Carter v Delgrove Holdings Pty Ltd
[2013] FCCA 783
•12 July 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CARTER & ANOR v DELGROVE HOLDINGS PTY LTD & ANOR | [2013] FCCA 783 |
| Catchwords: CONSUMER LAW – Auction of applicant’s home – respondents bid below reserve but vendors authorise property to remain on the market – property then knocked down to the respondent – respondent then leaves auction without executing contract – rescission by vendors who sue for loss and damages under Competition and Consumer Act (and Fair Trading Act) and at common law on the contract – whether conduct in trade or commerce – whether conduct misleading or deceptive – whether loss or damages “because of” contravention – whether Statute of Frauds (UK) 1677 applicable to contract claim. |
| Legislation: Competition and Consumer Act s.131 Fair Trading Act s.19 Corporations Act 2001 ss.128, 129 Australian Consumer Law Instruments Act 1958 Property Law Act (WA) s.34 Law Reform (Statute of Fraud) Act 1962 |
| Cases cited: Philip Morris Inc. v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 Wakim RE: Ex Parte McNally (1999) 198 CLR 511 Franich v Swannell (1993) 10 WAR 459 O’Brien and Anor v Smolonogov and Anor (1983) 53 ALR 107 Ku-ring-gai Corporative-Building Society (No.12) Ltd (1978) 36 FLR 134 Shone v Davies [2012] WASCA 83 Futuretronics International Pty Ltd v Gadzhis [1992] 2 VRE 217 McGrath and Anor v Australian NaturalCare Products Pty Ltd [2008] FCAFC 2 Jones v Dunkel [1959] HCA 8 Demagogue Pty Ltd v Ramensky [1992] FCA 557 Johnston Tiles Pty Ltd v SO Australia Ltd [2000] FCA 1572 Kimberley NZI Finance Limited v Torero Pty Ltd (1989) ATPR (Digest) 46-054 Briginshaw v Briginshaw [1938] HCA 4 Henville v Walker [2001] HCA 52 Wardley Australia Ltd v Western Australia [992] HCA 55 Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd [1987] FCA 230 Barrington Castings Ltd v Wardlaw [1956] AC 613 Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357 Adamson v Haighs [1974] 130 CLR 276 Wright v Madden (1992) 1 QdR 343 Alonso v SRS Investment (WA) Pty Ltd 2012 WAC 168 Lang v Miller [1879] 4 CPD 450 |
| First Applicant: | JEREMY CARTER |
| Second Applicant: | HELEN CARTER |
| First Respondent: | DELGROVE HOLDINGS PTY LTD (ACN 051 442 436) |
| Second Respondent: | ATA ILAHI |
| File Number: | PEG 402 of 2011 |
| Judgment of: | Judge Lindsay |
| Hearing date: | 6 December 2012 |
| Date of Last Submission: | 6 December 2012 |
| Delivered at: | Perth |
| Delivered on: | 12 July 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr A Rumsley |
| Solicitors for the Applicant: | Alan Rumsley |
| Counsel for the First Respondent: | Mr R Lindsay |
| Solicitors for the First Respondent: | iLaw Barristers & Solicitors |
| Counsel for the Second Respondent: | Mr R Lindsay |
| Solicitors for the Second Respondent: | iLaw Barristers & Solicitors |
ORDERS
The application filed on 23 December 2011 including the Amended Statement of Claim filed on 9 October 2012 do stand dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 402 of 2011
| JEREMY CARTER |
First Applicant
| HELEN CARTER |
Second Applicant
And
| DELGROVE HOLDINGS PTY LTD (ACN 051 442 436) |
First Respondent
| ATA ILAHI |
Second Respondent
REASONS FOR JUDGMENT
(As Corrected)
These proceedings involve an application by the registered proprietors of a home at 121 Riverton Drive West Rossmoyne Western Australia (herein after “the property”) for damages for misleading or deceptive conduct under the Australian Consumer Law and for damages for breach of contract arising out of an auction of the property conducted on 11 June 2001.
At trial the property had an agreed value of $3.275million.
The first respondent is a company which is the trustee of a family trust. The second respondent is a director and shareholder of the first respondent and a beneficiary of the family trust.
The claim of the applicants is set forth in an amended statement of claim dated 9 October 2012.
There are very few factual matters in contention. Those that are in contention are not, for reasons indicated herein, in my view significant factual issues.
The claims against the respondents arise under both laws of the Commonwealth and of the State of Western Australia. Each of the parties filed affidavits constitutive of the evidence-in-chief of their witnesses. Objections to the admissibility of certain parts of those affidavits were dealt with during the course of the hearing. There was cross examination of a number of the witnesses. I had the benefit of extensive written submissions from counsel for the parties both before and at the conclusion of the hearing.
In 2010 the Commonwealth Parliament introduced the Competition and Consumer Act (herein after “the CCA”). Section 131 of the CCA provides that Schedule 2 to the CCA applies as a law of the Commonwealth to the conduct of corporations. Schedule 2 contains the Australian Consumer Law (hereinafter “the ACL”).
In 2010 the Western Australian Parliament passed the Fair Trading Act (herein after “the FTA”). Section 19 of the FTA provides that the ACL applies as a law of the jurisdiction of Western Australia. Section 18 of the ACL provides:
18 Misleading or deceptive conduct
(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 4 of the ACL provides:
4 Misleading representations with respect to future matters
(1) If:
(a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b) the person does not have reasonable grounds for making the representation; the representation is taken, for the purposes of this Schedule, to be misleading.
(2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a) a party to the proceeding; or
(b) any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
(3) To avoid doubt, subsection (2) does not:
(a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or
(b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.
(4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:
(a) a misleading representation; or
(b) a representation that is misleading in a material particular; or
(c) conduct that is misleading or is likely or liable to
mislead;
and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation.
Section 236 of the ACL deals with action for damages. I set out the relevant parts of that section hereafter at [133] when dealing with the question of loss.
Section 237 of the ACL provides for compensation orders. I set out the relevant parts of that section at [134] hereof.
This Court has a jurisdiction to determine the non-Federal aspect of the claim in accordance with its accrued jurisdiction as described by Federal Court authority which goes back at least as far as Philip Morris Inc. v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457. Jurisdiction is conferred on this court to determine the application under the ACL, not only in relation to claims brought specifically under the Commonwealth Act, but claims brought under aspects of other Acts and the common law provided those claims form part of the same single justiciable controversy (see also Wakim, RE; Ex Parte McNally (1999) 198 CLR 511 at 585 per Gammow and Hayne JJ).
Even if the federal aspect of the claim fails the court is not necessarily deprived of jurisdiction to determine the non-federal claims. (See the discussion of this issue by French J as he then was in Johnson Tiles Pty Ltd & Esso Australia Pty Ltd (2000) 104 FCR 564 at 597ff).
Neither respondent has agitated this jurisdictional issue and I have proceeded to determine the matter on the basis that no challenge to the exercise of the Court’s accrued jurisdiction in this matter is raised by either respondent.
I will now summarise the relevant factual matters. The summary is of facts that are either not in contention or which I have found after the hearing of the evidence. I will specifically identify the latter and provide my reasons for so finding.
The applicants are the owners of the property. The first respondent was at all relevant times the trustee of the Ilahi Family Trust. The second respondent and his wife have been directors of the second respondent since 1995. The first respondent has purchased properties for the Ilahi Family Trust over the many years.
Cross examination revealed that the affidavits of the second respondent and his wife gave an incomplete account of the real property owned by the first respondent and by them including real property owned by them jointly. Both Mr and Mrs Ilahi specifically deposed to the fact that the first respondent was incorporated in 1991 with the express purpose of being the trustee of the Ilahi family trust. Their affidavits went on to describe 4 separate properties that were owned by the first respondent.
However, cross examination of the second respondent elicited the following additional information:
i)The property at Maddington was owned by the second respondent partly on behalf of the Ilahi Family Trust and partly on behalf of the Ilahi Family super fund;
ii)The property at High Wycombe was partly owned by the first respondent and partly by Mr and Mrs Ilahi;
iii)The first respondent also is the registered proprietor of an industrial property in Canningvale not disclosed in the affidavits. That property is said to be owned by the first respondent on behalf of the Ilahi family superannuation fund;
iv)There are four other house properties owned by the second respondent not disclosed in the affidavits one of which is utilised as a child minding centre; and
v)Further information in relation to the properties not disclosed in the affidavits was also elicited from Mrs Ilahi.
All of the properties acquired (both those disclosed in the affidavits and those subsequently disclosed) were leased out for rental income. The evidence satisfied me that the first respondent engages in the business of property acquisition for the purposes of generating rental income and that where Mr and Mrs Ilahi hold a common interest with the first respondent in a property that is also held by them for the same purposes.
The applicants engaged the Real Estate agency of Raine and Horne Canningvale (hereinafter “R&H”) in March 2011 to market and sell the property. The applicants obtained a valuation of the property from a licensed valuer who determined the value of the property as at March 2011 was $3.650million.
Mr and Mrs Ilahi inspected the property in April 2001 in the company of a Mr Stephen Arscott of R&H.
On 11 June 2011 an auction was held at the property. The auctioneer was a Mr Mark Sinclair. Mr and Mrs Ilahi arrived either before the auction commenced or shortly after it commenced. There is some dispute in the evidence between Mr and Mrs Ilahi and that of the witnesses Arscott and Klahn as to precisely when it was that the Ilahis arrived, whether it was as the auctioneer was describing the vendor’s right to make one or more bids (as the Ilahi’s claim) or whether they arrived before the auctioneer commenced to read out any of the auction particulars and conditions (as those witnesses claim). Nothing turns on this dispute. Mr Ilahi confirmed that he heard the auctioneer describe the settlement date as 12 July and that a deposit of $100,000.00 was required on the fall of the hammer. Mr Ilahi maintained that the auctioneer did not read out all of the terms and conditions in his presence, but no aspect of the defence of the respondents relates to any lack of knowledge of any aspect of the general conditions of auction or general conditions relating to the sale of the property. At the end of the evidence there was no suggestion on the part of the respondents that their ignorance of any aspect of the general conditions of auction that Mr Sinclair read out in the absence of Mr and Mrs Ilahi (if their version were to be accepted) made any difference to Mr Ilahi’s decisions or conduct on the day of the auction.
Mr Ilahi’s evidence in cross examination on this topic was somewhat uncertain in any event. It was not altogether clear that he recalled exactly what he had heard and whether he had missed any of the general conditions being read out (see page 91 of the transcript).
The applicants had placed a reserve price of $3.9million on the property prior to the commencement of the auction. Mr Arscott and Mr Sinclair were aware of the reserve price but it was not disclosed to anyone else at the auction. During the auction Mr Sinclair called a number of vendor bids. They were disclosed as vendor bids. The final vendor bid was $3.6million. Mr Sinclair made a second call of the final bid. At that point Mr Ilahi raised his hand. He said that he raised his hand when the price reached $3.6million.
He said that he had the capacity to complete the sale at that price because he had received pre-approval from the AMP Bank for a loan of up to $1.5million and that he had access to an amount in excess of $1.2million from his own interest in the superannuation fund and that his wife was able to access a minimum of $2.2million from her interest in the superannuation fund. Written confirmation of the approval of the loan from the AMP Bank was not provided to Mr Ilahi, however, until 26 August 2011.
With the reserve price not having been met Mr Sinclair considered himself obliged to seek instructions from the vendors as to whether he could sell the property at an amount less than the reserve price and in particular if he could sell it at a price of $3.6million, being the last bid received. Mr Sinclair could sell the property at a price less than the reserve price provided he obtained the owner’s consent to sell at that lower price. The instructions were sought by Mr Sinclair from the owners in the presence of Mr Arscott. As he left to speak to the owner Mr Sinclair indicated to those assembled at the auction, including Mr Ilahi, that he would need to check with the owners to see if the property could be sold at the price of the last bid, or words to that effect. Mr Ilahi’s account is that Mr Sinclair indicated at that point that he needed to get instructions from the vendor.
Mr Sinclair explained to the applicants that he had a bid of $3.6million and that he needed to know whether it could sell at that price. He left Mr Arscott to speak with the vendors. Mr Arscott said that the vendors spoke with each other and that then Mr Carter told Mr Arscott that the property was to go to market at the bid of $3.6million. Mr Arscott conveyed those instructions to Mr Sinclair. Mr Sinclair then recommenced the auction by indicating to those assembled that the property was on the market and that if there were no further bids the property would be sold. There was some discrepancy between Mr Sinclair’s affidavit and his trial evidence on this topic. His affidavit says that upon his return from his discussion with the vendor he warned the persons present at the auction that there was still a bid of $3.6million (this is my summary of his affidavit evidence on this topic). In his oral evidence he said that when he returned he said to the persons present at the auction that the property would be knocked down to the current bidder if there were no further bids. They are slightly different propositions. The difference in the accounts is not material, however. I gained the impression that the oral evidence was a somewhat casual embellishment upon the account given in the affidavit. He recommenced the bidding at $3.6million. There were no further bids. After calling that price three times the property was knocked down to Mr Ilahi for $3.6million.
There was some 40-50 people present on the lawn area of the property where the auction was conducted. Mr Sinclair and Mr Arscott congratulated Mr and Mrs Ilahi. Mr Arscott reported the outcome of the auction to Mr and Mrs Carter. Mr Arscott invited Mr and Mrs Ilahi into the home to sign the contract of sale. Mr Arscott asked Mr and Mrs Ilahi as they walked into the house whether they had their chequebook and he says that Mrs Ilahi said word to the effect:
Yes we have come prepared.
She was said to have tapped her handbag as she said those words. This exchange was not denied by either Mr or Mrs Ilahi. Inside the home Mr Arscott presented Mr and Mrs Ilahi with a contract of sale for the property. Mr Ilahi made some notes. His notes appear as annexures “A-5” to the affidavit of Mr Arscott. The notes included a list of names, being his name, his wife’s name, his son’s name and the first respondent’s name and then a tick next to the first respondent’s name.
Mr Arscott says that Mr Ilahi said words to the effect of:
I’m not sure which name to put it in.
I am asked by the applicants to draw the inference that he intended to put the property in the name of the first respondent. (I should also note that there are some hand written numbers on the exhibits which Mr Arscott says were written by him. There are also some other figures Mr Ilahi claims are associated with his calculation with the value of the property – see [99] herein).
Whilst they were inside the home Mr and Mrs Ilahi telephoned their son who came to the property and spoke with them.
Mr Ilahi asked if the vendors would accept a 60 day settlement period and Mr Arscott replied in the negative and said that the auction conditions provided for settlement for the 12th July.
After their son had left Mr Arscott asked Mr and Mrs Ilahi to sign the contract and requested payment of the deposit. Mr Ilahi then said that he did not want to buy the property. He and his wife then left. By that stage Mr Sinclair had departed, as had a very large number of the people who had been present for the auction.
Subsequently the applicants through their solicitors demanded payment of the deposit. Settlement did not occur on the 12th July or at any other time.
The property was placed upon the market again in September of 2011. Additional costs were incurred in respect of the marketing of the property. The property did not sell.
Since December 2011 the property has been leased for an amount of $1000 per week and certain expenses have been incurred with respect to the maintenance of the property. Interest charges on the mortgage over the property have also been paid by the applicants.
It is said that the conduct of the first respondent (or alternatively the second respondent) from the point at which Mr Ilahi placed the bid by raising his hand, to the point at which he departed the property, constituted conduct that was misleading or deceptive contrary to s.18 of the ACL. In particular it is said that the bid was a representation in relation to a future matter in terms of s.4 of the ACL (see para 9 hereof).
There are two key aspects to the claim. The first key aspect of the applicant’s claim under the ACL is that the bid to purchase the property for $3.6 million was a statement as to a future matter for the purposes of s.4 and was misleading and deceptive; the second key aspect of the claim is that the conduct of Mr Ilahi in allowing the auction to continue without withdrawing his bid and saying and doing nothing thereafter to indicate in any meaningful way that he was not proceeding with the purchase of the property misled both the applicants and other persons associated with the auction.
The respondents raise at the outset the question as to whether a claim arises under s.18 because of the absence of the trade and commerce aspect. It will be recalled that the statutory provision prohibits engaging in misleading or deceptive conduct “in trade or commerce”. This argument is raised on behalf of the corporate respondent under the Commonwealth provision and the natural person respondent under the State provisions. It is said, consistently with the decision of the Full Court of the Supreme Court of Western Australia in Franich v Swannell (1993) 10 WAR 459, that this case involves the sale of a private house without any business character and is not conduct in trade or commerce within the meaning of the Act.
The respondent also relied upon the decision of the Full Court of the Federal Court of Australia in O’Brien and Anor & Smolonogov and Anor (1983) 53 ALR 107.
The applicants contend that those decisions are clearly distinguishable from the facts of the present case and in particular that the land dealings in those cases were absent any aspect of commerciality.
The applicants rely upon the well known dicta of Deane J (as he then was) in Re Ku-ring-gai Corporative-Building Society (No.12) Ltd (1978) 36 FLR 134 at 167:
The terms “trade” and “commerce” are not terms of art. They are expressions of fact and terms of common knowledge. While the particular instances that may fall within them will depend upon the varying phrases of development of trade, commerce and commercial communication, the terms are clearly of the widest import: see generally W, & A McCarthur Ltd v State of Queensland (1920) 28 CLR 530 at 546 ff and Bank of NSW v Commonwealth (1948) 76 CLR 1 at 284 ff and 381 ff. They are not restricted to dealings and communication which can properly can be described as being at arms length in the sense that they are within open markets or between strangers or have a dominant objective of profit making.
Both the affidavit evidence and the oral evidence of Mr and Mrs Ilahi were absent any assertion that they intended to acquire the property for use as a residence either for themselves or any family member.
At the end of their evidence it was clear that the first respondent which is a company under their control and operating a family trust on their behalf has for many years acquired residential and commercial properties for the purpose of deriving rental income (indeed in one case, as Mrs Ilahi conceded, a residential property was leased for commercial purposes). There is a reasonable and rational basis for drawing the conclusion that this property was intended to be purchased for the same reasons. There was no suggestion in the evidence that the current residence in which the Ilahi reside was inadequate or unsuitable for them, and that this property was purchased for such a private residential purpose.
Then there is also in this context the writing down of the list of names by Mr Ilahi in the period immediately preceding his discussions with his son and his specifically marking with a tick the name of the first respondent on that note. I accept Mr Arscott’s evidence that Mr Ilahi indicated when making his notes that he was uncertain as to name which the property would be registered. There is no doubting that the applicant, looked at in isolation has not engaged in trade or commerce, but he does not have to do that for there to be an engagement of the statutory provisions. It is enough that the respondents are engaged in trade or commerce. If they are, then the applicant can be said to have been involved in a transaction that has that character. Murphy JA (with whom Martin CJ and Buss JA agreed) in Shone and Davies [2012] WASCA 83, a case dealing with the grant of an option for the purchase of land, had this to say about the characterisation exercise which must be undertaken:
110It is to be accepted that the activity of selling land by private, particularly a residence, would not ordinarily be regarded as being in trade and commerce. The real issue in this case is whether anything can be identified in the transaction in question, which imports a trading or commercial character to the activity which, without more, would not have that character…
111I accept the thrust of the Davies’ contention to the effect that the matters identified … import a commercial character to the grant of the option. The grant of an option, is itself, typically regarded as a species of commercial transaction. It is a step removed from the ordinary sale and purchase of a home. The language and subject matter of the option deed – a “call option” in respect of sub divisible property – also import the notion of commerciality into the transaction …
112 In these circumstances it cannot be said as it was said by the Court in O’Brien and Smolonogov … that the grant of the option “lacked … commercial character as a transaction”. Nor can it be said as it was said in Argy and Blunts …that the “present is purely a case of a person selling his house”. The house here was merely an incidental aspect of the land the subject of the option and was not in any sense a feature of the transaction. Further none of the matters referred to by the Shones … assist in shaking off what is essentially the commercial character of the transaction.
I am satisfied that when holding an intention to purchase the property Mr Ilahi was doing so on behalf of the first respondent and I am satisfied that the first respondent was engaged in commercial activity. Even if Mr Ilahi when he had the intention to purchase the property was doing so in a personal capacity I am still satisfied that it was for a commercial purpose namely to acquire a property to rent out and derive rental income in the same way that a range of other properties had been acquired by he and his wife and the first respondent for such purposes. The FTA provision is identical to the ACL provision and extends to the conduct of non-corporate persons.
A second preliminary point taken by the first respondent with respect to the ACL claim is that the general conditions of auction provided in Clause 2 that:
A Bidder will be the buyer unless prior to the commencement of the bidding a written authority to bid for and behalf of another entity has been obtained by the bidder.
The general conditions of auction appear as exhibit to the first applicant’s trial affidavit.
Certainly Mr Arscott did not see any written authorisation from the first respondent to Mr Ilahi at any stage of the auction or indeed before or after it.
The first difficulty with that argument is that the first respondent could only bid at the auction through one of its officers. Mr Ilahi was such an officer. It is not illogical to suggest that he may have been there in both his personal capacity and as representative of the first respondent. The property may even have been purchased jointly by the first respondent and Mr and Mrs (or Mr or Mrs) Ilahi. The respondents jointly owned other property. If he is there as a representative of the first respondent it is unnecessary for him to authorise himself to be there.
Section 128 of the Corporations Act 2001 (Cth) provides:
(1) a person is entitled to make the assumptions in section 129 in relation to dealings with the company. The company is not entitled to assert in proceedings in relation to the dealings that any of the assumptions are incorrect.
Section 129 (3)(b) provides:
a person may assume that anyone who is held out by the company to be an officer or agent of the company:
(a) …
(b)has authority to exercise the powers and perform the duties customarily exercised or performed by that kind of officer or agent of a similar company.
I am not certain that such provisions of the Corporation Act are themselves an answer to the authority point. It is not a question of whether Mr Ilahi was performing a duty he customarily would perform. It is a question of whether the requirement of the general conditions of auction for a specific authority to be granted was fulfilled.
The answer to the proposition, however, is that the bidder was the potential buyer. It is at least as likely that Mr Ilahi is bidding on the first respondent’s behalf as an officer of the first respondent as it is that he was bidding on his own behalf. The subsequent marking of the company name amongst the four names he scribbled on his note suggest that it is more likely that he was bidding on behalf of the company. As indicated above, however, it may be that he was bidding simultaneously in both roles and had determined to clarify the identity of the purchaser when it came to the point of signing the contract.
Clause 2 of the General Conditions of Auction is not, in my view, an answer to the claim under the ACL as it relates to the first respondent.
The claim for misleading or deceptive conduct under the ACL is based upon a statutory provision the same as that previously found under s.52 of the Trade Practices Act 1974 and the jurisprudence in relation to that section is directly applicable in respect of this claim.
As noted above there are two factual bases for this aspect of the claim. They are capable of standing alone but as I understand the applicant’s case he also relies on the aggregate affect of the two aspects of the conduct. The first aspect relates to the bid itself. The second aspect relates to the conduct after Mr Ilahi decided that he did not want to purchase the property. On his own case he decided that he did not wish to purchase the property when the auctioneer returned after speaking with the vendors and announced, according to Mr Ilahi:
We are going to ask for higher bids.
Whilst Mr Sinclair did not acknowledge using those exact words nothing turns on that because he certainly acknowledged that he invited further bids.
The first aspect of the conduct, the bid itself, raises a discrete issue in relation to s.4 of the ACL.
The applicant contends that the bid was a representation as to a future matter. If I find it to be so, the effect of the section is that I am to take the respondent as having no reasonable grounds for making the representation unless evidence is adduced to the contrary. I will discuss the meaning and effect of the section and the nature of the burden cast upon the respondent hereunder.
The first question that arises is whether the making of the bid can constitute a representation; if it does, then the next issue that arises is whether the representation was as to a future matter. Again, and provided the nature of the representation is properly identified, I think it can be characterised as such.
Ormiston J in the Supreme Court of Victoria in Futuretronics International Pty Ltd v Gadzhis [1992] 2 VR 217 was dealing with a very similar factual situation as arose in this case. A property was knocked down to a bidder who, a few moments after the conclusion of the auction, informed the auctioneer he had no intention of signing the contract of sale. No attempt was made by the auctioneer to restart the auction even though the terms and condition of the auction permitted the restart of it (a similar provision is contained in the general conditions of auction in the auction under consideration in the case before me in para 6 thereof). It transpired that all bids prior to the defendant’s bid were bids made by or on behalf of the vendor and in that sense were “false” bids. An application was made to the Victorian Supreme Court under s.11 of the Fair Trading Act 1985 (Victoria) which was in the same terms as s.52 of the Trade Practices Act. Section 10A of the Fair Trading Act was to the same effect as s.4 of the ACL. A claim was also made in contract.
The contractual claim was dismissed because of a provision in the Instruments Act 1958 (Victoria) which provided that no action to enforce the sale of an interest in land may be brought unless there is a memorandum in writing of the agreement. Ormiston J rejected an argument that said that the bid formed part of a collateral contract anterior to the sale of the land itself. He held that once a bid is accepted a single oral agreement containing all relevant terms in the auction contract including any terms requiring any signature came into existence. However that term of the said agreement as to the need to execute a document in writing was unenforceable because of the Instruments Act provision which required a written memorandum of the agreement signed by the purchaser or his authorised agent.
His Honour then dealt with the Fair Trading Act claim. The plaintiff contended that the defendant’s bid constituted a representation to the plaintiff that the bid was genuine and that the defendant intended to be bound by the auction conditions. The plaintiff further contended the representation was untrue because at the time of making the representation the defendant did not believe, and there were no reasonable grounds to believe, that he would comply with the auction conditions by paying the deposit and signing the sale contract.
On the facts of the case His Honour was satisfied that the bid was genuine. He found that the defendant intended to purchase the property at the time of the bidding but then changed his mind.
The non-fulfilment of a promise when the time for performance arises did not of itself establish the promisor did not intend to perform it or that when the promise was made the promisor’s intention lacked any adequate foundation.
His Honour doubted whether a contractual promise of itself carried with it any representation as to fact or conduct. As His Honour says, at 239:
It is only when it becomes apparent that the promise cannot be enforced, because for example, it is either unenforceable or the promisee’s rights are valueless or diminished, that one may return to the original promise to inquire whether that promise was of so little substance that it can be concluded that the promisee was indeed misled or deceived in the first place, at the time of his acceptance of the promise. Thus it may then be seen that the promisor originally had no intention to perform his promise or that he originally had no capacity or ability to perform it. Now, however, by reason of s 10A … the enquiry is apparently broader for one must also inquire whether at the relevant time the promisor had reasonable grounds for making any implicit representation (where relevant) that he intended in the future to perform his contractual promise and for this purpose the onus of proof is reversed. Nevertheless the section does not say in what circumstances as representation as to a future matter shall be implied from a contractual promisee.
His Honour was not satisfied that it was enough for there to be an implied promise plus breach of the promise for there to be misleading or deceptive conduct under the section, principally upon the basis that the question of whether the promisor had reasonable grounds for making the representation would, in such a scenario, be irrelevant and thus subsection (2) would be completely unnecessary.
His Honour’s analysis of s.10A of the Fair Trading Act (and the then analogous Commonwealth provision s.51A of the Trade Practices Act) led to the following conclusion and 240:
In my opinion, therefore, accepting that s.51A and s.10A each assumes that a promise may give rise to an implied representation that the promisor will perform an act in the future, namely the promised act, then the promisee is not, in proceedings under s.52 or s.11, bound to show that the promisor had no intention or no ability to perform the promise at the time of its making. The promisor will be deemed not to have reasonable grounds for making the representation or promise, unless he satisfies the court by evidence to the contrary that he had reasonable grounds for making that representation. He may achieve this, in part, by showing that he had a genuine intention to perform his promise and that he had the ability at the time to perform it, but in the end he must show objectively that he had reasonable grounds for making the representation. For present purposes I am not prepared to accept that the plaintiff can make out its case by showing merely promise and breach. In my opinion, that evidence, on its own, is insufficient to show that the promise was “led into error” unless the plaintiff can rely on s..10A or s.51A. If there is no element of actual or deemed misrepresentation then the promisee can have been led into no error, nor can it be said to have been misled, by reason of some subsequent breach which causes it harm or loss. If the facts connote no error or misrepresentation, nothing thereby led it to take a course which was erroneous.
Before discussing the respondents’ conduct in making the bid I should indicate that in applying s.4 of the ACL I do so upon the basis of the explication of that section by Allsop J in McGrath and Anor v Australian NaturalCare Products Pty Ltd [2008] FCAFC 2 (His Honour was in the majority as to the outcome of that appeal but the dissentient, Emmett J, agreed with him in relation to his discussion of s.51A).
Firstly, the evidentiary onus in subsection (2) is to adduce evidence “to the contrary”. It is not enough for the defendant to simply put some evidence forward to discharge his obligation pursuant to subsection (2). Any evidence is insufficient. It must be evidence to the contrary.
Secondly, if such evidence to the contrary is adduced the onus cast upon the defendant by subsection (2) will have been satisfied. However, this is not the expression of a view that the legal or persuasive onus had been changed by the introduction of subsection (2). As His Honour expressed it at [192] of this judgment:
For instance, if evidence “to the contrary” is adduced by the representor, and if the representee itself adduces evidence, tending to the lack of reasonable grounds, the matter might be equally poised. In such a case, there has been evidence “to the contrary” adduced by the representee, thereby eliminating the operation of the deeming provision and, on the totality of the evidence, the proof of reasonableness (or lack thereof) of the grounds is evenly balanced. Section 51A (2) does not, in my view, mean that in those circumstances, the representor has not met an onus. The section does not cast a legal or persuasive onus, in such a case, on the representor.
In the present case the first issue is whether the making of the bid itself was misleading and deceptive when it was made. In other words if the respondents had no intention of completing the contract or of acquiring the property or had an inability to do so, then the making of the bid was capable of constituting misleading or deceptive conduct. It would be a false or misleading representation as to a future matter. The applicant says that the respondents had no financial capacity to acquire the property and this submission is made on the basis of the fact that no written confirmation of the approval of the loan from the AMP had been obtained at the time of the auction and nor was that written confirmation available until some weeks afterwards.
Mr Ilahi said, however, that the loan had been verbally authorised and no evidence was put before me to indicate that such was not the case. There were certain unsatisfactory elements of Mr Ilahi’s evidence which I will discuss hereunder but they were not such as to undermine his evidence generally. Furthermore, the evidence of the availability of funds from the superannuation accounts of himself and his wife was not challenged. Mrs Ilahi corroborated Mr Ilahi’s evidence that they had come to the auction with the intention of bidding for the property and that they had a capacity at the time of the auction to complete the sale. Mrs Ilahi said that she had come prepared for the auction by bringing the cheque book to pay for the deposit and that evidence was confirmed by Mr Arscott, although he says that that statement was made in response to his question as to whether the applicants had their cheque book with them.
More generally, I find it difficult to accept on the evidence before me that the bid was made on some kind of cavalier basis. There is no evidence to suggest that Mr Ilahi made a bid, as it were, on the basis of a whim, or capriciously. I find that when the bid was made it was made because Mr Ilahi intended to acquire the property either on behalf of the first respondent or on behalf of himself or his wife or with an intention of there being a combination of ownerships. They had acquired many properties including residential properties before. I do not accept there was anything misleading or deceptive about the making of the bid itself.
I accept that the bid constituted a representation by Mr Ilahi that he would do what was required by the conditions of the auction to complete the acquisition of the property whether on his behalf or on the behalf of the first respondent. If the evidence adduced by the applicant were confined to the evidence of the bid only – in other words, if no part of the applicants’ case related to the conduct of the respondents after the making of the bid to the point of their communication of their intention not to settle – and the intention not to settle had been communicated almost immediately after the bid was accepted and the hammer fell (as was the case in Futuretronics), the case of the applicants would be answered by my finding that the bid was genuine. I would be satisfied that Mr Ilahi had reasonable grounds for making the representation because he intended to acquire the property and he had the capacity to do so. There would in that event be no other evidence adduced the applicants to make out the case for misleading or deceptive conduct.
I am satisfied that when Mr Ilahi bid he intended to acquire the property and he had the means to do so. If there is to be taken to be an implied representation in his bid that he wanted to buy the property and that he had the capacity to buy the property then I am satisfied that it was an honest representation.
Therefore even if I were satisfied that the making of the bid was a representation with respect to a future matter or contained within it a promise which constituted a representation with respect to a future matter I am satisfied that Mr Ilahi and, through him and his wife, the first respondent, have adduced evidence to the contrary. I am not to take either respondent, then, by the operation of s.4 not to have had reasonable grounds for the making of the representation or representations. More importantly, though, as indicated above, I am positively persuaded by that evidence that the respondents had reasonable grounds for making the representation.
Of course, the evidence as it relates to the bid is still said to form part of an entire course of conduct which is made and which needs to be taken into account in that context as well.
On my understanding of the applicant’s case the specific issue of the making of the bid, however, was the only issue to which any applicability of, or argument in relation to, s.4 of the ACL pertained. The balance of the issues raised by the applicant, which relate to Mr Ilahi’s conduct after the making of the bid do not, as I apprehend the plaintiff’s case, contain any representations as to future matters (even if Mr Ilahi’s conduct is taken to have contained or be constituted by representations). Even if I were wrong in apprehending that, in the light of my subsequent findings, I do not need to rely upon the presumption as to the absence of reasonable grounds for making the representation as to what may be said to be future matters constituted by the post-bid conduct. I find that conduct to have been misleading and deceptive in any event.
Mr Ilahi’s evidence was that when Mr Sinclair returned from speaking with the vendors after the suspension of activity at the auction he said words to the effect that
We are going to ask for higher bids.
Mr Ilahi said that:
at that time, I believed that my offer had not been accepted by the applicants and so I decided that I did not wish to purchase the property
He said that the auctioneer went on to invite further bids and then said words to the effect that:
The property is on the market. If there are no further bids, it will be sold.
Some time was spent at trial as to what those words meant and on the discrete issue as to what Mr Ilahi understood them to mean.
It will be recalled that Mr Sinclair himself acknowledged that he said at that point words to this effect:
The property is on the market, if there are no higher bids the property will be sold.
Mr Arscott gave evidence that when Mr Sinclair returned to the auction he used the expression:
The property is on the market.
He went on to say that Mr Sinclair noted the bid at $3.6million and asked if there were any other bids.
There is no relevant discrepancy in the evidence as to what Mr Sinclair said at that point.
There is also no relevant controversy as to whether he said at that point that the property was on the market or said the property was on the market to sell. Mr Sinclair acknowledged in his evidence that many people (and by that expression I took him to mean many people at auctions generally) did not understand the use of the expression “the property is on the market” and it was for that reason he went on to say words that indicated that if anyone wished to buy the property they need to buy now or otherwise it would be knocked down to the current bid. I accept that he said that. It is consistent with the evidence of Mr Ilahi and Mr Arscott who both, it will be recalled, only summarised the effect of what Mr Sinclair said rather than gave an account of his words verbatim.
Mr Ilahi said that he thought that when the auctioneer returned he was going to tell him that his bid had been accepted, and that when the property was declared to be on the market and when other bids were sought by Mr Sinclair, he decided at that point would not proceed with his bid of $3.6million. It is a somewhat curious position to take, that is, to decide not to purchase the property because he was told his bid was not accepted at that point. It is a plausible position, however.
His counsel is correct in saying this evidence was unchallenged in cross examination. Also unchallenged was Mr Ilahi’s account of his intentions immediately thereafter. He said that he thought that when he and his wife went inside the property at the conclusion of the auction at the invitation of Mr Arscott that he was being invited to re-negotiate the price. That is what he explicitly says at paragraph 32 of his affidavit as to his belief at that stage.
Once again there is very little relevant controversy as to what happens between the conclusion of the auction – that is, the knocking down of the property – and Mr and Mrs Ilahi leaving the property.
What, then, am I to make of this conduct?
Firstly it should be noted that having formed his intention not to purchase the property Mr Ilahi said nothing at that point to Mr Sinclair or to anyone else to indicate that he no longer wished his bid to be accepted.
Accepting, as I think I should do, and am bound to do given that his evidence was unchallenged in this regard, that he had formed the intention not to buy the property, he could reasonably have been expected to take steps to ensure that his new position was understood by the agent or the auctioneer. It will be recalled that he said nothing from the point of his bid being made to the point at which the property was knocked down. He then said nothing when the property was knocked down. He said nothing to Mr Sinclair or to any of the other persons who approached and congratulated him at the conclusion of the auction to indicate that he had not intended to acquire the property and that he considered that his bid had been rejected. His silence at this point is unexplained save for the contention in his affidavit that he was “confused and shocked”. But a state of confusion and surprise, especially in one familiar with the auction process, might yet be expected to elicit a declaration or indication by him that he had not intended to acquire the property or to have it knocked down to him, or at least to query Mr Sinclair or the Raine and Horne personnel as to why it had been knocked down to him. There is no doubt on the evidence that he understood that all of those present at the auction in the aftermath of it would have reasonably come to the conclusion that he knew he had purchased the property. His silence would have misled those persons as to his intentions at that point or, if it may be expressed more accurately, would have misled them as to his state of mind at that point as to whether he considered he had acquired the property.
When he enters the house with Mr Arscott and the auctioneer he is asked by Mr Arscott to come upstairs and sign the contract.
That is what Mr Arscott said in his evidence. That is unchallenged.
I have already referred to the evidence where Mrs Ilahi confirmed that she had come prepared and had gestured to her cheque book in her handbag. Mr Ilahi was present and witnessed that. Still, at that point, he said nothing to indicate to Mr Arscott or to anyone else that he was surprised about having acquired a property, being a property that, before the fall of the hammer, he had decided not to acquire.
Mrs Ilahi says that she, too, thought they were being invited to re‑negotiate a sale of the property following the fall of the hammer, but she gave no evidence as to having had any conversation with her husband in which he told her about his change of intention and his own shock and surprise. She says that she, too, was confused and surprised. So her evidence is that she shares the same concerns and has the same essential state of mind as her husband immediately after the fall of the hammer even though there has been no communication between them.
Mr Ilahi says that once inside the property he still has the intention to negotiate the terms of sale.
There follows the notations on the piece of paper which appear as annexure A-5 to Mr Ilahi’s affidavit. I have already noted the listing of the four names which I am prepared to infer were indicative of Mr Ilahi’s choice of prospective purchasers. Some of the other writing on the note relates to was said by Mr Arscott to be his own handwriting. He was not cross examined about that topic. There are other numbers on the page which are consistent with Mr Ilahi’s claim to have made some calculations about the value of the property totalling $.3.3million. (see para 38 of his trial affidavit). But whatever his cogitations about that matter there was no discussion with Mr Arscott about offers for the property less than his bid of $3.6million. There was some discussion about an extension of the settlement to 60 days (which was refused by Mr Arscott as being inconsistent with the auction conditions). There is no controversy about that. But Mr Ilahi raising such a topic is still consistent with an intention to settle in terms of the accepted bid, or so anyone would be entitled to think. A request to vary the settlement date would not indicate to Mr Arscott any state of mind on the part of Mr Ilahi that he was not proceeding with the acquisition of the property. The discussion that follows in relation to the request by Mr Ilahi to arrange for the attendance of his son, similarly, flags no intention to not proceed with the acquisition.
In his affidavit, Mr Ilahi said that at this point he said “words to the effect” that if they decided to buy the property that they may need to put the property in another name. He was not cross examined about that conditional expression which might be taken to be an indicator of the state of mind he says that he then possessed; that is, that he had determined not to proceed with the bid and to instead to only negotiate. Mr Arscott, to whom the words were addressed, said in his affidavit (which gave a much more detailed account of these interactions) that Mr Ilahi said at this point:
I am not sure which name to put it in.
but that he did not use any words which indicated any ambiguity or indecision about the sale proceeding. He was not cross examined about this topic.
I will discuss this particular aspect of the evidence, hereafter.
By this point, I find on the evidence, that Mr Sinclair the auctioneer had already left the property and so had almost all of the persons who had attended the auction had left the property. There was some faint suggestion in the evidence of Mr Ilahi that some of the number of persons who had been present at the auction were still present (Mrs Ilahi’s evidence about observations she made as to persons being present on the lawn at this point, she conceded in cross examination, related rather to the period before she was brought into the house to sign the documents). And certainly he did walk outside of the property to call his son and could have made observations at that point. But the evidence of the witnesses who are employees of Raine and Horne is overwhelming on this topic. In any event I am prepared to infer that anyone who had been present at the auction had no reason to stay after the property was knocked down and would not have stayed but would have made their way out of the property and the evidence of the witnesses called by the applicant is consistent with that).
Neither Mr Ilahi nor Mrs Ilahi gave any evidence as to the nature of their conversation with their son. And he was not called to give evidence by them. I am asked to draw an inference of the kind discussed by the High Court in Jones v Dunkel [1959] HCA 8 that given his availability to give evidence the evidence of the son if had been called would not have been of assistance to the respondent. I will discuss whether I am entitled to draw this inference hereunder but note at this point that I proceed upon the basis that the issue in respect of which I am asked to draw the inference must have been whether or not the conduct of Mr and Mrs Ilahi from the point at which the property was knocked down was misleading or deceptive rather than any more specific aspect of the evidence. That, at least, is how I understand the submission to be put by the applicant.
After the son’s departure and Mr Arscott’s insistence that the contract needed to be signed and the deposit money provided, Mr Ilahi told Mr Arscott that he did not want to buy the property and he and his wife left the property.
The son was not called by the respondents. There was no suggestion that he was unavailable at trial. The reasons for his attendance at the property and for his departure are essentially unexplained. I do not know, even on their own accounts, what Mr and Mrs Ilahi spoke to their son about at the property (or what Mr Ilahi spoke to him about on the phone prior to his arrival). The Jones v Dunkel submission is not made, as I have noted above, with respect to any particular aspect of the evidence. There were, after all, very few factual disputes at trial. Whatever evidence the son gave, though, I am prepared to infer would not have assisted me in accepting Mr Ilahi’s explanation of his conduct following his making of the bid. But the importance of my drawing such an inference, in the context of this case, is limited. Was the conduct of the respondents misleading and deceptive in the period following the making of the bid and to the point of their departure? For the reasons which I have given to this point of the judgment and for reasons which I will give hereafter, I am satisfied that it was. I am satisfied of that on the basis of the evidence given at trial, both oral and affidavit. I will infer that the son would not have assisted the respondents in persuading me to resist such a finding, but not necessarily because his evidence would have been inconsistent with anything the respondents asserted or because it may have been consistent with evidence given by the applicants’ witnesses. It may have been unhelpful to the respondents simply because Mr Ilahi had no discussion of any relevance to the issues in the proceedings with his son. It may be that the respondents did not want their son to be exposed to cross examination because of their apprehension that his evidence may have been inconsistent with their own evidence. The point is I cannot say that such is the case. The son would have been called if his evidence were thought to have been helpful to the respondents, I find. That he was not called enables me to find and I do find that his evidence would not have been helpful to the respondents. But I am not able to find why it is that his evidence would have been unhelpful. So that in that sense the inference drawn is of little significance.
The application of the principle with which the case of Jones v Dunkel is associated is really the application of a process of logical inference. But what it is that is said to be capable of being inferred from the failure to call a witness must be identified and that process usually provides assistance in enabling the finding of a specific and material fact. Here, no such fact was identified by the applicant when I was asked to draw the inference; rather it was left as an invitation for me to find that the evidence of the son would not have been helpful to the applicants’ case in a general sense. I am prepared to infer that such is the case, but as indicated above, that does not provide me with much assistance here. (see the passage from Wigmore on Evidence cited by Windeyer J at p 321 of Jones v Dunkel as to explanations which may be available in relation to the failure to call a witness and which may be wholly unrelated to the fear on the part of a party as to the elucidation of unfavourable facts by the calling of the witness).
The key issue is whether the conduct (including silence) of the respondents following the making of the bid to the point of their departure was misleading or deceptive. Or in other words, whether, having formed a view that he did not intend to acquire the property, Mr Ilahi’s conduct (and through him the conduct of the first respondent) was misleading and deceptive because it did not include any revelation by him or any other conduct by him, indicative of an intention not to acquire the property in accordance with the bid he had made
No argument was put to me as to whether conduct that could be found to be misleading may be conduct that may not be found to be deceptive (either on the facts of this case or as a more general proposition). Neither was any issue raised as to whether the respondents did “engage in conduct” as that expression is defined by s.4(2) of the CCA.
I will deal with the issue of silence as misleading and deceptive conduct hereafter but note here that silence, in the process of evaluating “conduct” simpliciter would seem to be covered by s.4(2)(c) of the CCA. (That the wording of s.4(2) should not distract attention from the “fundamental issue” of whether the conduct is misleading and deceptive is a point made by Gummow J, as he then was, in Demagogue Pty Ltd v Ramensky [1992] FCA 557 at [30]).
I proceed on the basis that conduct is misleading and deceptive if it induces or is capable of inducing error; that the representee must be led into error; that it may, but need not necessarily, involve a representational element; that whether the conduct is misleading and deceptive is to be assessed according to its actual or possible consequences but that there is no requirement of evidence that someone has actually been mislead; that it is not necessary to show that the person whose conduct is being impugned intended to mislead or deceive; and that there must be a logical causal connection between the conduct and the error into which the applicant has been led (though even there there is still an evaluative judgment involved when such a connection has been established as to whether the conduct is a real and operative cause of the error).
All of these propositions I have summarised from the matters to be found in the judgment of French J, as he then was, (with whom Beaumont and Finkelstein JJ agreed) in Johnston Tiles Pty Ltd v SO Australia Ltd [2000] FCA 1572 at [64] and [65].
These propositions as to the meaning of misleading and deceptive conduct were not the subject of any significant controversy at trial.
The authorities make clear that silence may amount to misleading or deceptive conduct. As Gummow J, as he then was, said in Demagogue at [34]:
… the large number of cases brought under the Act in respect of conduct analogous to passing-off has encouraged the notion that some representation must be demonstrated as an element of conduct in contravention of s. 52. But, consistently with regard to the natural meaning of the terms of s. 52, the question is whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is or is likely to be misleading or deceptive. Conduct answering that description may not always involve misrepresentation.
His Honour went on, however, in that same paragraph to note his agreement with the following passage from a decision in French J, as he then was, in Kimberley NZI Finance Limited v Torero Pty Ltd (1989) ATPR (Digest) 46-054:
If in a particular case silence would, as a matter of fact,
constitute misleading or deceptive conduct, sec. 52 by
virtue of its prohibition of such conduct imposes its own
statutory duty to make disclosure.
The cases in which silence may be so characterised are no
doubt many and various and it would dangerous to essay any
principle by which they might be exhaustively defined.
However, unless the circumstances are such as to give rise
to the reasonable expectation that if some relevant fact
exists it would be disclosed, it is difficult to see how
mere silence could support the inference that the fact does
not exist.
That it is unnecessary to show that anyone was actually mislead or deceived is indicated by (at the very least) the inclusion in s.18(1) of the words “or likely to deceive” (my emphasis).
I have already noted that Mr Ilahi was not cross examined as to his contention that he decided not to buy the property only when he heard, from Mr Sinclair, that the property was back on the market, and that his bid had not been accepted.
It was very clear from his evidence that Mr Arscott had no understanding that such was Mr Ilahi’s state of mind. He congratulated the Ilahis; he told the vendors that the property had sold at $3.6million; he took the Ilahis in to the house to sign the documentation and asked, a number of times, for that to happen and for the deposit to be paid. His evidence was highly detailed. It indicates his consistent understanding, right up until the point at which Mr Ilahi said he did not want to buy the home, that Mr Ilahi had in fact bought the home. After Mr Ilahi informed him that he did not want to buy the home he expressed the surprise consistent with the state of his former understanding. He acted throughout as one who had been led to believe by Mr Ilahi that the bid Mr Ilahi made was reflected in his intention to buy the property and that Mr Ilahi had continued to hold that intention right up until the point of the communication that he would not. It is unnecessary to go in to these matters in any detail; the evidence of Mr Arscott’s state of belief throughout these events is conclusive of Mr Ilahi’s bid and subsequent conduct (being conduct which included his failure to tell anyone of his state of mind whilst these events are unfolding) having given rise to a belief on the part of Mr Arscott that Mr Ilahi had successfully bid for the property and intended to do what was required by the general conditions of auction to complete the purchase. The fact that Mr Ilahi did not have that state of mind from a time prior to the fall of the hammer means that Mr Arscott was led in to error by Mr Ilahi.
The position with respect to the other witnesses called by the applicant who were present during these events is no different.
Mr Sinclair, the auctioneer, was misled by Mr Ilahi. He would not otherwise have, at the fall of the hammer, congratulated Mr Ilahi. He clearly did not regard Mr Ilahi as having withdrawn his bid or of even having an intention to do so. Why, on the evidence, would he? Even if we assume that Mr Ilahi was confused by the process of the stopping of the auction when the only non-vendor bid was below the reserve and then the restarting of the auction by the announcement that the property was on the market, he did not convey to any person present his state of mind. Mr Sinclair had no reason to infer from anything Mr Ilahi said or did or what Mr Ilahi’s true state of mind was.
The Raine & Horne employees Klahn and Walsh, who were cross examined, also congratulated the Ilahis after the auction and they were misled as to Mr Ilahi’s state of mind.
Mrs Carter did not deal with Mr Ilahi directly. Mr Carter did so but only at the point, after the fall of the hammer, when Mr Ilahi entered his office in the house and Mr Carter said words to him that acknowledged that the property now belonged to Mr Ilahi. Mr Ilahi did nothing to disabuse Mr Carter of the belief that grounded Mr Carter’s statement to him.
So Mrs Carter was not directly misled but Mr Carter was misled to this extent. In any event both Mr and Mrs Carter were ultimately misled because that is the logical consequence of their agents having being misled.
Mrs Ilahi is not a party; she did not bid with her husband. There is no evidence of a post-fall of the hammer discussion between she and her husband. She holds the same state of mind as her husband claims as to the events relating to the period after the fall of the hammer being explained by an intention to renegotiate a sale of the property, but given the lack of any evidence as to discussions she had with the bidder, her husband, as to any of these matters, and her lack of involvement in any of the discussions, such as they were, between the husband and Mr Arscott, I cannot know why she had this state of mind and therefore whether her holding such views tends to explain why the husband held them. Even if it did help explain why her husband held that view, it would not assist in explaining why he did not communicate his view to anyone present, before or after the fall of the hammer.
The applicant does not need to prove any particular person or persons were misled, but, in my view, in relation to the persons I have referred to, such has been established. None of these witnesses could have known that Mr Ilahi, from before the time of the fall of the hammer, did not regard himself as having purchased the property at auction, whether on his own or his company’s behalf.
I have here just used the expression “did not regard himself as having purchased the property” to describe Mr Ilahi’s state of mind. My earlier description of his state of mind herein might more accurately be summarised as “did not intend any longer to purchase the property. I find that he decided not to purchase the property after Mr Sinclair restarted the auction. His affidavit says, at [25]:
At that time, I believed that my offer had not been accepted by the applicants and so I decided that I did not wish to purchase the property.
And, at [27]
I understood the words “the Property is on the market” to mean that my bid was rejected and that a statement that “the Property is off the market” would mean that my bid was accepted.
That contention, included both a belief aspect and a decision aspect. I suspect that it may be deliberately ambiguous. The decision did not have to be made at all if he had genuinely held the belief that his offer had not been accepted. It would simply operate as a belief as to the state of affairs being that his bid was unsuccessful. To attempt to justify his purported belief, the cross examination of the applicant’s witnesses by his own counsel focussed on the language choice relating to the property being “on the market”. I am not persuaded that such language choice gave rise to any such genuine belief by Mr Ilahi’s part (see [80]-[89] hereof).
There is also the attempt to say that these events gave rise to a state of confusion (see [29] of the affidavit).
I find however that there was a change of mind. It may have been at the point that Mr Sinclair said the property was on the market; it may have been later during the course of events inside the house; in particular, it may have been after the arrival of the son.
Whenever it was, Mr Ilahi did not communicate it to anyone when he knew or ought to have known that they would be unaware of his change of state of mind (I do not accept any suggestion that anyone else was “confused” or “shocked” by the language choice of Mr Sinclair when he restarted the auction.
The same must maintain for all other persons present at the auction who witnessed these events (those events of which they have knowledge). For example, no one who was present at the bidding to the point of the fall of the hammer or, beyond that, to the point at which Mr Ilahi entered the house with Mr Arscott, would have known or could reasonably have been taken to have known that he did not regard himself as having purchased the property at auction or he had formed any intention not to do so.
Mr Ilahi’s silence on these matters in this situation was misleading and deceptive.
The single aspect of the evidence which arguably revealed that Mr Ilahi’s state of mind was as he says it was, is the matter referred to at [99]. I have different versions from each person involved in the relevant conversation; neither were cross examined; both give their account of what was said by Mr Ilahi on this occasion as being words “to the effect of”, meaning that the wording itself is imprecisely recalled.
The fact that neither was cross examined on this element of their conversation is somewhat surprising. It is additionally surprising that Mr Arscott was not asked what he understood Mr Ilahi’s qualified statement – the use of the word “if” he bought the property – to have meant.
I am in a state of considerable uncertainty about whether Mr Ilahi used this expression. If it were used, it is an indirect indication of something that I would have expected to have been explicitly articulated by him throughout these events and this episode in particular, and more than once. Instead, nothing was said. I do not accept on the balance of probabilities and bearing in mind the possible significance of the evidence and the other matters identified by Dixon J (as he then was) in Briginshaw v Briginshaw [1938] HCA 4 as relevant to the finding of facts on the civil standard, that Mr Ilahi used this conditional expression.
I find that by the conduct of its officer, the second respondent, in not revealing his intention not to purchase the property following the making of his bid until the point at which he departed from the property and by his conducting himself during that period otherwise in a way that was objectively consistent with his having an intention to proceed with the purchase of the property, the first respondent engaged in conduct that was misleading and deceptive pursuant to s.18(1) of the ACL.
Whether or not, following the consideration of issues of causation, damages and other issues relating to the contractual claim, the applicant’s succeeds on either aspect of his application, the finding constituted by the previous paragraph hereof may have a significance in relation of the exercise in the discretion of the Court relating to costs. I have, after all, found that the respondents breached s.18(1) of the ACL. And I have done so in circumstances where the explanation for their so doing or their motivation for so doing is very unclear on the evidence.
It will be recalled that I have reached this finding without reliance on s.4(1) and (2) of the ACL. I did so because I did not understand the applicant’s case to be conducted so as to suggest that any of the conduct of the respondents following the bid was a representation as to a future matter. If I am wrong about that, and the said conduct is said to be such a representation, and if I accepted that the silence and the other conduct were representations as to a future matter, then the respondents have not adduced evidence to the contrary and the presumption would apply. The result therefore would be the same.
Section 236 of the ACL provides:
(1)[Recovery of loss or damage] If:
(a)a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) …
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention.
Section 237 of the ACL provides:
(1)[Compensation order] A court may:
(a)on application of a person (the injured person) who has suffered, or is likely to suffer, loss or damage because of the conduct of another person that:
(i) was engaged in a contravention of a provision of Chapter 2, 3 or 4; or
(ii) …
(b)…
make such order or orders as the court thinks appropriate against the person who engaged in the conduct, or a person involved in that conduct.
(2) [Orders must compensate for loss or damage] The order must be an order that the court considers will:
(a)compensate the injured person, or any such injured persons, in whole or in part for the loss or damage; or
(b)prevent or reduce the loss or damage suffered, or likely to be suffered, by the injured person or any such injured persons.
(3)…
The loss claimed by the applicant fell into two broad categories. Firstly, calculated upon an agreed value of the property at trial of $3.275million and given that Mr Ilahi’s bid was in the amount of $3.6million, the difference between the two figures – the sum of $325,000 – is sought as damages.
Secondly, what might cumulatively be described as “holding costs” are also sought; that is, any expense to which the applicants have been put as a result of the bid not being followed through to transfer. This category of claim includes additional mortgage payments and utility payments. The holding costs are evidenced by that collection of invoices and like documents constitutive of exhibit 1.
I must be satisfied that the loss or damage suffered by the applicants was “because of” the conduct of the respondents.
The conduct need not be the sole cause of the loss and damage (see Henville v Walker [2001] HCA 52, per Gleeson CJ at [14] and McHugh J at [109]).
S.18 picks up the common law commonsense concept of causation (see Wardley Australia Ltd v Western Australia (“Rothwells Loan case”) [1992] HCA 55, albeit that was a case dealing with damage “caused by” rather than “because of” conduct under s.82 of the Trade Practices Act 1974). As was said in Henville v Walker (McHugh J at [96]):
No doubt in most cases, applying common law conceptions of causation will be sufficient to answer the issues posed by s.82 in its application to contravention of the Act
I also bear in mind as Gummow J pointed out in Re Elna Australia Pty Ltd v International Computers (Australia) Pty Ltd [1987] FCA 230 at [26] and [28] (cited with approval by McHugh J in Henville at [96]):
It would be an error to translate automatically to the particular statute what appeared the closest analogue from the common law “rules” as to causation. It is rather a question of statutory construction …
Thus, in construing s.82 it is appropriate to bear in mind such matters as the scope and purpose of Parts IV and V…(and) the wide range of subject matters dealt with in Parts IV and V but all linked to s.82…
It is enough that the breach has materially contributed to the loss or damage suffered (see McHugh J in Henville at [106], referring with approval to the use of that expression by Lord Reid in Barrington Castings Ltd v Wardlaw [1956] AC 613 at [620]).
In the judgment of Kiefel J in the decision of the Full Court of the Federal Court in Hanave Pty Ltd v LFOT Pty Ltd [1999] FCA 357 Her Honour made this remark in relation to causation under the analogous provisions of the Trade Practices Act 1974 at [45]:
The question of causation can sometimes be resolved not by direct evidence as to what part a misrepresentation played in the process of entry into the contract, but by a court determining what effect must be taken to have resulted.
This remark is equally applicable to conduct other than representations and to reliance other than entry into a contract.
I remind myself that I have found that the making of the bid itself did not constitute misleading or deceptive conduct. I found it to be a genuine bid. I found that the respondents had the financial capacity to complete the purchase. And that when Mr Ilahi bid he genuinely wished to buy the property.
Mr Ilahi changed his mind. He says he changed his mind because Mr Sinclair did not tell him his bid had been accepted when he returned from speaking with the vendors. I have accepted this account, albeit with some misgivings. I also have some suspicions that it had something to do with the son’s attendance but I cannot make any finding in that regard.
In any event he did not by his conduct or by his words indicate to persons present at the auction including the applicants that he changed his mind. He misled them. He deceived them.
It will be recalled that Mr Ilahi was the only non-vendor bidder.
Mr Sinclair made a number of vendor bids. He bid at $3.3million, $3.4million and $3.5million and then at $3.6million. He then took the bid of Mr Ilahi at $3.6million. In his affidavit, and initially in his evidence, Mr Sinclair said that he had made notes prior to the auction to make 5 vendor bids beginning at $3.3million and ending at $3.7million. His oral evidence was a little inconsistent and confusing on this point. He thought at first that he had made a vendor bid at $3.7million but then said that he had not; rather he had stopped the auction upon receiving the bid at Mr Ilahi at $3.6million. I find that he made 4 vendor bids beginning at $.3.3million and ending at $3.6million, at which point Mr Ilahi made such a bid.
No other bids but these – and Mr Ilahi’s bid – were made by any person, whether before the pause in the auction or after Mr Sinclair had returned from speaking with the vendors and obtaining the instructions that the property was on the market.
I have already indicated that I accept that the crowd of potential bidders who had attended the auction had almost entirely dissipated by the point at which Mr Ilahi ceased to mislead and deceive in relation to his intentions.
But to the point of the fall of the hammer not one genuine bid had been made by any person at the auction, other than Mr Ilahi.
It is not to engage in unwarranted speculation for me to ask myself what was the chance of any of those persons formerly present at the auction who had not made a bid now making a bid – and a bid acceptable to the vendors – if the auction had been able to be reconvened shortly after Mr Ilahi’s bid. In other words, if Mr Ilahi had been open about his change of mind and then the auction had been immediately reconvened or restarted, what possibility was there of a genuine bid being received (for the first time) at the auction?
This is the same question that Ormiston J had to ask in Futuretronics. There a number of significant differences in the facts of that case and this case; of course; there, the successful bidder indicated a lack of intention to complete the purchase very shortly after the fall of the hammer. The vendors did not take advantage of the clause in the General Conditions of Auction which would have entitled them to rescind and restart the auction very quickly; there are no facts relating to any ongoing deception by silence or otherwise following the acceptance of the bid, as is the case here.
But the evidence in Futuretronics was that there was no other genuine bidder to the point of the fall of the hammer. Having found (at 244) that:
It follows that under both the Trade Practices Act the Fair Trading Act the remedies are designed to compensate for misleading or deception, not as a substitute means for enforcing promises …
His Honour went on to find at (245):
Here the deception led to the knocking down of the property to Mr Gadzhis and the conclusion of the auction, but nothing more. If it could be shown that the error into which the plaintiff’s auctioneer had been led had resulted in the loss of a sale to a genuine bidder, then all available remedies would have been appropriate to compensate the plaintiff … Thus is clear from what occurred in the auction that there was no available alternative purchaser willing to bid … For all practical purposes the error caused by the representation was quickly dispelled and the plaintiff was not thereby entrapped by any obligation from which it was necessary to free itself. Essentially the remedies provided by the Fair Trading Act … are there to restore those affected by misleading or deceptive conduct to the position in which they were before any contraventions of the Act take place.
In this case the bid, whilst forming part of the sequence of events which culminated in Mr Ilahi behaving in a misleading and deceptive way was not, I found, in itself misleading and deceptive. I am not able to find in the facts in this case, for example, that all that transpired was part of a plan by the respondents to extract a minimum selling price from the vendors by pretending to make a genuine bid, drawing the matter out and not revealing their lack of intention to settle and then trying to have the vendors accept, in those circumstances, an offer that Mr Ilahi then proposed to make. The misleading and deceptive conduct by Mr Ilahi is that constituted by his failure to inform those present of his change of mind.
The general conditions of auction in this case also provided the vendors with an opportunity to rescind and recommence the auction following a failure by the purchasers to complete the purchase.
The loss that followed from the misleading and deceptive conduct of Mr Ilahi can only be a loss of an opportunity to restart the auction at an earlier time but I am unable to find on the facts of this case that such a loss had anything other than a theoretical significance.
There was no loss of a sale to a genuine bidder.
That being the case the accrual of consequential losses such as the need to auction the property again and the decrease in the value of the property (relative to the value of the bid), do not arise.
In relation to the ACL claim (and the FTA claim) there has been a contravention of s.18 but there is no loss or damage established.
I turn now to the contractual claim.
First of all, I accept the applicant’s contention that at an auction a contract arises when the auctioneer accepts a bid on behalf of a vendor or, put another way, on the fall of the hammer, and that the bids themselves are offers to purchase at the price stipulated and acceptance occurs when the auctioneer knocks the property (whatever kind of property it is) down to a particular bidder.
The difficulty in this case arises from the fact that the property concerned is land.
There are two relevant pieces of Western Australian legislation which arise for consideration.
Section 34(1)(a) of the Property Law Act (WA) (herein after referred to as the “PLA”) provides that:
No interest in land is capable of being created or disposed of except by writing signed by the person creating or conveying the interest, or by his agent there unto lawfully authorised in writing.
There had been a controversy arising in the cases and the academic commentary as to whether that section applied to executory contracts or was limited in its application to conveyances and other instruments relating to the actual creation of the legal interest in the land. This controversy is helpfully described by Honey in an article described as “Marist Brother Community Inc The Shire of Harvey: Formalities Relating to Contracts for the Sale of Land: (1995) 25 WALR 180”.
However that controversy has been settled by the decision of the Full Court of the Supreme Court of Western Australia in Marist Brothers Community Inc the Shire of Harvey (1994) 14 WALR 69. In that case the executory agreements were evidenced in a chain of correspondence which satisfied the requirements of s.4 of the Statute of Frauds 1677. The prospective purchasers argued that the PLA applied. The consequence of the PLA applying rather than only the Statute of Frauds was that the PLA had a higher hurdle in relation to the writing required and that while both required the relevant document to be signed by an agent the PLA required that the agent be authorised in writing. That is what turned on the applicability of the PLA in that case. The majority found that the PLA did not apply to executory contracts for the sale of the fee simple in land and that an earlier decision of the High Court of Adamson v Haighs [1974] 130 CLR 276 had not decided otherwise. Thus s.4 of the Statute of Frauds was applicable and there was sufficient writing to satisfy it.
In accordance with that decision, I am bound to find here that the PLA has no applicability in the circumstances of this case.
However the Statute of Frauds in my view is applicable. The Statutes of Fraud is a British Act which continues in force (in amended form) in Western Australia pursuant to s.2 of the Law Reform (Statute of Fraud) Act 1962. It provides:
Noe Action shall be brought whereby to charge the Defendant upon any special promise to answer for the debt default or miscarriages of another person … unless the Agreement upon which Action shall be brought or some Memorandum or Note thereof shall be in Writing and signed by the party to be charged therewith or some other person thereunto by him lawfully authorised.
The respondents say in this case that there is no note evidencing the agreement for the sale of land that was signed by the party to be charged therewith or any other person lawfully authorised.
In Wright v Madden (1992) 1 QdR 343 the Full Court of the Queensland Supreme Court was dealing with a case where a successful bidder at an auction had refused to execute any written agreement. The Full Court said (at 346):
There is nothing unusual about the facts of this case. Indeed auctions were conducted on precisely the same terms and bidders acted in the same way as the appellant, more than 100 year ago … it has always been recognised that the Statute of Frauds applied to a sale of land by auction and the contract could not be enforced in the absence of a memorandum in writing …
At 349 the Full Court said:
Looked at in that light this case is no different from the situation where parties orally agreed all terms with the respect to the sale of land, but one party thereafter refused to sign a memorandum in writing relating thereto. In most situations where the was an oral agreement for the sale of land there would be either an express , or at least an implied, term that the parties would subsequently sign a memorandum in writing. But the law over some centuries now has steadfastly refused to recognise that in such a situation the party refusing to sign the memorandum in writing can be sued successfully on the antecedent oral agreement; the prohibition extends to an action for damages for breach of contract in refusing to sign.
Ormiston J in Futuretronics, in rejecting the creation of a separate preliminary or collateral contract in that case, found that at the fall of the hammer the purchaser’s offer was converted into a single oral agreement containing all the relevant terms in the auction contract including not only the agreed terms of purchase but also the terms requiring a signature and payment of the deposit (at 232).
The applicant’s answer to the claim of the applicability of the Statute of Frauds was to firstly submit that a liberal approach ought to be adopted with regard to the identification of documents which followed the creation of an unsigned contract and were capable of constituting sufficient compliance with the Statute. Reference was made to a decision of Edelman J in Alonso v SRS Investment (WA) Pty Ltd 2012 WAC 168 at [74]-[92] His Honour there discusses at length a series of cases in which what he described as “a contorted interpretation of the words of the Statutes was adopted to escape strict requirements of it.
It was submitted that the contract which was initialled by the applicants in the note in Mr Ilahi’s hand identifying the second respondent as the purchaser constituted such sufficient compliance.
Of course any document executed by the applicants will be of little relevance unless it has some kind of logical connection with the document (or a document) executed by the respondent which is relied upon. This is because the Statute speaks of the requirement of a document signed by the party charged with the Memorandum or that person’s agent. An example of two disparate documents being taken together to constitute sufficient compliance with the Statute is given in Alsono at [90] with the reference to Lang v Miller [1879] 4 CPD 450 (an unsigned agreement for sale) coupled with a signed receipt of sale). That decision and the “approach” of the case was said by His Honour to have been followed in Australia for many years [91]. The state of the law on the topic is summarised [again at 191] thus:
It has, therefore, been the law since 1807 that s 4 of the Statute of Frauds can be satisfied by a letter which refers to a written, although unsigned, agreement. The boundaries of this doctrine have varied but a situation such as the 30 October 2006 letter from the second defendant, which expressly referred to the Lease, has always fallen within the doctrine. The 30 October 2006 letter was signed by the second defendant and her signature was unqualified.
There is no “letter” here signed by the respondents referring to an unsigned agreement.
I have already referred to the document that is said to contain Mr Ilahi’s identification of the company as the purchaser.
It is a question of what constitutes a Memorandum or note in relation to the agreement. Here the only term to which the note could refer is the identity of the purchaser. The note is absent any reference to price or any other term of the agreement (or of the contract note initialled by the applicants). There is no logical reason to link it with the terms of the document that the applicants had initialled (the contract).
I am not satisfied that the requirement for the contract to be evidenced in writing has been satisfied. No action on any agreement said to have arisen on the bid and its acceptance can be brought.
The accrued jurisdiction claim must fail.
The outcome is that the application must be dismissed.
I certify that the preceding one hundred and eighty seven (187) paragraphs are a true copy of the reasons for judgment of Judge Lindsay
Associate:
Date: 12 July 2013
Corrections
The citation has been corrected from 782 to 783.
Trade Practices Act1974 under LEGISLATION changed to AustralianConsumer Law.
Trade Practices Act in Catchwords changed to Competition and Consumer Act.
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