidence would not have been helpful. Handley JA said at 418E ‑ 419C:
"In my opinion the Court should not draw inferences favourable to the insured on these matters when no attempt was made to prove them by direct evidence and in particular when no relevant questions were asked of Mr Ferrarese. Rather it seems appropriate to apply the principles of Jones and Dunkel (1959) 101 CLR 298.
There appears to be no Australian authority which extends the principles of Jones v Dunkel to a case where a party fails to ask questions of a witness in chief. However I can see no reason why those principles should not apply when a party by failing to examine a witness in chief on some topic, indicates 'as the most natural inference that the party fears to do so'. This fear is then 'some evidence' that such examination in chief 'would have exposed facts unfavourable to the party': see Jones v Dunkel 320 – 321 per Windeyer J. Moreover in ex parte Harper; Re Rosenfield [1964 – 5] NSWR 58 at 62, Asprey J, citing Marks & Thompson 1 NYS 2d 215 (1937) at 218, held that inferences could not be drawn in favour of a party that called a witness who could have given direct evidence when that party refrained from asking the crucial questions."
The gist of that decision is that a court should not draw inferences on a relevant issue favourable to a party whose counsel refrains from asking questions of a witness who could have answered them. On the contrary, the opposite inference is open, namely, that the testimony would have been harmful. Handley J cited the decision of Follett J of the Appellate Division of the Supreme Court of New York in Milliman v Rochester Railway Co 3 App Div 109; 39 NYS 274 (1896) at 276.
In the present case the trial Judge did not draw any inference from Mr Dixon's evidence either way about the inherent probability of Ms Bahen's evidence in relation to the offer she was prepared to make. His Honour had the evidence of Ms Bahen about her intended offer. He described Ms Bahen in the following terms:
"Bahen was a very direct, confident and apparently sincere witness. She did not prevaricate in her evidence at any time nor was she hesitant. My impression was that she was honest and straightforward and a witness on whom I could rely."
Mr Dixon's evidence was directed to his and Ms Bahen's financial capacity, not to the amount they were prepared to offer. It was open to the defendant's counsel at trial to cross‑examine Mr Dixon on this issue. He did not do so. It is significant in this respect that counsel for the appellant expressly disavowed any argument that Ms Bahen was lying.
In my opinion it has not been shown that the trial Judge's finding on the assessment of damages was wrong because it was based on any "glaringly improbable" evidence of Ms Bahen. The trial Judge was entitled to accept her evidence. For these reasons ground 19 fails.
Ground 20: Brockway's Claim for Contribution against Madaffari
Ground 20 was that the trial Judge erred in dismissing the Brockways' claim for contribution against Mr Madaffari and denied the appellants' natural justice in giving insufficient reasons for such dismissal.
Section 7(1)(c) of the Law Reform (Contributory Negligence) Act 1947 provides that a joint tortfeasor may recover contribution:
"… from any other tortfeasor who is or would if sued have been liable in respect of the same damage whether as a joint tortfeasor or otherwise but so that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability for which contribution is sought.
A person shall be entitled to be indemnified within the meaning of this paragraph ¾
(i)if his complicity in the tort arose from fraud or misrepresentation practised on him by the person from whom the indemnity is sought so that he honestly believed and had no reasonable cause to suspect the truth of the matters represented to him and would not have been liable in tort if such matters had been true;
(ii)where the act was not clearly illegal or tortious in itself and the person seeking indemnity had no knowledge when the tort was committed of the true legal character of the act;
(iii)where he is responsible on grounds of vicarious liability as for example in the case of master and servant or as a member of a partnership where the act was done without his connivance, knowledge or express authority."
After referring to s 7(1)(c) and to the common law (as stated in Behrendorff v Soblusky (1957) 98 CLR 619) as the basis for claims for contribution and indemnity, the trial Judge said:
"I have already found that there is a basis in the evidence upon which it could reasonably be inferred that Brockway was aware of the existence of Holland Street as a possible sale by Madaffari (and Brockways) and that on or about 6 July 1994 Brockway became aware of the sale by Pando to Madaffari and his wife. I have made findings as to Brockway's actions thereafter. In my view, these findings prevent Brockways claiming any indemnity or contribution from Madaffari."
In light of the conclusion I have already reached concerning ratification, and having regard to the rule that a principal who ratifies his agent's wrongs cannot obtain indemnity against his agent, it is sufficient to say that this ground fails. However, part of the fraud by Madaffari was concealing the higher offer Ms Bahen was prepared to make. This was not known to Mr Brockway at all, and so it could not be said that this aspect of Mr Madaffari's conduct was ratified. For Brockways to be liable for that fraud, it would have to be found that it occurred within the scope of Mr Madaffari's express or implied authority. In my opinion, it was. However, in relation to this ground concerning a claim for indemnity, the Act uses the term "express authority" (my emphasis), which is subtly but relevantly different insofar as it excludes implied or ostensible authority.
There was no evidence that Mr Madaffari acted with the "express authority" of Mr Brockway in the first instance to make an offer and procure Mrs Pando's acceptance of it whilst concealing a higher offer. His actions were later ratified and approved on the basis that he paid an additional sum of $5,000 to Mrs Pando. But that ratification and approval was not made or given on the basis of full disclosure by Mr Madaffari. There was nothing to suggest that Mr Brockway knew of the proposed offer from Ms Bahen. This was an aspect of Mr Madaffari's fraud which fell outside the knowledge of Mr Brockway, because it was concealed by Mr Madaffari. This could open up a possible ground for a claim for contribution by Mr Brockway against Mr Madaffari, at least so far as the damages awarded reflected the failure of Mr Madaffari to pursue the Bahen offer is concerned. In my opinion, however, that would not necessarily entitle the appellants to a full indemnity from Mr Madaffari, but only in relation to the failure to act on the proposed Bahen offer. This possibility of a limited indemnity was not the subject of investigation or argument at the hearing of the appeal. Consequently, I say nothing more about it. If it is to be pursued, further argument would be required.
Effect of Madaffari not Appealing
Mr Madaffari did not appeal or appear in the appeal. The Court received correspondence from his solicitors confirming that he would not be participating in the appeal. It was argued on behalf of Mrs Pando that the appeal could not be allowed in respect of vicarious liability because to do so would give rise to inconsistent judgments. This was said to be because of the nature of vicarious liability being the attribution to the employer of the employee's conduct. Hence, to succeed on appeal would require variation of findings against Mr Madaffari, which it was contended was not permissible. Reference was made to Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 599 ‑ 601 per Gibbs CJ, Mason and Aicken JJ; and Tanning Research Laboratories Inc v O'Brien (1990) 169 CLR 332 at 346 per Brennan and Dawson JJ. Whether or not those authorities support the respondent's submission, I do not accept the premise that a successful appeal would result in inconsistent judgments. The trial Judge's finding of fraud on the part of Mr Madaffari was not challenged on appeal. The only questions were whether his conduct came within the scope of authority vested in him by Brockways or was ratified by Brockways. In other words, the issues in the appeal concerned Brockways, and specifically Mr Brockway's conduct, not Mr Madaffari's conduct and the findings against him. Therefore it is not necessary to consider Rutherford v Richardson [1923] AC 1 and Chappuis v Filo (1990) 19 NSWLR 490 referred to by the appellants in answer to this argument. In any event it is not correct, in my opinion, that the appellants should be denied their right to appeal simply on the basis that another defendant has not appealed.
Natural Justice
The appellants advanced denial of natural justice arguments at various points in respect of certain findings of the trial Judge. It was said the reasons did not sufficiently state the basis of the findings. While his Honour's reasons were, with respect, lacking in clarity in some respects, when read as a whole they do provide sufficient findings of fact and explanation of the relevant basis in law for the conclusions reached and the orders made so as to preserve the appellants' rights of appeal. They do provide this Court with sufficient reasons to enable consideration and determination of the correctness of the relevant conclusions: Cooper v Director of Liquor Licencing, unreported; FCt SCt of WA; Library No 990109; 16 March 1999, at 18 ‑ 19 per Malcolm CJ.
For these reasons, subject to the reservation regarding ground 20 which concerns Mr Madaffari as second respondent, I would dismiss this appeal as against the first respondent Mrs Pando.
KENNEDY J: I have had the benefit of reading in draft the reasons published by Malcolm CJ. I am in agreement with those reasons and with the orders his Honour proposes.
MURRAY J: In my view also this appeal should be dismissed. I have nothing to add to the very comprehensive reasons published by Malcolm CJ.
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