Butcher & Anor v Lachlan Elder Realty Pty Ltd

[2003] HCATrans 396

[2003] HCATrans 396

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S342 of 2002

B e t w e e n -

JEFFREY GORDON BUTCHER and JUDITH KAY RADFORD

Applicants

and

LACHLAN ELDER REALTY PTY LIMITED

Respondent

Application for special leave to appeal

McHUGH J
KIRBY J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 3 OCTOBER 2003, AT 9.35 AM

Copyright in the High Court of Australia

MR R.J. ELLICOTT, QC:   Your Honours, I appear for the applicant with MR G.A. MOORE.  (instructed by Williams Woolf & Zuur)

MR L.G. FOSTER, SC:   If the Court pleases, I appear for the respondent.  (instructed by Murray Stewart & Fogarty)

McHUGH J:   Yes, Mr Ellicott.

MR ELLICOTT:   Your Honours, this is one of two matters in the list that follow one another.  They are all probably in constitutional terms ‑ ‑ ‑

KIRBY J:   We cannot hear you, Mr Ellicott.

MR ELLICOTT:   ‑ ‑ ‑ all part of the one matter.  I am approaching this, your Honours, on the basis that there was a plan on a brochure that showed that the waterside boundary of the land was beyond the swimming pool, whereas the title to the land when measured showed that it went through the middle of the swimming pool.  That led, of course, to great consternation and the contract was not completed.

Your Honours, it really has to do to a large degree with Yorke v Lucas.  I have handed up a page which has the relevant part of York v Lucas in it.  This statement was obiter because section 75B was the real question, but if one goes to just below the citation of those cases:

That does not, however, mean that a corporation which purports to do no more than –

that is the important phrase –

pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false.  If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive.

Before I take your Honours to the brochure, a copy of which you have, could I just take your Honours to some passages in the judgment of Justice Austin.  First of all, AB 7, paragraph 16:

The plaintiffs inspected the Rednal Street property with Mr Spring –

he is of the real estate company, the respondent.

They . . . observed a swimming pool with various improvements adjacent to it, located between the dwelling and the waterfront.  Mr Spring did not show Mr Butcher a draft contract at that time, but he handed plaintiffs a glossy coloured brochure which depicted the property.  The plaintiffs allege that he said:

‘These are all the details for the property.  You have a full coloured brochure on the front and all the council outgoings land survey etc on the rear.  That is everything you need to know.’

Mr Spring denies saying “that is everything you need to know’.  It seems to me likely that he used some such words, but within their context, those words did not convey a representation that the brochure contained all the information that a purchaser would need before entering into a contract of purchase.  Rather, the statement conveyed that the brochure was a very helpful document which conveniently put together in a single place the answer to some questions that purchasers typically asked.

KIRBY J:   It is not an unimportant question as to whether the swimming pool is on your property.

MR ELLICOTT:   It is very important, particularly if you are waterside and you are in Pittwater and you are going to have to pay $1 million plus in 1997.  Then, paragraph 20:

The diagram shows an irregular line running across the property . . . In my opinion, a reader of the brochure who compared the diagram with the photographs on the other side would conclude that the ‘M.H.W.M.’ line was approximately the line of the fence.

Then on page 10 at paragraph 26:

For their inspection of the Rednal Street property they were accompanied by Paul Gillmer, an architectural designer retained by the plaintiffs.  At the site, Mr Butcher told Mr Elder that he planned to turn the pool around and have it by the side boundary, to open up space for entertaining.  Mr Elder was sceptical, saying –

Mr Elder, of course, is one of the respondent’s officers –

the plan would be expensive to implement and the pool would encroach the mean high water mark.  Mr Gillmer advised Mr Butcher that the idea of ‘moving’ the pool was feasible, based on the position of the high water mark indicated by Mr Butcher, in reliance on the diagram in the brochure.

And then a short passage at page 11:

The plaintiffs have given evidence that they would not have bid at the auction or contracted to purchase the Rednal Street property if they had known that the mean high water mark traversed the swimming pool.

Your Honours have the brochure there and will see that in the front it has an inset of a photograph with a swimming pool and the fence and then glorious Pittwater.  Looking at that one would assume, I would suggest, that the swimming pool was within the land, that is, the title to the land, even if you knew that there was a permissive occupancy somewhere.

Then over there is what I suppose you might think is a surveyor’s plan.  It is not in such print that you can read everything but there it is, but it shows MHWM, mean high water mark, for those who understand a bit.  For those who do not, it would certainly indicate, we say, to a purchaser, that the fence that is shown in the small photograph, as his Honour found, was where that line is, which has what we understand to be mean high water mark on it.

There is material on the left, “Set in the best position”, I will not read it all, but it is obviously promotional material extolling the virtues, and then at the bottom “nobody does it better”, “L.J. HOOKER Mona Vale”, and then in small print:

All information contained herein is gathered from sources we deem to be reliable.

That is important.

KIRBY J:   Read on.

MR ELLICOTT:  

However we cannot guarantee its accuracy and interested persons should rely on their own enquiries.

Now, first of all, there is obviously a question whether anybody would be expected to read it, it is in such small print, but at least it warrants the accuracy in the sense that it says, “is gathered from sources we deem to be reliable”, so they have put their imprimatur on it.

KIRBY J:   Can it be said that when you purchase something as valuable and expensive as this that you do not rely on brochures but you rely on the searches of your solicitors?

MR ELLICOTT:   It would be a question of fact in each case and, of course, you might rely on both, but for the purposes of the Trade Practices Act you may still get damages, because you have relied on both, you can get it in relation to each.

KIRBY J:   One could turn that around the other way and say because it is so valuable and because it is so important this Court should not send signals that you can just put any old thing in them, they should be accurate.

MR ELLICOTT:   That is right, your Honour, and, of course, that is why this is a matter of significance because it is happening every day of the week, that brochures are going out with information about the property.  I am reminded it was an auction where this was sold.  So we have a document which is a selling tool.  There is a photo on the front.  We say it is clear that Elders endorsed the accuracy of it and they say “nobody does it better” and the disclaimer only confirms it.

McHUGH J:   To get special leave though you have to elevate the background or the facts into some proposition of law.  Is your point this, that the legal question is, does a person who prepares a document based on information supplied to another engage in false or misleading conduct if the information is false or misleading, as a matter of law?

MR ELLICOTT:   It does involve that and it involves the borderline between where it is not misleading for that person to convey it and where it is.

McHUGH J:   In the law of defamation there would be no doubt that the respondent would be liable for any defamatory statements contained in the brochure, notwithstanding they were based on information supplied by others.

MR ELLICOTT:   Yes.

KIRBY J:   That is a tort of strict liability though.

McHUGH J:   It is still a question of publication.

MR ELLICOTT:   Yes.  Prima facie, there is a document uttered by the estate agent who is in trade or commerce and that has something misleading in it and, prima facie, it is misleading and deceptive conduct.  But a court might decide it is not because when looking at it you can conclude that in the circumstances all he was doing was merely passing it on for what it was worth and not giving it any credence of its own.

McHUGH J:   But as a matter of law there may be a distinction between simply passing on a statement made by somebody else and preparing one’s own document incorporating information and then publishing your own document.

MR ELLICOTT:   Yes, and we say that is exactly what they have done here.  They have done it for the purposes of trade and they have done it for the purposes of obtaining what is quite a substantial commission on properties over $1 million and, therefore, that sense of accuracy needs to be guarded against and people should be not warned within simple terms ‑ even if that was a warning, it is more of an endorsement than a warning.  When you see the evidence adopted by the trial judge, that they went to the block and then there is a discussion about the mean high water mark and Mr Elder says, “If you do that, you might pass beyond the mean high water mark”, that was endorsing the fact that the swimming pool was within it, and that is a selling point, that is part of the negotiation for sale, trying to make the would‑be purchaser comfortable about purchasing this property.

Your Honours, just to quickly go to what Justice Handley found.  That is at 105, paragraph 47:

The only representation in the brochure as to the location of the pool in relation to the title boundary was that conveyed by the diagram reproduced on the back.

We would say that is a very confined statement and is inaccurate, with respect.

McHUGH J:   It was paragraph 45 that gave me some concern because his Honour sought to apply a proposition of a common law conveyancing in the very different context of the Trade Practices Act, which has a different purpose for the protection of consumers, and his Honour at paragraph 46 says that “these principles should not apply to other agents as well”.  So, in effect, his Honour is saying you have to take the greatest caution in requiring statements by estate agents to contain representations when they are based on information given by their clients.

MR ELLICOTT:   Yes, and he says:

The text contained nothing of relevance for present purposes.

I have taken the Court to what we would submit is relevant.

The agents represented that the reproduction was an accurate copy of what they believed was a genuine and correct survey diagram.

Where one obtains that from, except by silence, I do not know, but that is what his Honour said.

In my judgment they made they made no representation as to its accuracy.  The question can be tested –

and he just treats it as handing copies of a survey report and diagram and it goes back, of course, to what your Honour the presiding Justice said in relation to paragraph 45.

KIRBY J:   We have to look at it on whether this – if the views that Justice Handley has expressed become a general rule, then real estate agents in very valuable properties can make representations concerning a very important matter and that that does not breach the Trade Practices Act.  That might be the correct conclusion, but at least it is an arguably important question.

MR ELLICOTT:   Yes.  Your Honours, there was a case in the Federal Court called John Glass and your Honours have a copy of ‑ ‑ ‑

McHUGH J:   Yes, it is to the contrary, is it not?

MR ELLICOTT:   It goes the other way and, really, there are two decisions, one of the Federal Court and one of the Court of Appeal ‑ ‑ ‑

KIRBY J:   The only issue is it seems a big fight over what, in national terms, is a comparatively small matter.  We would not want to become caught up in it simply to, as it were, dispose of the final costs outcome of this litigation.

MR ELLICOTT:   No, your Honour.

KIRBY J:   That is a matter that concerns me, that it has become a federal case, as it were, literally.

MR ELLICOTT:   Every litigant, if they satisfy the requirement, are entitled to have that special leave if it is a matter of public importance and it is a matter of public importance, we say, because it deals with everyday relationships between estate agents and would‑be purchasers at auction and the proclivity of estate agents ‑ ‑ ‑

McHUGH J:   It seems tragic though.  It appears as though costs are driving both this case and the following case.

MR ELLICOTT:   It may, your Honour, and there may be issues of damages that hang around in relation to what we have suffered as a result of this.  There are other issues but, your Honours, that is the basis upon which we seek special leave.

McHUGH J:   Yes, we will might call on your opponent, Mr Ellicott.

MR FOSTER:   Your Honours, there is another aspect to the application, which is the other property, the Calvert Parade property.  My learned friend said nothing about that.  We would submit that is clearly a question of fact that has been decided appropriately and there is no basis for this Court interfering in that part of the special leave application.

KIRBY J:   Remind me of what that point is.

MR FOSTER:   Yes, your Honour.  I can tell your Honour and then I will give your Honour a reference.

KIRBY J:   Just tell us.

MR FOSTER:   The agents made some comments and gave opinions as to value in respect of the other property owned by the applicants.

KIRBY J:   Yes, that is right.

MR FOSTER:   The proposition put below was that they relied upon that in order to purchase the case about which your Honours have heard this morning.

KIRBY J:   On the face of things, we would not want to get involved in that sort of thing.

MR FOSTER:   No, and I just want to clear that away, your Honour, if I may.

KIRBY J:   Mr Ellicott did not mention it.

MR FOSTER:   No, so I am not going to say any more about it other than that it is there.

KIRBY J:   It is his style to mention everything that has any legs.

MR FOSTER:   Your Honour, it comes back then to the question that has been raised by Mr Ellicott.  Our primary submission is it is not a question of law at all, it is a question of fact.  Whilst this Court can obviously take notice of the fact that real estate agents issue brochures and other advertisements and material from time to time, just exactly what impact that might have and what it actually might convey will depend upon the circumstances on each occasion.  For example, the John G. Glass Case ‑ ‑ ‑

KIRBY J:   Yes, but the pool is shown within the property and that was not true, the property line went through the pool, and this decision, as it were, says it does not matter much, and that is a bad decision on the face of things.

MR FOSTER:   Your Honour, it does not quite say that.  What the court found was – the trial judge found that the vendor made a representation about the accuracy of the diagram and would have been liable under section 52 but for the fact it was not in trade or commerce.  The distinction, of course, as your Honours know, is between the vendor on the one hand and the agent on the other.  Just exactly what is it that the agent conveys in circumstances when brochures and advertisements are handed out and published?

KIRBY J:   Yes, but, Mr Foster, Immanuel Kant taught in philosophy that you test moral propositions by what happens when they become a general rule and, similarly, I think in law, you have to test legal propositions by what happens if it becomes a general rule, especially at the level of this Court.  As a general rule, that would be – we all know from reading newspapers how important waterside properties are, how valuable they are, they are on the international market, and what happens if this decision is upheld is that a person who has been misled at an auction is held to have no entitlement under the Act, which is designed to protect consumers.  That might be the law, but it seems an odd result.

MR FOSTER:   It is not quite that, your Honour, it is no entitlement against the agent, but there is plenty of entitlement against the ‑ ‑ ‑

KIRBY J:   Yes, but the agent is in this for big bucks. 

MR FOSTER:   Yes.

KIRBY J:   The law should send a signal to agents.  You do not just say down the bottom “we have done the best but check yourself”, especially at auctions.  You have to be accurate, especially in big properties.

MR FOSTER:   But, your Honour, the particular subject matter of what is conveyed by that document is – where the pool is is part of it, I accept that and have to, but it is plain, in our submission, that that reproduced diagram is part of a surveyor’s report and, as the trial judge found and the Court of Appeal found, the agent did not add or convey anything additional when that was incorporated into that brochure.  It was plain it was a surveyor’s report and both courts below held that in that circumstance the agent, unless he does something else, is not adding anything.

McHUGH J:   But that is the whole point, is it not?  Having produced the document, why should the agent not be responsible for the document?  The difficulty I have at the moment, Mr Foster, is that the Court of Appeal seems to have laid down a prima facie rule which weighs against the applicant in this sort of case.  It says “great caution”.  You have to approach these brochures with great caution in determining that they contain a representation.

KIRBY J:   It does not seem to be the standard of the Trade Practices Act.

MR FOSTER:   If it is put as a principle of law, that may be going too far.

McHUGH J:   It is most unfortunate that Dean v Allin was referred to.  It might have been regarded as a straight‑out question of fact case, but it does seem to me at the moment that the Court of Appeal has stacked the deck against the purchasers in this class of case.

KIRBY J:   And it is said to be a different standard than the Federal Court has adopted in Glass.

MR FOSTER:   Your Honours, it is not really.  Glass is a question of fact.  That is plain from the judgment itself.  Do your Honours have a copy of that?

McHUGH J:   Yes.

KIRBY J:   They are all questions of fact but they are fact as applied to an Act which is designed to protect consumers.

MR FOSTER:   That is accepted, your Honour, that principle is not gainsaid.  As your Honours will see, if your Honours look at page 41,359 in the Glass report, in the first column under the references to the cases, the Full Federal Court in that case clearly categorised this whole question as a question of fact.  In that case, of course, there were a number of facts present which were not here.  So the approach taken by the Full Federal Court was, as your Honour Justice Kirby is putting to me, to articulate an appropriate principle and apply it to the facts.

I have to accept that Justice Handley appears to have picked up what is in Dean v Allin, but when one actually looks at what he did in paragraph 47 at application book 105, what he did was to simply look at the diagram having regard to the other findings of fact that had been made by the trial judge earlier and which he recaptured, starting at 99, all of which were contextual matters in terms of how this brochure would be understood and received.  Your Honour, it does not in the end lend itself very simply to the proposition that Mr Justice Handley has taken Dean v Allin and applied it inappropriately to the Trade Practices Act but, rather, he has taken that as what is happening elsewhere and simply looked at the facts in this case.

KIRBY J:   Were the facts here that the purchasers had prior notice of this brochure or did they simply turn up at the auction and the brochures were there?

MR FOSTER:   No, it was given to them at the property before the auction.  Their solicitor obtained a contract and advised them on it.  In that contract was a copy of that survey diagram.  That was one of the factors that Justice Austin ‑ ‑ ‑

KIRBY J:   But between the time that happened – I mean, this is a very responsible real estate agent, well known and I would think it fair to say respected.  It is not a fly‑by‑night agent.  I would have thought, contrary to what Justice Handley says, that you would be entitled to think that with such a valuable property such a real estate agent would show care in making such a representation over such a lot of money, knowing that there may be people who will turn up at the auction who just look at the brochure and do not have time to get their solicitor – people do that, they wake up on a Saturday morning and say, “I am going to buy a waterfront property”.

MR FOSTER:   Your Honour, I do now know in what circles your Honour moves, but I do not think people do do that, with respect.

KIRBY J:   Well, I did.

MR FOSTER:   All I can say in answer to that, your Honour, is that I would not.

KIRBY J:   I would have got a bit of a shock if the line had gone through the pool.

McHUGH J:   And he has profited well from it too.

MR FOSTER:   But the problem really is, your Honour, that it is not a question of negligence, that is not the case that is put here.  The case is, what is conveyed in the circumstances of this case by that brochure?

McHUGH J:   I know and you have the advantage of concurrent findings of fact in your favour.  I must say I am probably very naïve, but it really does surprise me that Justice Handley took the view at the bottom of 105 in paragraph 48 where he said:

I see no good reason why they would intend to represent that it was in fact accurate, or why the recipients would think that the agents were making any such representation.

I must be very naïve.  I would have thought that they did intend and that ordinary people would think they intended it to be accurate.

MR FOSTER:   I think the distinction, your Honour, that he has drawn ‑ ‑ ‑

McHUGH J:   He draws a distinction between people who only think that they believed it was accurate, as opposed to it being in fact accurate.  People who buy properties are not interested in people’s beliefs; they are interested in facts.

MR FOSTER:   One of the matters that one would test this proposition against is what is it that the agent in the particular case has by way of expertise?  What is it that ordinarily agents have by way of expertise?  If one takes it from that angle rather than from the purchasers’ point of view, all one sees here is a real estate agent – people who act on the sale of properties.  He is not a surveyor.  So what is it, one can ask rhetorically, about this diagram and this agent’s activities that would connect the two in the sense in which it would be necessary to connect it to make the point?

McHUGH J:   But in this area you have to guard against the approach of the medieval schoolman and analyse these documents up hill and down dale.  You have to think of what ordinary people do when they read these documents.  It would not surprise me if most ordinary people, looking at this brochure, would think it was a representation as to what it purports to represent.

MR FOSTER:   But that is the issue ‑ ‑ ‑

McHUGH J:   That is a question of fact, but the real concern, as I suggested to Mr Ellicott, is whether or not the Court of Appeal has, in effect, laid down a prima facie rule of construction in this class of case, based on Dean v Allin.

MR FOSTER:   That cannot be, your Honour, because ‑ ‑ ‑

McHUGH J:   His Honour says:

There is no reason why these principles should not apply to other agents as well.

So, prima facie, if that is going to become the rule, then ‑ ‑ ‑

KIRBY J:   It chips away at the Trade Practices Act, it undermines the policy of the Federal Parliament, and common law rules cannot do that.

MR FOSTER:   It is a question of really whether or not his Honour has done as much as his Honour Justice McHugh suggests or, rather, whether he has simply taken it as a guideline, applied appropriate principles in 47 and 48, and come to the conclusion on the facts.

KIRBY J:   We are not deciding the matter now.

MR FOSTER:   No.

KIRBY J:   You might well win because, as Justice McHugh said, you have concurrent findings of fact, and it is a very rare thing that they are disturbed.  But the issue is, should the Court look at it?

MR FOSTER:   And why I am dwelling on the factual side of it is this, your Honours, that whilst my learned friend can present the brochure on its own, this brochure and other brochures are not presented on their own.  They are always part of exchanges that occur.  It is questions of fact.  Your Honour Justice McHugh is right.  Unfortunately, this case and the next one are somewhat driven by costs from our perception ‑ ‑ ‑

McHUGH J:   Of course.  It sticks out a mile.

MR FOSTER:   ‑ ‑ ‑ and the High Court is probably going to be asked to involve itself in a facts case which really is only tenuously connected to perhaps a wrong application of principle in paragraphs 45 and 47, and we submit this is not an appropriate case for the High Court to do that.  Now, John G. Glass is a facts case.  They are not inconsistent approaches at all.

KIRBY J:   I think you are repeating yourself now.

MR FOSTER:   Yes, I am, your Honour.

KIRBY J:   You have put your case very effectively.  It is just a question of whether there is a principle here that judges should not approach the Trade Practices Act with the baggage of old common law doctrine.  It is a new statute for a consumer age.  That is the question.

MR FOSTER:   I do not wish to repeat myself further, your Honours.

KIRBY J:   Either do I.

McHUGH J:   Yes, we need not hear you in reply, Mr Ellicott.  There will be a grant of special leave, confined to this one point in respect of this property.  I do not know whether your notice of appeal needs amending, does it?

MR ELLICOTT:   No.  Your Honour, I did not mention the other matter because ‑ ‑ ‑

KIRBY J:   You are not going to try and slip it in now, Mr Ellicott.

MR ELLICOTT:   No, your Honour, I was hoping it would just stay there.

AT 10.05 AM THE MATTER WAS CONCLUDED