Charles Lloyd Property Group Pty Ltd v Buchanan
[2013] VSC 148
•5 April 2013
| IN THE SUPREME COURT OF VICTORIA COMMERCIAL AND EQUITY DIVISION |
S CI 2012 03385
| CHARLES LLOYD PROPERTY GROUP PTY LTD | Plaintiff |
| - – and – | |
| VALDA LORRAINE BUCHANAN | Defendant |
JUDGE: | MUKHTAR AsJ | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 1 November, 17 December 2012 | |
DATE OF JUDGMENT: | 5 April 2013 | |
CASE MAY BE CITED AS: | Charles Lloyd Property Group Pty Ltd v Buchanan | |
MEDIUM NEUTRAL CITATION: | [2013] VSC 148 | Revised 5 April 2013 |
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CONTRACT ― Sale of land ― Sale of undeveloped and forested land for subdivisional development ― Occurrence of past suicide on land ― Non disclosure by vendor to purchaser of that fact ― Subsequent discovery of event by purchaser ― No assertion by vendor of wrongful silence by vendor on a material matter ― Agreement to extend completion date of contract despite discovery ― Purchaser failed to complete and failed to remedy default ― Vendor’s rescission ― Purchaser’s action to annul contract on the grounds of misleading and deceptive silence ― Vendor’s application for summary dismissal ― Application granted
FAIR TRADING ― Misleading and deceptive conduct ― “Engaging in conduct“ ― Conduct by silence ― Mere silence ― Elements of liability ― Requirement for materiality ― Requirement for reliance and being led into error ― Fair Trading Act ss 3, 9
PRACTICE AND PROCEDURE ― Summary dismissal ― Applicable test under Civil Procedure Act ― “No reasonable prospect of success” ― Differentiation from established test under Rules of Court for summary judgment ― Civil Procedure Act ss 63, 64 ― Rules of Court r 22, 23
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Morrison | Burchartz Intellex |
| For the Defendant | Mr M Campbell | Heinz & Partners |
HIS HONOUR:
In this case a purchaser of a large area of vacant land at Mount Clear (near Ballarat) who was in default under the contract of sale has sued the vendor under the Fair Trading Act to annul the contract on the ground that it was misled and deceived by the pre-contractual silence of the vendor about something which the purchaser says was material. The vendor did not disclose that two years before the contract was made a young man had committed suicide in a forested area on the land.
The plaintiff seeks to portray the case as a type which is referred to in legal discourse as “psychologically stigmatised property”.[1] Such a defect is not one of title. Nor does it go to the physical features of the land. The stigma in such cases might emanate from some non-physical defect that causes emotional or psychological discomfort to a buyer. A publicised, and extreme, example in Australia was the case of Hinton[2] in which a real estate agent in New South Wales was prosecuted successfully by the Commissioner of Fair Trading for marketing a home in North Ryde without revealing to the unknowing purchasers the material and horrible fact that a young man had murdered his parents and sister in the house.
[1]See Eileen Webb, ”Houses with a history – Disclosure obligations and ‘psychologically stigmatised’ property” in (2006) 13 Australian Property Law Journal 67, especially at 86 ff.
[2]See Hinton v Cmmr for Fair Trading [2006] NSWADT 257 (NSW Administrative Decisions Tribunal); on appeal in [2007] NSWADTAP 17. These were proceedings for offences under the legislation affecting agents as well as the Fair Trading legislation. The executrix released the purchasers from the contract.
The vendor says he did not intend to hide the fact that a young man had taken his life on the land. He simply did not think it mattered. It was in a forested area and the land was to be subdivided and developed. The plaintiff as purchaser does not say that anything was said or aroused in discussions between the parties and the vendor’s agent to make such an event something that might have mattered. Moreover ― and this is where I think the determination of this application really turns ― two months after the contract was due to settle, the purchaser became aware of the suicide and the presence of a memorial near the scene of death. That is not disputed. Yet, the purchaser did not then assert that it had been misled by the silence or somehow reserve rights to disavow the contract or otherwise make an issue of the suicide or the non disclosure. To the contrary the purchaser then made a deed with the vendor under which he obtained at a price an extension of the completion date of the contract. The purchaser failed to complete the contract. The vendor then terminated for breach. The plaintiff now sues to annul the originating contract. It says the vendor engaged in misleading and deceptive conduct in staying silent about the suicide when the contract was first made. Had it been told about the suicide, the plaintiff says it would not have bought.
The legal problem for the plaintiff is visible. It is asking to set aside the contract even though it later found about the suicide but went ahead and made a deed and paid the vendor money to extend the contract to give it more time to complete the sale.
The defendant says the facts are plain and speak for themselves to say the plaintiff’s case has no real prospects of success. It applies to have the proceedings summarily dismissed under s 63 of the Civil Procedure Act or under order 23 of the Rules of Court. It characterises the case as one of mere silence, rather than a case of silence that distorts a positive assertion so as to make it a half truth. The plaintiff does not say differently. The defendant says primarily that the silence was not deliberate. Anyway, it says the purchaser’s conduct in making the deed of extension in the face of the discovery shows manifestly there was no materiality in the non disclosed fact; there was manifestly no reliance on the non-disclosure; and that in making another contract to extend completion there was manifestly a demonstration of the purchaser’s intention to proceed with the contract anyway. Thus the defendant’s case is that it may be concluded on the objective facts already that the plaintiff has no case because it was not led into error.
I would allow this application. Whether one applies the test for summary judgment under rule 22 and 23 or what has been thought to be the more liberalised test under the Civil Procedure Act (about which, more later) I think the plaintiff’s case is bound to fail. At the outset I would summarise my reasons as follows.
I am willing to accept in the plaintiff’s favour that under misleading conduct legislation[3] it is not enough for the defendant to defeat the claim by saying the alleged contravening conduct was not deliberate. The prevailing principle under the statute is that if conduct was misleading and deceptive and led a plaintiff into error, then there may be a contravention even if the defendant did not intend that, or acted with propriety. In that sense the liability under the statute is “strict”. However, where the misleading conduct involves a person refraining from doing an act (a statutory description which attracts conduct by silence) the legislation speaks of “refraining otherwise than inadvertently”. Whilst there is support for the view that such language means therefore that silence has to be deliberate before it is actionable under the misleading conduct legislation, there is real legal debate on that question to which I shall make brief reference later. There is the thinking, faithful to the dominant provision of the statute, that the decisive question is whether as an objective matter the plaintiff was led into error by the silence. So, I would not say this case is bound to fail because the defendant says, and the plaintiff cannot gainsay, the non disclosure was not deliberate.
[3]That is the expression I shall use, as some authors have done, to cover s 52 of the Trade Practices Act and the equivalent provisions of the Fair Trading Act, and now the Australian Consumer Law under the Competition and Consumer Act.
The question is: was the plaintiff in all the circumstances led into error?
To that question, what is fatal already to the plaintiff’s case is the making of the second or extension contract in the face of the discovery of the previously undisclosed fact. The misleading conduct legislation prescribes a norm of conduct. A contravention is not actionable unless it be shown at a primary level of causation there was reliance on the silence which led the plaintiff into error. I think the making of the second contract sterilises any possible suggestion that the silence truly was material or, if it was, that that the plaintiff was led into error. The plaintiff in the face of the discovery of the suicide went ahead and made the extension deed and the plaintiff cannot now be heard to say it was misled at the very beginning. The plaintiff says that is a matter of credibility and something that might be explained away or rehabilitated at trial. I do not accept this. That is because in making the deed of extension the plaintiff entered into new or altered legal relations albeit by way of variation with the knowledge of the suicide. Those legal relations as a matter of law confirmed necessarily the original contract. The plaintiff in effect refreshed the contract as previously made and became bound to perform it by an extended date in the knowledge of the suicide. Although not argued as a matter of election or affirmation on Sargent lines[4] (that is, making a choice between alternative and inconsistent rights), I accept the submission that it is no good now the plaintiff trying to rescue the position by possibly explaining away why it made the deed. That contract of variation stood at law. There was no vitiating element to it. The law looks to what was done objectively under the deed of extension and its legal effect, and not why it was done. Thus, in that regard, there is no case to be investigated.
[4]Sargent v ASL Developments (1974) 131 CLR 634 esp at 642 and 656-8.
Of course, in these applications the Court must act with great care: Fancourt v Mercantile Credits.[5] But it must be mindful of the overarching purposes of the Civil Procedure Act. In this case the objective facts are in. They are clear and uncomplicated. If the decisive facts are in then it is no barrier to summary judgment that a Court has to hear and decide matters of substantial legal argument.
[5](1983) 154 CLR 87 at 99.
The facts in detail
The plaintiff is a property developer. Its managing director Mr Frank Bevacqua describes it as a family run development company which acquires broad based lots for subdivision and residential development. The company’s project manager is his son, Mr Tony Bevacqua who says that in about April 2010 he saw on the Realestate.com website an advertisement for the sale of residential land of approximately 30.37 acres at 44 Lavery Avenue in Ballarat. The advertisement, expressed with the usual encomium, said
Located in the prestigious growth corridor of Mt Clear, situated between Haymes Road and Lavery Road, this parcel of land offers huge potential either as a development opportunity (STCA) or as a once in a lifetime chance to build your dream home. Nestled amongst the gums in a beautiful, unspoilt setting, close to public transport, schools, shops and the University of Ballarat. Approximately 30.3731 acres, the land is held over three titles and is zoned Residential 1.
He says there was another advertisement within the commercial real estate section of that website saying:
ENTRY LEVEL RESIDENTIAL SUBDIVISION
Total site area 12.1 Ha (approx)
2 kilometres from the centre of Ballarat
Beautifully located within peaceful environment
Average lot size: 600 sqm
Rapidly growing regional area
The defendant has put into evidence an aerial picture of the land which shows it is not only undeveloped but it is substantially afforested.
Mr Tony Bevacqua says he then contacted the selling agent in Ballarat. He introduced himself as a developer from Melbourne and said he was interested in purchasing the land to use as a development site. He says between April 2010 and 28 May 2010 he spoke with the agent by telephone on numerous occasions. There is no evidence about the substance of those conversations beyond saying “…we discussed the business carried out by CLPG [i.e., the plaintiff] and that CLPG was interested in purchasing the Property to use as a development site.” In this case the plaintiff’s case does not depend on anything said or not said by a vendor’s selling agent. But more to the point, Mr Tony Bevacqua does not say there was anything said in any conversation with the agent or the vendor as principal in the lead up to the contract which might have aroused a need or reasonable expectation that something would be said about the suicide. The facts about the contact with the agent were adduced in aid of showing that this was a dealing in trade and commerce so as to attract s 9 of the Fair Trading Act. For the purposes of this application the defendant does not contend to the contrary.
The next event occurred on 28 May 2010 when the agent attended Mr Bevacqua’s office in the Docklands. A contract of sale of land was signed that day. The vendor (the defendant) was Valda Buchanan from Ballarat. Her son, Garry Buchanan holds an Enduring Power of Attorney for her. He signed the contract as vendor. The contract was standard form and is unremarkable. It is essential provisions were: (i) price of $1 750 000; (ii) deposit of $175 000 by 28 June 2010 of which $50 000 had already been paid; and (iii) completion by 27 May 2011. There is nothing else within the terms of the contract that has any bearing on the dispute. In particular, as this was to be land for development, there is no question of warranties or descriptions or anything else which might in some way be connected with the suicide on the land.
The defendant swears, (and this is not disputed) that the plaintiff could not proceed to settlement of the sale as obliged. The plaintiff sought an extension of the settlement date because obtaining the relevant planning permission had taken longer than the plaintiff had anticipated. On 27 July 2011 the parties made a Deed of Variation of Contract of Sale which extended the settlement dated from 27 May 2011 to 24 January 2012 which is about 20 months from the date of the original contract. This was something more than a mere indulgence or a one way dealing because under that deed, the purchaser agreed to pay three instalments of “penalty” interest as follows:
(a)$50 000 on 1 July 2011;
(b)$48 437.50 on 27 August 2011; and
(c)$32 632.70 on 30 September 2011.
That obligation has to be understood by reference to an ancillary clause 1.c.ii. which said that if the contract was rescinded as a result of the purchaser’s default between 27 May 2011 and 24 January 2012 then the deposit would be forfeited; penalty interest of 12.5% per annum would be payable on the unpaid balance of the purchase price; and if any of the instalments paid by the purchaser exceeded the penalty interest payable then the vendor could keep the excess.
What follows are the critical facts. They are not disputed by the plaintiff. I shall proceed step by step bearing in mind that the completion date for the original contract was on 27 May 2011, and the deed giving the extension was made on 27 July 2011.
On Thursday 21 July 2011, a lawyer acting for the purchaser, one Bianca Scarlett sent an email to the vendor’s lawyer saying:
Hi Ian,
Our clients are aware that there is a memorial on the land and would like to contact the family as a matter of respect. We would appreciate if you could provide us any contact details you may have.
On Monday 25 July 2011, that e-mail was forwarded to Mr Buchanan and he was asked “Is it ok for me to give them your mobile number to discuss this matter?”
On Tuesday 26 July 2011, (that is, the day before the deed of variation was signed) the vendor’s lawyer sent an email to Bianca Scarlett saying:
I think the memorial you are talking about is a cross and a shrub near a tree where a young man tragically committed suicide approximately 2 years ago.
My client would like to contact his family to give them the opportunity to relocate the memorial.
This may take a couple of weeks to complete since my client will have to ascertain a contact within the family from the Police. Is this ok with your client?
Thus it is plain that before the deed of variation was made, the plaintiff purchaser became aware about the suicide and the memorial on the land. It did not complain or contend that such matters were material and had been wrongfully undisclosed at the time of the original contract. The plaintiff did not complain or contend that the suicide or the memorial somehow stigmatised the property or otherwise undermined its prospect of being subdivided and sold. The plaintiff did not somehow reserve its rights in light of the discovery, in this a commercial dealing. Nor was the previously undisclosed presence of the memorial then said by the plaintiff to be the cause of some delay in the planning approval process. To the contrary, so the defendant amplifies, there was no issue raised and the plaintiff bargained for an extension of the completion date to enable it to perform the contract that it now seeks to invalidate in this case.
What did the vendor know? Mr Buchanan swears that some time in July 2009 he was told that his brother had discovered a body in a heavily forested part of the property, but that it was in an area that was not intended for subdivision. He was told that the family of the deceased wanted to conduct a memorial service on the land, but he did not know that any form of memorial had been erected on the land. His first knowledge of a memorial came when Bianca Scarlett had sent the e-mail in July 2011. He says that in May 2012, his brother gave him a memorial crucifix and a poem that had been removed from a tree on the land both of which were returned to the deceased’s parents.
The purchasers did not proceed to settlement on the due date, as extended. On 17 February 2012 the vendor sent a 14 day rescission notice. The default was unremedied. In a letter dated 14 March 2012 the purchaser’s solicitor introduced as a primary matter, a new or ancillary element to the silence question. It was asserted that the vendor had given a possessory right to the family of the deceased to visit the memorial. The letter said where relevant
Our client entered into the Contract on the basis of the disclosures made in the Contract and in the Vendor’s Statement, as well as the warranties given by your client.
General Condition 2.3 of the Contract states that, inter alia:
2.3 The Vendor warrants that the Vendor:
…
(d)has not previously … agreed to lease or granted a pre‑emptive right which is current over the Land and which gives another party rights which are priority over the interest of the Purchaser …
General condition 2.4 of the Contract then goes on to state that, inter alia:
2.4The Vendor further warrants that the Vendor has no knowledge of any of the following:
…
(c)lease or other possessory agreement affecting the Land;
…
Subsequent to signing the Contract and as set out in our earlier correspondence, we are instructed that Council’s planning and heritage assessors have explicitly advised our client that the existence of the memorial is an issue which our client must consider and deal with as part of any future development of the Property.
Further to this, it has been indicated to our client by third parties that the family of the deceased person were given some form of access right to construct the memorial and have been told that they have ongoing access rights over the Property to continue to visit the memorial, to the point where Council is recognising their interest over the Property and requiring our client to negotiate with the family in this regard.
On this basis, it would appear that some form of interest and possessory rights affecting the Land has been granted by your client, in breach of your client’s warranties in the Contract.
Above and beyond this interest and possessory rights which appear to have been granted, we are also instructed that the Vendor ought to have disclosed the facts surrounding the deceased person (and in particular, the circumstances of the death) to our client prior to execution of the Contract, particularly given your client’s knowledge of our client’s intended use of the Property, namely as a residential development site.
No disclosure of the death itself, the circumstances leading to the death, nor the interest and possessory rights granted to the family of the deceased person were ever made by the Vendor as part of the Contract, nor were any of these matters ever brought to the Purchaser’s attention before the Purchaser entered into the Contract.
We are instructed that had our client been properly advised of what your client ought to have disclosed pursuant to its contractual and legal obligations, then our client would not have entered into the Contract.
As such, we are instructed that the Vendor’s failure to disclose this interest and these rights granted to the family of the deceased person clearly constitutes misrepresentation on your client’s behalf and our client has suffered significant financial loss as a consequence of the misrepresentations.
The letter is conspicuously silent about the deed of extension.
The purchaser filed a writ on 14 June 2012. It appears the plaintiff no longer contends there was a breach of warranty. It confines itself to alleging a case of misleading and deceptive conduct under the Fair Trading Act by silence and seeks to annul the contract. It seeks damages made up essentially of three items: recovery of the deposit of $175 000; consultant’s fees of $170 208; and borrowing costs of $131 070. It does so by pleading the originating contract of 28 May 2010 and saying nothing about the deed of extension. It confines the case to matters in existence at the time of formation of the contract to allege this:
6. The following events occurred prior to the formation of the Contract:
(a)On a date not known to the Plaintiff, a young person committed suicide on the Land; and
(b)a memorial was erected on the Land by that person’s parents (“the Facts”);
7.The Defendant (or her servants and agents) failed to disclose the Facts to the Plaintiff prior to the Plaintiff’s entry into the Contract (“the Omission”);
8.The Plaintiff had a reasonable expectation that the Facts would be disclosed prior to its entry into the Contract.
Particulars
The Facts were not discoverable by the Plaintiff’s own searches.
The Facts were known to the Defendant.
The Facts were known to the council.
The Facts materially affected the value of the Land.
The Facts materially affected the use to which the Land could be put.
The Defendant was aware, or ought reasonably to have been aware, that had the Plaintiff known of the Facts, it would have affected its decision to enter into the Contract (as was the case).
The Plaintiff was vulnerable and would be likely to suffer harm if the Facts were not disclosed prior to its entry into the Contract.
9.The Omission was made in the course of trade or commerce within the meaning of the Fair Trading Act 1999 (Vic) (as it was then in force) (“the FTA”).
10.In the circumstances, the Omission was misleading or deceptive, or was conduct likely to mislead or deceive, contrary to section 9 of the FTA.
11.Relying on the Omission and induced thereby, the Plaintiff acted to its detriment by entering into the Contract and has thereby suffered loss or damage.
The pleading shows this to be a case of mere silence as it is conveniently called. The relationship is not fiduciary or one importing obligations of good faith. Nor is it one alleging the attraction of tortious duties despite the use of “vulnerability” amidst the particulars. This was an arm’s length commercial deal. The plaintiff does not say there was a half truth; that is, silence coupled with statements that if not corrected or qualified would lead a person onto error. The plaintiff’s case is based on a “reasonable expectation” of being told about a suicide, a conclusion not based on facts as pleaded but borrowing phraseology from Demagogue v Ramensky.[6]
[6](1992) 39 FCR 31 at 41 (per Gummow J).
So, how does the plaintiff deal with the objective fact that it did find out about the suicide before it decided to seek an extension of the impugned contract?
The managing director of the plaintiff, Mr Frank Bevacqua, has sworn an affidavit in opposition to the application. Its essential parts say (with my emphasis):
6.If I had been informed that someone had taken their life on any part of the Property, I would not have purchased the Property as I have deep moral convictions about this and feel that by building a development on such Property, we would be desecrating it.
7.I was absolutely shocked when I was informed that someone had died on the Property and was not comfortable developing the Property from that point on. Once I found out, I nevertheless persevered with the sale because I was not aware of any legal rights I had to avoid the sale as a result of the non-disclosure of the Facts at that point.
8.One of the causes of CLPG’s not being able to settle the Contract of Sale was that before granting a development permit, the council required us to negotiate with the parents of the boy if any plans were to affect the memorial. This significantly delayed the permit application process.
9.Given my personal convictions, I feel that I have been misled as no‑one made me aware that someone had taken their life on the Property, before CLPG entered into the Contract of Sale. I expected that matters like the Facts (to which is attached a significant moral stigma) would have been disclosed to me before buying the Property, and so I did not think specifically to enquire of the Defendant’s representatives if there was anything like that that had occurred on the Property.
10.The email dated 21 July 2011 … sent from my lawyer at the time, Bianca Scarlett, was sent at my request, shortly after I was informed of the death on the Property, so that I could offer my condolences to the deceased family. This email was just an expression of my concerns for the family.
11.The Deed of Variation of the Contract of Sale dated 27 July 2011 (“Variation”) related only to:
(a)Extension of settlement Date;
(b)Deletion of General Condition 20;
(c)Penalty Interest; and
(d)Acknowledgement of Validity and Enforceability of the Vendor’s Statement;
and did not deal with the issue of someone having committed suicide on the Property.
When it came to explaining the making of the Deed of Variation, Mr Bevacqua swears:
The Variation was designed to try and underpin the significant investment CLPG had already made and I was still in the process of determining what CLPG would do in relation to the recent information that there had been a suicide on the Property.
Silence as misleading and deceptive conduct
Much has been written, and there have been quite a few decided cases (all turning on their peculiar facts) about the circumstances in which silence in pre contractual negotiations may contravene the misleading conduct legislation.[7] This case does not call for an exegis of the law. It is sufficient to make some general statements only.
[7]For an instructive overview and analysis see Gillies P, “Non-disclosure: Trade Practices Act, s 52” in (2004) 78 ALJ 653. See also Cheshire & Fifoot Law of Contract (10th ed.) at 11.115 ff.
First, misleading and deceptive conduct is a statutory remedy independent of the common law. Even though courts have seen it useful to have resort to the common law principles for misrepresentation by conduct or by silence, the law as developed in the cases has been careful to emphasize that Courts must adhere to the words of the statutory prohibition. Thus, circular as it sounds, in determining whether there has been misleading and deceptive conduct under the statute it is necessary to determine whether in the light of all relevant circumstances constituted by acts, omissions, statements or silence, there has been conduct which is likely to be misleading or deceptive: see Miller and Associates v BMW Australia,[8] referring to Demagogue v Ramensky.[9]
[8](2010) 241 CLR 357 at 368 [14].
[9](1992) 39 FCR 31 at 41.
Secondly, cases have drawn a distinction between a case of mere silence and a case involving silence coupled with related positive statements that if uncorrected or qualified are capable of leading a plaintiff into error. This is the so-called half truth.[10]
[10]See Gillies P above at 656.
Thirdly, silence per se will rarely attract a liability to disclose information in contractual negotiations. Absent a special relationship such as fiduciary relationship or one importing good faith, the law does not require a party to disclose something adverse to their negotiating position for to do so would interfere with the “traditional secretiveness and obliquity of the bargaining process”.[11] The law looks to remedying deceit. That is why, for mere silence to attract liability there has to be something more. That something more has led to the approach of seeing whether circumstances were present that gave rise to a reasonable expectation that if some relevant facts existed, then they would be disclosed. That approach was based upon the judgment of Gummow J in Demagogue.[12] But in Miller v BMW, the High Court warned that the language of reasonable expectation is not statutory. It is more of a conclusion. French CJ and Kiefel J said:
The language of reasonable expectation is not statutory. It indicates an approach which can be taken to the characterisation for the purposes of s 52, of conduct consisting of, or including, non-disclosure of information. That approach may differ in its application according to whether the conduct is said to be misleading or deceptive to members of the public, or whether it arises between entities in commercial negotiations. An example in the former category is non-disclosure of material facts in a prospectus.
In commercial dealings between individuals or individual entities, characterisation of conduct will be undertaken by reference to its circumstances and context. Silence may be a circumstance to be considered. The knowledge of the person to whom the conduct is directed may be relevant. Also relevant, as in the present case, may be the existence of common assumptions and practices established between the parties or prevailing in that particular profession, trade or industry in which they carry on business. The judgment which looks to a reasonable expectation of disclosure as an aid to characterising non-disclosure as misleading or deceptive is objective. It is a practical approach to the application of the prohibition in s 52.
[11]Poseidon Limited v Adelaide Petroleum (1992) ATPR 41-164 at 40, [227].
[12](1992) 39 FCR 31 at 41.
Their Honours then made this important statement:
To invoke the existence of a reasonable expectation that if a fact exists which will be disclosed is to do no more than direct attention to the effect or likely effect of non-disclosure unmediated by antecedent erroneous assumptions or beliefs or high moral expectations of one person held by another which exceed the requirements of the general law and the prohibition imposed by the statute.
Fourthly, the statute imposes strict liability in the sense that it is not concerned with the state of mind of the person who engaged in the misleading and deceptive conduct. But there is some support for the view in the silence cases that a failure to disclose must be deliberate. Under s 4(2)(a) of the Trade Practices Act and now the Competition and Consumer Act , engaging in conduct includes refusing to do any act. Under s 4(2)(c)(i) a reference to refusing to do an act includes a reference to “refraining (otherwise than inadvertently) from doing that act.” The definition in s 3 of the Fair Trading Act is not exactly the same, but it is in substance.
In Costa Vraca Pty Ltd v Berrigan Weed & Pest Control Pty Ltd,[13] Finkelstein J held that where the plaintiff’s complaint under s 52 was that the defendant had either refused or refrained from doing an act, then before such conduct was actionable it must have been engaged in deliberately. That was said to follow from the use of the words “refuse” and “refrain” and reinforced by the words “otherwise than inadvertently”. Thus in that case, a conclusion that a negotiator did not deliberately withhold information, because it did not enter his mind that he should make mention of the fact, was held to be a ground for precluding liability under the Act. Merkel J formed the same view in Johnson Tiles Pty Ltd v Esso Australia.[14] That is, there must be an element of intent in the refusal to do or the refraining from doing the act in question, at least where silence alone constitutes the misleading conduct. In D’Souza v Wedgewood Road Hallam No. 1 Pty Ltd,[15] Gordon J accepted uncontradicted evidence that an omission in a vendor’s statement under s 32 of the Sale of Land Act was an “honest mistake”. Her Honour concluded that such an omission was an inadvertent omission, and accordingly there was no “engaging in conduct” for the purposes of s 52 of the Trade Practices Act.
[13](1998) 155 ALR 714.
[14](1999) FCA 477.
[15][2010] FCA 765.
But there are views to the contrary. They are based on the paramountcy to be given to the contravention section of the misleading conduct legislation which does not concern itself with intention to deceive but in the objective effect of conduct leading a party into error. Thus, in CCP Australian Airships v Primus Telecommunications,[16] the Victorian Court of Appeal dealt squarely with a submission that silence may not constitute actionable misleading and deceptive conduct unless it is intentional. Nettle JA with whom other members of the Court agreed rejected that submission in this way:
As to the law, the misleading and deceptive quality of remaining silent inheres in the non‑disclosure of information; not in any refusal to provide it. Consequently, it does not follow from the fact that a failure to act must be intentional in order to be actionable, that silence must be intentional in order to be actionable. It is plain in principle and authority that it is not necessary that silence be intentional in order that it may constitute misleading and deceptive conduct for the purposes of s 52.
[16][2004] VSCA 232
Writers in the field are inclined to the same view. The authors of Cheshire and Fifoot Law of Contract say:[17]
[T]he definition is merely inclusive and does not deal with the circumstance where an inadvertent failure to reveal information led the other party into error. Inadvertence, as Finn J pointed out in the Hughes Aircraft case (cit omitted), may cover ignorance, incompetence and other states of mind that may explain failure to disclose. Equally, deliberate non-disclosure is not necessarily limited to cases of fraud. The difference between inadvertent and deliberate non disclosure is not self evident and may in some cases be practically impossible to determine. It is therefore suggested that the cases that hold that silence must be deliberate to be actionable are incorrect because section 2(2) [the definition which includes “inadvertently”], as an inclusive definition of refusal, does not dictate the result and the meaning of s 18 [the contravention section] is inappropriately confined by such an interpretation.
[17]At 610-11
Thus it comes to this. This is a case of mere non disclosure. It is not a case of misleading impression or half truth. It is arguable that it matters not that the vendor’s son, Mr Buchanan did not intend to stay silent about the suicide or did not intend to deceive anyone. The vendor was under a statutory duty to act in a way which does not mislead or deceive. The question is whether the plaintiff was led into error. As a working test, one may ask were the circumstances such as to give a reasonable expectation that if some relevant fact existed it would be disclosed.
The plaintiffs’ case was essentially fashioned on the determination of the proceedings in Hinton. Suicide in a forested area of land to be subdivided and developed is not the same as a horrible murder in a dwelling, but this was submitted to be a similar species of case. Faithful to the way the case has been pleaded, Mr Morrison of counsel for the plaintiff stayed away assiduously from the fact that the purchaser had made the deed of extension in the face of the discovery of the suicide. The analytical focus was on the making of the contract in the first place. It was said the Court should ignore what happened in the making of the deed because there may, at trial, be a credible explanation for the purchaser’s inconsistent conduct in making that deed. For example, there may be evidence that it was done as a matter of pragmatism or in ignorance of legal rights. If I was to ignore the making of the deed then, the submission was this: is it fanciful to say that the plaintiff would not have entered into the contract had it been told about the suicide?
Great care must be taken with the Hinton case. At first instance, the judicial member of the Administrative Decisions Tribunal was first concerned with the question whether the estate agent had committed an offence contrary to s 52 of the Property Stock and Business Agents Act of New South Wales. In essence, that provision makes it an offence for an estate agent who “conceals a material fact (whether intended or not) and thereby induces any other person to enter into any contract or arrangement”. The member concluded that the meaning of materiality in that statute involved an assessment of the relevance significance of the fact in issue to the matter being determined. That is, regard must be had to first, the importance that the material fact would be likely to have on the making on the decision to enter into a contract, and secondly, the relevance of the material fact to inducing a person to enter into the contract. The member’s conclusion was hardly surprising. He said:
In this case I am satisfied that the fact that the property was the scene of the Gonzales murders was a matter of high significance to the purchasers and their family. The murders were notorious and were still the focus of public attention. Sef Gonzales was yet to be sentenced. The evidence is clear that the purchasers would not have entered into the contract had they known that the property was the scene of the murders. I accept that is the case. I am satisfied that the fact that the property was the scene of the Gonzales murders was a matter of both relevance and significance to the purchasers. It was of similar significance to the other prospective purchaser who I heard evidence from …
It is hard to question, in the context of a family dwelling, the materiality of the fact that a triple murder had occurred. It is easy to imagine the unease which any agent might have in keeping that sort of fact to himself. It is self-evidently something which would repel a purchaser regardless of cultural, personal or ethnic background. From that finding, it likewise comes as no surprise that the member came to the conclusion that, applying the Demagogue test, there would be a reasonable expectation of disclosure. As the member said of the agents:
[The agent] made a positive representation to [the purchaser] to the affect that the owners were in the process of moving out. The property was presented in a condition consistent with that statement. Neither [of the agents] told any of the prospective purchasers that the house was a deceased estate. There was nothing in the advertising material or contractual documents which showed that the property was a deceased estate. The house obviously was not being lived in. There was nothing about the manner in which the house was presented which would automatically alert prospective purchasers to the fact that the house was the scene of a crime, so that they could make enquiries, let alone that the house was the scene of a notorious triple murder which remained the focus of public attention. The house was poorly maintained, unclean, not occupied and half-packed. The applicants were consciously silent as to the property being the scene of the Gonzales murders. That was a fact that could not be discovered in the course of usual events by a properly advised purchaser. It was also fact which would have a significant impact on the minds of prospective purchasers in determining whether to make an offer to purchase the house at all, and if so, with respect to the price they would be prepared to pay. To many prospective purchasers, as the evidence indicates, living in a home in which such a tragedy has occurred is not a possibility to be considered. [The agent] contemplated this in his discussions with [the executrix of the deceased estate]. [The agent] certainly contemplated that the fact the house was a murder scene could affect the price a purchaser was prepared to pay. Yet both of them chose not to disclose the history of the property to prospective purchasers.
What has occurred in this case is a far cry from Hinton. Beyond the obvious, I cannot engage in some psychological comparison between a suicide in a forested part of undeveloped land with a triple murder in a suburban dwelling, or the sensitivities of a family home buyer as distinct from land for subdivision and development. For analytical purposes in this case I think it is a diversion to take attention away from what I regard as a supervening objective fact, namely, the making of the deed of extension and its legal effect. The litigation stratagem was to try and establish that had Mr Bevacqua known about the suicide at the outset he would not have made the contract. From there it was said that he should have an opportunity to explain at trial why it is he made the deed of extension. I do not accept this. The argument does not grapple with the gained knowledge of the suicide and legal effect of the deed of extension.
I can accept as a general proposition that great care must be taken with reaching a legal conclusion about the absence of a prior consistent statement in determining whether a fact existed. For example, there can be many reasons why a borrower did not complain at the time of default about a promise previously made to him by a lender which then forms the foundation of a resistance to a case brought by the lender in Court. But something more, or something different, has occurred here. The plaintiff in the face of discovering that a suicide had occurred chose nevertheless to make legal relations with the purchaser to preserve the contract by extending the completion date. That has two consequences.
First, a variation is a contract.[18] In agreeing to an extension the purchaser has of course preserved the obligation to perform in accordance with terms of the contract, and has made that agreement with the gained knowledge of the suicide. The plaintiff is bound and has not sought to set aside the deed. Therefore there is a fallacy in saying the Court should ignore the deed and go back to the original contract to see if silence induced the purchaser into error. There is also a fallacy in saying a trial should be had to understand better, maybe, why the purchaser did what it did. Under the law of contract, it does not matter why the purchaser did what it did.
[18]FCT v Sara Lee Household & Body Care (Aust) Pty Ltd ( 2000) 201 CLR 520.
Secondly, the making of the deed demonstrates the truth of the matter. In truth there was no materiality to the fact of the suicide. Even if there was, having been told about it the purchaser decided nevertheless to proceed with the contract. As a matter of law that is a demonstration that there is no reliance on the putative misleading conduct. The plaintiff was determined to proceed with the contract in any event. Thus on the ultimate question the plaintiff in truth was not led into error.
Whether a plaintiff claims it was misled as a result of a positive misrepresentation, or misled as a result of an omission or silence, it is essential to actionability under the Fair Trading Act to allege and prove that the plaintiff relied upon the misrepresentation or was led into error as a result of the non-disclosure. That is, in a silence case, that had there been disclosure of material fact, the plaintiff would have acted differently. Absent reliance of course s 18 of the Fair Trading Act does nothing more than proscribe conduct. It is only upon proof of reliance and proof of damage that remedies may be granted by the Court. The glaring problem for the plaintiff here of course is its conduct in making the Deed of Variation having been made aware of the suicide and the memorial. The plaintiff cannot assert it was misled and deceived into making the contract when it chose to proceed with it when it was exposed to the very same facts.
The test for summary judgment
Finally, something needs to be said about the applicable test to a summary dismissal under s 63 of the Civil Procedure Act compared with the test under order 22 and 23. of the Rules of Court. The plaintiff submitted I should only allow the application if the defendant had a “killer point” to show that the plaintiff had no case, and the Civil Procedure Act required no less. The Act uses the language “no real prospects of success”.
Before the Civil Procedure Act, in considering applications for summary judgment or summary dismissal, Courts applied routinely the well known statement of principle by Dixon J in Dey v Victorian Railways Commissioners[19] that applications for summary judgment were really based on the inherent jurisdiction of the Court to stop the abuse of its process when it was employed for groundless claims. For the exercise of the jurisdiction, Dey said that once it appeared that that there is a real question to be determined whether of fact or law and that the rights of the parties depend on it, then it was not competent for the Court to dismiss the action as frivolous or vexatious or an abuse of process. That is also the basis of dismissal under rule 23. Subsequently, various epithets have been used to describe the test of “no real question to be determined” by equating it practically with a requirement that a case has to be “hopeless” or “bound to fail” or “beyond argument”. Courts have to deal with strong cases and weak cases all the time, and parties propounding serious actions or defences are entitled to have their day in Court.[20]
[19](1948) 78 CLR 62 at 91. See also Webster v Lampard (1993) 177 CLR 598 at 602-3.
[20]Behrooz v Sec, DIMIA (2004) 219 CLR 486 at 517.
Allied with that conventional approach were these well established principles. First, exceptional caution was required especially where the outcome might turn on resolution of some disputed issues of fact. That is because facts adduced at trial might cast light and colour upon the resolution of legal issues.[21] Secondly, and more recently, from Manderson M&F Consulting v Incitec[22] comes the warning that summary judgment applications involve considerations extending beyond an analysis of the sufficiency of the pleadings in the case. Thirdly, if the dispositive facts were in, then it was no barrier to granting summary judgment if the Court had to undertake a comprehensive legal analysis to show that a party did not have an arguable case.
[21]British American Tobacco v WA (2003) 217 CLR 30 at 70-1.
[22][2011] VSCA 444.
The explanatory memorandum to the Civil Procedure Bill 2010 is on this occasion a very important document in understanding the legislative intention for the enactment of s 63 of the Civil Procedure Act. It had this to say about the “liberalised” approach to applications for summary judgment (with my emphasis):
The Commission stated that claims or defences that are without merit create problems for the parties and the administration of justice, subjecting plaintiffs and defendants to the inconvenience and expense of litigation. The pursuit of unmeritorious claims or defences also has adverse consequences for the administration of justice. Judicial and other publicly funded resources are expended and diverted from dealing with other cases.
The Commission stated that the summary judgment procedure is too restrictive, that the applicable test should be liberalised and that the procedure should be used more frequently and flexibly to dispose of claims or defences that are unmeritorious. It recommended that summary disposition should be available where a claim or defence has “no real prospect of success”.
Faithful to that, there have been many cases in this Court at first instance where Judges have decided that the new powers of summary dismissal under the Act differ from, in that they are less stringent than, the court’s existing powers under the rules conditioned by Dey. That is, the expression “no real prospects of success” in the Act means it is not sufficient for a party to have merely an arguable case. As Dixon J said in Ottedin Investments[23]
Section 63…does not direct an enquiry into whether a certain and concluded determination could be made that the proceeding, or a claim, would necessarily fail. What is required is a practical judgment by the court as to whether a claim has a more than a “fanciful” prospect of success.
[23][2011]VSC 222
Other judges have reached the same conclusion about the liberalised test, whilst of course adding that despite that, the power has to exercised with great care and (returning to the Dey formulation) only when there is no real question to be tried: see Wheelahan v City of Casey (No 3);[24] Matthews v SPI Electricity;[25] JBS Southern Australia Pty Ltd v Westcity Group Holdings;[26] Dattner v Wharton;[27] Samfa v Hilane;[28] Jackson v Newns;[29] and Westpac v Tesoro.[30]
[24][2011] VSC 15.
[25][2011] VSC 168.
[26][2011] VSC 476.
[27][2011] VSC 610.
[28][2011] VSC 644.
[29][2011] VSC 32.
[30]{2012] VSC 182.
An assimilation of these authorities leads I think to what was said by Bell J in Capital One Securities v Soda Kids Holdings Pty Ltd[31] that: “It is not sufficient for the party to have a merely arguable case. It must have a real prospect of succeeding, although it need not have a probability of succeeding”. To say that I think is largely in accordance with what the High Court said in Spencer v Commonwealth.[32] Although that case dealt with the Federal Court rule which uses the expression “no reasonable prospect of success” the Court in Spencer recognised that the expression “no real prospect” was derived from a British precedent under the Woolf Report to mean that “a party seeking to resist such an order would have to show more than a merely arguable case; it would have to be one which he had a real prospect of winning”.[33] Of course, as the references in the judgment show, so much will depend on the complexity of the case and whether facts are to be contradicted. But, what matters I think is a recognition in Spencer that the test in Dey was a test requiring certain demonstration of the outcome of litigation, not an assessment of the prospect of its success, as the Act requires.[34] Thus, Spencer recognised that a test which looks to prospects of success must be understood as “requiring a different enquiry from that which had to be made under earlier procedural regimes”.
[31][2012] VSC 163
[32](2010) 241 CLR 118.
[33]At [20].
[34]At [54] and [55].
This differentiation seems to have been acknowledged by Osborn J (as he then was) in Wheelahan v City of Casey, when his Honour said:
I accept that the test of ‘no real prospect of success’ may in some circumstances extend to cases not regarded as sufficiently hopeless was warranting striking out under the Rules.
The appropriate inquiry is in terms of the section itself. In Swain v Hillman (2001) 1 All E 91 the Court of Appeal had to consider an English rule of Court in similar terms. Lord Woolf MR said at p 92:
The words ‘no real prospect of succeeding’ do not need any amplification, they speak for themselves. The word ‘real’ distinguishes fanciful prospects of success or … they direct the Court to the need to see whether there is a ‘realistic’ as opposed to a ‘fanciful’ prospect of success.
It comes as curious therefore to see the determination of the Court of Appeal in Karam v Palmone Shoes Pty Ltd[35] in which Nettle and Osborn JJA said this:
There is then the question of summary judgment. Since the coming into force of s 63 of the Civil Procedure Act 2010, the test for summary judgment in favour of a plaintiff in a civil proceeding has been whether a defence or part of it ‘has no real prospect of success’. In terms, it is a little different to the criterion under Rule 22.02 of the Supreme Court (General Civil Procedure) Rules 2005, of whether the defendant has no defence. But the change in terms was not intended to establish a new or different test; rather to express more accurately the way in which the rule had been interpreted by the courts. It remains, as the High Court said in Fancourt v Mercantile Credits Ltd,[36] that the power to order summary judgment is to be exercised sparingly and not ‘unless it is clear that there is no real question to be tried’. Accordingly, we agree with the judge that the Magistrate correctly identified the test for summary judgment as being that it should only be granted if it is clear there is no real question to be tried.
[35][2012] VSCA 97 at [12]
[36](1983) 154 CLR 87, 99.
That was a case where the appellant, against whom summary judgment had been granted, was a litigant in person who did not appear on the appeal. The Court did not have occasion to consider the explicit statement in the Explanatory Memorandum about the restrictiveness of the pre existing test and the intention to introduce a liberalised test. Nor did it have occasion to consider the authorities in this Court that are consonant with that statement. At the daily level of the interlocutory work of the Court, it is undesirable to have divergences in approach as between rules of Court and the Civil Procedure Act in summary judgment applications (both of which are directed to the same end) even though the Act preserves the “interaction” between the two under s 65. Karam signals a convergence between the two.
One thing remains a constant. As Karam says, the power to exercise summary dismissal is one to be exercised with great caution whether under the Rules or under the Act. The debate becomes one over language. A case which has no real prospects of success is one in which there is therefore no real question to be tried. In either case, the claim is unmeritorious and the ethos of the Civil Procedure Act is to summarily deal with it in the interest of minimising expense and delay for the parties and burdens on the Courts. In the end the judgment in these applications tends to be one of asking whether there is a case to be investigated at trial.
For the purposes of this application, debate on the differentiation does not matter. Whether one applies the test in Dey or Karam, or the “liberalised” test that was ostensibly intended to be introduced under the Act, I conclude for the reasons that I have given that there is no real question to be tried; that is, there is no real prospect of success. And I conclude the plain facts of the case leading up to the making of the deed of extension, and the effect of the deed, are such that there is no injustice in not allowing the matter to proceed to trial.
I would make the following orders:
1.The application be granted.
2.This proceeding be dismissed.
3.The plaintiff pay the defendant’s costs of the proceeding to be taxed in default of agreement.
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