Commissioner for Fair Trading v Bowes Street; Developments Pty Ltd (No 3)
[2024] ACTSC 315
•16 October 2024
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title:
Citation: Hearing Dates:
Decision Date: Before: Decision: Catchwords:
Legislation Cited:
Commissioner for Fair Trading v Bowes Street Developments Pty Ltd (No 3)
[2024] ACTSC 315
3 – 14, 18 – 21 July 2023, 28 – 29 August 2023, 1 September
2023
16 October 2024 Curtin AJ
See [36]-[56]
CONSUMER LAW – MISLEADING, DECEPTIVE OR FALSE
CONDUCT – Advertising – representations as to future matters – reasonable grounds – whether the representor had reasonable grounds for the representations – representor must have had possession of facts and circumstances comprising reasonable grounds – burden of proof – evidential burden – services – facts and circumstances must objectively support the representations
CONSUMER LAW – SERVICES – Whether sale of land a service – nature or characteristics of services – representation as to “value” – representation as to “benefit” – representation as to “performance characteristic”
EVIDENCE – WITNESS EVIDENCE – Fallibility of recollection evidence – lack of independent corroboration – internal and external inconsistencies – no corroborative contemporaneous documents, objective facts or the inherent probability of events – evidence appearing for the first time in cross-examination – late appearing evidence ordinarily damages a witness’s credibility
CONTRACTS – CONSTRUCTION – Extrinsic evidence – admissibility of agreements executed contemporaneously and forming part of the same overall transaction – construction by rectification – necessary conditions to be fulfilled – commonsense approach to construing terms
STATUTORY INTERPRETATION – APPROACHES – Literalism
not applied – context – full meaning of context – mischief to be addressed
AGENCY – CREATION OF AGENCY – More required than complete shareholding – indicia of agency – terms of agreements between multiple parties – rights and obligations in agreements insufficient of themselves to establish agency
CIVIL PROCEDURE – PLEADINGS – requirement to plead material facts – what are material facts – amendment – late application for amendment – prejudice – reasonable prior opportunity to have pleaded case – enough is enough
Agents Act 2003 (ACT)
Australian Capital Territory (Planning and Land Management) Act 1988 (ACT), s 29
Australian Capital Territory (Planning and Land Management) Act 1988 (Cth)
Australian Capital Territory (Self-Government) Act 1988 (Cth), s 36
Australian Securities and Investments Commission Act 2001
(Cth), s 12DA
Competition and Consumer Act 2010 (Cth), ss 4, 139B(2), sch 2
Corporations Act 2001 (Cth), ss 674, 1041HCourt Procedures Act 2004 (ACT), ss 5(2), 5A
Court Procedures Rules 2006 (ACT), rr 406, 501, 502, 606 Environment Protection and Biodiversity Conservation Act 1999 (Cth)
Fair Trading Act 1999 (Vic), ss 3, 107
Fair Trading (Australian Consumer Law) Act 1992 (ACT), s 52
Legislation Act 2001 (ACT)
Parliament Act 1974 (Cth)
Planning and Development Act 2007 (ACT)
Seat of Government (Administration) Act 1910 (Cth), s 9Trade Practices Act 1974 (Cth), ss 4, 51AC Trade Practices Amendment Act 1977 (Cth) Trade Practices Amendment Bill 1977 (Cth) Unit Titles Act 2001 (ACT), s 33
Cases Cited: Ackers v Austcorp International [2009] FCA 432
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; 239 CLR 27
Aliotta v Broadmeadows Bus Service Pty Ltd [1988] ATPR 40- 873
Aon Risk Services Australia Ltd v Australian National University
[2009] HCA 27; 239 CLR 175
Aquilina Holdings Pty Ltd v Lynndell Pty Ltd [2008] QSC 57 Australian Building and Construction Commissioner v Parker [2017] FCA 564; 266 IR 340
Australian Competition and Consumer Commission v Billbusters Pty Ltd [2003] FCA 423
Australian Competition and Consumer Commission v Clinica Internationale Pty Ltd (No 2) [2016] FCA 62
Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Ltd [2014] FCA 634; 317 ALR 73 Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408
Australian Competition and Consumer Commission v Emerald Ocean Distributors Pty Ltd [2005] FCA 1703; ATPR 42-096 Australian Competition and Consumer Commission v Gary Peer and Associates Pty Ltd [2005] FCA 404; 142 FCR 506 Australian Competition and Consumer Commission v Google LLC (No 2) [2021] FCA 367; 391 ALR 346
Australian Competition and Consumer Commission v iSelect Limited [2020] FCA 1523
Australian Competition and Consumer Commission v Pest Free Australia Pty Ltd [2004] FCA 527
Australian Competition and Consumer Commission v Singtel Optus Pty Ltd [2010] FCA 1177
Australian Competition and Consumer Commission v SmileDirectClub LLC [2022] FCA 1343Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2013] HCA 54; 250 CLR 640
Australian Competition and Consumer Commission v TPG Internet Pty Ltd [2020] FCAFC 130; 278 FCR 450
Australian Competition and Consumer Commission v TPG Internet [2011] FCA 1254; ATPR ¶42-383
Australian Competition and Consumer Commission v We Buy Houses Pty Ltd [2017] FCA 915
Australian Competition and Consumer Commission v Woolworths Limited [2019] FCA 1039
Australian Competition and Consumer Commission v Woolworths Group Ltd [2020] FCAFC 162; 281 FCR 108 Australian Competition & Consumer Commission v Dateline Imports Pty Ltd [2015] FCAFC 114
Blatch v Archer (1774) 1 Cowp 63
Bloomcorp Pty Ltd v Meninya Investments Pty Ltd (Retail Tenancies) [2013] VCAT 1311
Bretair Pty Ltd v Cave (Retail Tenancies) [2012] VCAT 1039 Briggs v James Hardie & Co Pty Ltd (1989) 16 NSWLR 549 Briginshaw v Briginshaw (1938) 60 CLR 336
Brown v Jam Factory Pty Ltd (1981) 53 FLR 340
Campomar Sociedad, Limitada v Nike International Ltd [2000] HCA 12; 202 CLR 45
Canberra Data Centres Pty Ltd v Vibe Constructions (Act) Pty Ltd [2010] ACTSC 20; 4 ACTLR 114
Cash Resources Australia Pty Ltd v Bentley [2002] VSC 271; 19 VAR 119
City of Botany Bay Council v Jazabas Pty Limited (ACN 060 105 053) [2001] NSWCA 94
C H Magill & 1 Or v National Australia Bank Ltd [2001] NSWCA 221; Aust Contract R 90-131
Codelfa Construction Pty Ltd v State Rail Authority of NSW
(1982) 149 CLR 337
Commissioner for Fair Trading v Bowes Street Developments Pty Ltd (No 2) [2023] ACTSC 168; 378 FLR 390
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; 275 CLR 165
Crowley v Worley Limited [2022] FCAFC 33; 293 FCR 438 Dang v T.M. Smith Street Pty Ltd (Retail Tenancies) [2005] VCAT 2926
De Jong v Prudential Assurance Co Ltd (1977) 14 ALR 694 Dennis v Australian Broadcasting Corporation [2008] NSWCA 37
Dillon v Chin (1988) 84 ALR 457
Dovuro Pty Ltd v Wilkins [2003] HCA 51; 215 CLR 317 Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199 Electricity Generation Corporation t/as Verve Energy v Woodside Energy Ltd [2014] HCA 7; 251 CLR 640
Energy Beverages LLC v Cantarella Bros Pty Ltd [2022] FCA 113; 403 ALR 299Fox v Percy [2003] HCA 22; 214 CLR 118
General Accident Fire & Life Assurance Corp v Tanter (The Zephyr) [1984] 1 Lloyd’s Rep 58
General Accident Fire & Life Assurance Corp v Tanter (The Zephyr) [1985] 2 Lloyd’s Rep 529Gestmin SGPS SA v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm)
Given v Optional Extras Pty Ltd (1976) 10 ALR 627
Golden Mile Property Investments Pty Ltd (In liq) v Cudgegong Australia Pty Ltd [2016] NSWCA 224; 18 BPR 36,121
Hamilton v Whitehead (1988) 166 CLR 121
Hansen Beverage Co v Bickfords (Australia) Pty Ltd [2008] FCAFC 181; 171 FCR 579
Havyn Pty Ltd v Webster [2005] NSWCA 182; ATPR (Digest) 46-266
Henderson v Pioneer Homes Pty Ltd (No 2) (1980) 43 FLR 276;
29 ALR 597
Henley Arch Pty Ltd v Henley Constructions [2021] FCA 1369; 163 IPR 1
Highfield Property Investments Pty Ltd v Commercial and Residential Developments (SA) Pty Ltd [2012] SASC 165 Hollis v ABE Copiers Pty Limited (1979) 41 FLR 141 Humphries & Cooke Ltd v Essendon Airport Ltd [2001] VCAT 2439Jones v Dunkel (1959) 101 CLR 298
Liuzag Custodian Pty Ltd v Brown Gouge Pty Ltd (Building and Property) [2021] VCAT 1212
Lym International Pty Ltd v Marcolongo [2011] NSWCA 303; 15 BPR 29,465
McIver v Australian Capital Territory; Williams v Australian Capital Territory [2024] ACTSC 112McMahon v John Fairfax Publications Pty Ltd [2010] NSWCA 308
McVeigh v National Australia Bank Ltd [2000] FCA 187; 278 ALR 429
Mercier Rouse Street Pty Ltd v Burness [2015] VSCA 8
Monroe Topple & Associates Pty Ltd v The Institute of Chartered Accountants in Australia [2001] FCA 1056; ATPR (Digest) 46-
212
National Australia Bank Ltd v Sproule (1989) 98 ALR 570 New South Wales Mutual Real Estate Fund Ltd v Brookhouse (1979) 38 FLR 257
Nguyen v Cosmopolitan Homes (NSW) Pty Ltd [2008] NSWCA 246
Northern Territory v Mr A. Griffiths (decd) and Lorraine Jones on behalf of the Ngaliwurru and Nungali Peoples [2019] HCA 7; 269 CLR 1
Obeid v Australian Competition and Consumer Commission
[2014] FCAFC 155; 226 FCR 471
Perpetual Ltd v Myer Pty Ltd [2019] VSCA 98
Queensland Aggregates Pty Ltd v Trade Practices Commission
(1981) 57 FLR 314
Roberts v Murlar Pty Ltd (1986) 68 ALR 62
R v A2 [2019] HCA 35; 269 CLR 507
Salomon v A Salomon & Co Ltd [1897] AC 22Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 277 CLR 186
Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd (in liquidation) [2019] NSWCA 11; 99 NSWLR 317
Sigma Constructions (Vic) Pty Ltd v Maryvell Investments Pty Ltd [2004] VSCA 242; 22 VAR 279
Simic v New South Wales Land & Housing Corporation [2016] HCA 47; (2016) 260 CLR 85
South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; 177 ALR 611
SSABR Pty Ltd v AMA Group Limited [2024] NSWCA 175 Sykes v Reserve Bank of Australia [1998] FCA 1405; 88 FCR 511
Tameeka Group Pty Ltd v Landan Pty Ltd (No 3) [2016] FCA 733Tesco Supermarkets Ltd v Nattrass [1972] AC 153
The J & P Marlow (No 2) Pty Ltd v Hayes and McCabe [2023] NSWCA 117; 112 NSWLR 29
Tomasevic v Simms Corp Hotels and Leisure Pty Ltd (Residential Tenancies) [2011] VCAT 2170
Tonto Home Loans Australia Pty Ltd v Tavares; FirstMac Ltd v Di Benedetto; FirstMac Ltd v O'Donnell [2011] NSWCA 389; 15 BPR 29,699Traderight (NSW) Pty Ltd v Bank of Queensland Limited (No 10)
[2012] NSWSC 1181
Treloar v Ivory [1991] ATPR 41-123
Tucci v Victorian Civil and Administrative Tribunal & Anor [2010] VSC 425; 33 VAR 206
Watson v Foxman (1995) 49 NSWLR 315
Webb v GetSwift Limited (No 5) [2019] FCA 1533
White v Shortall [2006] NSWSC 1379; 68 NSWLR 650 Xiamen Huadian Switchgear Co Ltd v Powins Pty [2022] FCA 1159; 169 IPR 77
Zeus and Ra Pty Ltd v Nicolaou [2003] VSCA 11; 6 VR 606
Texts Cited: RP Austin & IM Ramsay, Ford, Austin and Ramsay’s Principles
of Corporations Law, (17th ed., LexisNexis, 2023) Explanatory Memorandum, Trade Practices Amendment (Australian Consumer Law) Bill 2009 (Cth)
JD Heydon, Cross on Evidence (online, LexisNexis, 2023) Justice David Ipp, ‘Problems with fact finding’ (2006) 80 Australian Law Journal 667
Justice Peter McClellan, ‘Who is telling the truth? Psychology, common sense and the law’ (2006) 80 Australian Law Journal 655
Parties: Commissioner for Fair Trading (Plaintiff)
Bowes Street Developments Pty Ltd (First Defendant) Geocon Bowes Street JV Pty Ltd (Second Defendant) Zapari Property Bowes Street Pty Ltd (Third Defendant) GZ Developments Pty Ltd (Fourth Defendant)
GRE Sales Pty Ltd (Fifth Defendant)
Representation: Counsel
N Sharp SC w/ S Speirs & A Osborn Brodie (Plaintiff) I Percy w/ C Alden (First and Third Defendants)
J Steele SC w/ D Fuller (Second Defendant)
P Walker SC w/ P Bindon (Fourth Defendant) WDB Buckland (Fifth Defendant)
Solicitors
ACT Government Solicitor (Plaintiff)
King & Collins (First and Third Defendants) Minter Ellison (Second Defendant)
MV Law (Fourth Defendant) BAL Lawyers (Fifth Defendant)
File Number: SC 415 of 2019
CURTIN AJ................................................................................................................................................................................... 9
INTRODUCTION......................................................................................................................................................................... 9
The parties and dramatis personae.................................................................................................................................... 12
Messrs Georgalis and Skepev....................................................................................................................................... 12
The corporations involved............................................................................................................................................ 13
Others involved.............................................................................................................................................................. 14
The main issues and findings in summary.......................................................................................................................... 15
Background......................................................................................................................................................................... 17
The Commissioner’s case on agency and who engaged in the relevant conduct.......................................................... 31
Who made the representations (or engaged in the relevant conduct)................................................................. 31
The Commissioner’s original pleaded agency case.................................................................................................. 32
The application to amend the second tier agency case........................................................................................... 32
The second tier agency case at the commencement of the hearing........................................................................... 32
A new second tier agency case emerges..................................................................................................................... 34
The new second tier agency case was not pleaded..................................................................................................... 39
The application to amend the second tier agency case.............................................................................................. 41
Reasons for refusing the application to amend the second tier agency case............................................................. 43
Australian Consumer Law................................................................................................................................................. 46
Applicable legal principles............................................................................................................................................ 46
Section 4 of the ACL....................................................................................................................................................... 46
Section 18 of the ACL.................................................................................................................................................... 52
Section 29(1) of the ACL................................................................................................................................................ 59
The statutory provisions and some general matters................................................................................................... 59
Principles of statutory construction............................................................................................................................. 62
The sale of the Units was a supply of services under the ACL..................................................................................... 63
The Rental Yield Representation was a representation within s 29(1)(b) of the ACL................................................. 79
The Rental Yield, Light Rail Location and Travel Times Representations, but not the Approval Representation, were representations within s 29(1)(g) of the ACL............................................................................................................... 80
Identification of the representative member of the class to whom the representations were made.......................... 86
The Promotional Material and what representations were made................................................................................ 92
Some general matters.................................................................................................................................................... 92
The Billboards................................................................................................................................................................. 95
The Approval Representation...................................................................................................................................... 98
The Light Rail Location Representations...................................................................................................................... 98
The Rental Yield Representation................................................................................................................................ 100
The Brochure................................................................................................................................................................. 102
The Approval Representation.................................................................................................................................... 105
The Light Rail Location Representations.................................................................................................................... 108
The Rental Yield Representation................................................................................................................................ 109
The Flyer........................................................................................................................................................................ 111
The Approval Representation.................................................................................................................................... 112
The Light Rail Location Representations.................................................................................................................... 112
The Rental Yield Representation................................................................................................................................ 113
The Promotional Video............................................................................................................................................... 113
The Approval Representation.................................................................................................................................... 115
The Light Rail Location Representations.................................................................................................................... 115
The Travel Times Representations............................................................................................................................. 116
The Promotional Emails.............................................................................................................................................. 118
Overview.................................................................................................................................................................... 118
Which disputed Light Rail Location Representations emails were sent.................................................................... 119
No evidence that the three Rental Yield Representation Promotional Emails were sent........................................ 122
The seven admitted emails........................................................................................................................................ 124
The Approval Representation.................................................................................................................................... 126
The Light Rail Location Representations.................................................................................................................... 126
The Real Estate Websites Marketing........................................................................................................................ 126
The Approval Representation.................................................................................................................................... 127
The Light Rail Location Representations.................................................................................................................... 127
The witnesses..................................................................................................................................................................... 127
What remains to be decided...................................................................................................................................... 127
Credit and fact finding principles.............................................................................................................................. 129
Mr Dalton...................................................................................................................................................................... 134
Mr Stephens................................................................................................................................................................. 138
Mr Skepev..................................................................................................................................................................... 146
Mr Micalos.................................................................................................................................................................... 162
Mr Georgalis................................................................................................................................................................. 189
Who made the representations........................................................................................................................................ 211
The 22 December 2017 Agreements........................................................................................................................ 212
The proper construction of the Agency Agreement............................................................................................... 215
The answers to the s 52 Notices................................................................................................................................ 223
The evidence of Mr Georgalis and Mr Stephens..................................................................................................... 227
GRE made the representations.................................................................................................................................. 229
Conclusions on reasonable grounds.............................................................................................................................. 230
Some general matters................................................................................................................................................ 230
Whose evidence is relevant to s 4 of the ACL and reasonable grounds............................................................. 231
No reasonable grounds for the Light Rail Location Representations.................................................................. 235
No reasonable grounds for the Travel Times Representations............................................................................ 239
No reasonable grounds for the Rental Yield Representation............................................................................... 241
Conclusions on the first and second tier agency cases................................................................................................. 249
Applicable legal principles.......................................................................................................................................... 249
GRE was the agent of GZ............................................................................................................................................ 256
GRE was not the agent of Zapari.............................................................................................................................. 257
GZ was not the agent of BSD or Geocon Bowes..................................................................................................... 258
Costs of applications made during the hearing.............................................................................................................. 263
Submissions required on orders to be made................................................................................................................... 264
ANNEXURE A......................................................................................................................................................................... 265
ANNEXURE B......................................................................................................................................................................... 285
ANNEXURE C1....................................................................................................................................................................... 288
ANNEXURE C2....................................................................................................................................................................... 294
ANNEXURE C3....................................................................................................................................................................... 299
ANNEXURE C4....................................................................................................................................................................... 305
ANNEXURE C5....................................................................................................................................................................... 311
ANNEXURE C6....................................................................................................................................................................... 316
ANNEXURE C7....................................................................................................................................................................... 322
ANNEXURE C8....................................................................................................................................................................... 328
CURTIN AJ:
Introduction
Between about late 2017 and 2020, a large residential development (the Development) ultimately called Grand Central Towers (GCT) was constructed at Block 5, Section 35, Phillip, in the ACT, and known as 15 Bowes Street, Phillip (the Land).
The Development comprised two towers, one of 16 floors and the other of 24 floors, with a total of about 431 apartments (the Units) and accompanying common property.
The five defendants were involved in the Development in the various ways described later in this judgment.
The Units were advertised for sale in various mediums which made various representations about the Development.
The Commissioner’s case was that some of the representations made in some of the promotional materials were misleading or deceptive, or likely to mislead or deceive, or were false within the meaning of those terms in ss 18, and 29(1)(b) and (g) of the Competition and Consumer Act 2010 (Cth), sch 2 (the Australian Consumer Law or ACL), which is applied in the Territory pursuant to the provisions of the Fair Trading (Australian Consumer Law) Act 1992 (ACT) (the FTACT).
The promotional materials which contained the representations that are the subject of this case were alleged to have been published from around February or March 2018. They were contained in the following six mediums (together, the Promotional Materials):
(a)two large billboards located on the site of the Development (the Billboards);
(b)a 36-page brochure disseminated in hard and soft copy (the Brochure);
(c)a 2-page double-sided colour flyer distributed in hardcopy and electronically (the
Flyer);
(d)a 3 minute and 26 second video available uploaded to YouTube, Allhomes.com.au, Realestate.com.au, and Vimeo.com (the Promotional Video);
(e)promotional emails sent to prospective buyers (the Promotional Emails); and
(f)advertisements published on real estate websites (the Real Estate Websites Advertising).
The offending representations in the Promotional Materials concerned the ACT Government’s proposal to extend the existing light rail system (Gungahlin to Canberra
City, Stage 1) to the Woden town centre in Philip. Eventually, that proposal was divided into two sections. Stage 2A would extend the light rail from Canberra City to Commonwealth Park. Stage 2B would extend the light rail from Commonwealth Park to Woden Town Centre. This case concerns Stage 2B. Where I refer to “Stage 2” at times below, I include both Stages 2A and 2B in that expression.
The Commissioner’s case was that the following representations were made in one or more of the Promotional Materials (collectively, the Representations), namely that:
(a)the light rail to Woden Town Centre had received planning approval or such approval as was required by law (the Approval Representation);
(b)the light rail would be extended to Woden Town Centre, and/or stop at, adjacent to or proximate to the Land (the Light Rail Location Representations);
(c)the travel time from the Land to Canberra City on the light rail would be under 10 minutes and/or that the light rail service would provide light rail every five minutes between Woden Town Centre and Canberra City (the Travel Times Representations); and
(d)a purchaser of a unit on the Land would be able to rent out their unit and obtain a seven percent gross rental yield from a lessee (the Rental Yield Representation).
All defendants disputed that the representations alleged were conveyed by the Promotional Material, were misleading, deceptive or false, and contended that there were reasonable grounds for the making of the representations as to future matters with one exception. Geocon Bowes Street JV Pty Limited (Geocon Bowes), GZ Developments Pty Limited (GZ), and GRE Sales Pty Limited (GRE) (the second, fourth, and fifth defendants) accepted that there were no reasonable grounds for making the representation that the travel time from the Land to Canberra City on the light rail would be under 10 minutes. Bowes Street Developments Pty Limited (BSD), and Zapari Property Bowes Street Pty Limited (Zapari) (the first and third defendants) submitted to the contrary.
By an order made on 22 November 2022 by Kennett J, the case was split between a hearing on “liability” (which I am determining in this judgment) and, separately and later, what relief or penalties (if any) should flow from my judgment on liability. The word “liability” really means “breach”. That is, was there misleading or deceptive conduct (s 18 of the ACL) or misleading or false representations (s 29 of the ACL), or both, and, if there was some wrongdoing, is one or more of the defendants liable for that conduct.
Put shortly, the five central questions in this liability part of the case are these:
(a)First, whether some or all of the identified representations were made. That is, were the Representations alleged conveyed by the Promotional Materials.
(b)Second, whether some or all of the Representations were misleading, deceptive or false.
(c)Third, who made the Representations.
(d)Fourth, whilst the Approval Representation was a representation as to a past fact, the remaining Representations were as to future matters. Under the Australian Consumer Law, representations as to future matters are deemed to be misleading unless the person making the representation has reasonable grounds for making the representation. In this case, the defendants called a number of witnesses who gave evidence to the effect that there were reasonable grounds for the Representations as to future matters. Whether the grounds were reasonable, and whether the evidence of those witnesses should be accepted, were very much in dispute.
(e)Fifth, if one or more of the Representations was misleading, deceptive or false, which of the defendants, if any, is or are liable for those Representations. This issue had two parts. First, who had engaged in the conduct. Second, were the remaining defendants liable on agency principles.
There was no dispute that the Representations were made in trade or commerce.
The underlying premise of the Commissioner’s case was, although it need not be determined in this judgment, that the Representations allowed higher prices to be obtained from the sale of the Units than if the Representations had not been made.
The path needed to be taken to answer those apparently simple questions is not so short given the large amount of evidence, submissions, the complexity of the commercial relationships between the defendants and the legal issues which arose. The case was listed for 10 days and took 17. The Court sat extended hours most days. The Court expresses its gratitude to all counsel and solicitors for their cooperation and endurance in sitting extended hours in order to complete the case as expeditiously as possible.
Not every piece of evidence, submission made, or authority referred to is mentioned in this judgment. I have only mentioned the evidence, submissions and authorities which I considered relevant or significant in determining the issues before me, and some evidence which, although not strictly relevant to the issues determined by this judgment, is relevant to what orders and penalties I may later make in that they give colour and context to the relevant conduct.
The parties and dramatis personae
Messrs Georgalis and Skepev
Nikolaos Georgalis was born in Canberra and has lived in Canberra or the surrounding region all his life. He obtained a qualification in construction management in 1999. He is a licensed builder. He worked as a senior site engineer and construction manager at Bovis Lend Lease and was responsible for running construction projects in the ACT. He has over 25 years' experience in the building and construction industry and over 20 years' experience as a property developer.
He founded Geocon in 2007 (the shorthand name used to describe a group of companies which included Geocon Bowes and GRE at the time of the events in question), and he is the sole director and sole shareholder of Geocon Group Pty Limited (Geocon Group). Geocon Group was not a party to the proceedings, but played a role that featured in the evidence and is relevant to the matters I must determine.
In these reasons I shall sometimes refer to “Geocon” where it is unnecessary to specify which Geocon corporation was involved, or where the evidence referred to “Geocon” without specifying which Geocon entity was involved.
Mr Georgalis was and is:
(a)the sole director of Geocon Bowes, the second defendant;
(b)one of two directors and the company secretary of GZ, the fourth defendant; and
(c)one of two directors of GRE, the fifth defendant in this proceeding.
Nicholas Skepev studied law and commerce and started work in the Commercial Division of St. George Bank. Through that work, he developed an interest in the property market in Canberra. As a result, he commenced purchasing businesses and properties, performing small projects, developments, and fit outs in and around the Canberra region.
Mr Skepev is:
(a)the sole director and company secretary of BSD, the first defendant; and
(b)the sole director and company secretary of Zapari, the third defendant.
The corporations involved
BSD, the first defendant, is ultimately owned by Mr Skepev and is what I will call his private development vehicle for the Development. It had no employees.
Geocon Bowes, the second defendant, is ultimately owned by Mr Georgalis and was his private development vehicle for the Development. It had no employees.
Zapari, the third defendant, was ultimately owned by Mr Skepev, and was the corporate vehicle he used to purchase the Land. As such, it was the vendor of all of the Units when sold upon the completion of the Development. It had no employees.
GZ, the fourth defendant, was incorporated on 20 December 2017, and was the special purpose development vehicle utilised by Messrs Georgalis and Skepev to undertake the Development. It had two issued shares. One share was owned by Geocon Bowes. The other share was owned by BSD. GZ had no employees.
GRE, the fifth defendant, was ultimately owned by Mr Georgalis. Its general business was to sell units in residential developments undertaken by Geocon. It was first registered in 2013. It has one issued share which is owned by Georgalis Investments Pty Ltd (Georgalis Investments). Mr Georgalis is the sole director and shareholder of Georgalis Investments. GRE had no employees.
With particular reference to GRE having no employees, Geocon Group was the primary vehicle used by Geocon to employ people performing work for Geocon entities. Geocon Group would commonly provide, share, or assign Geocon Group employees to other Geocon entities so that those entities could perform their functions. Sometimes this was done informally, sometimes it was done pursuant to a written agreement.
Geocon Constructors (ACT) Pty Ltd (Geocon Constructors) was the builder of the Development. It is owned by Geocon Constructors Investments Pty Ltd. Mr Georgalis is the sole director and secretary of Geocon Constructors.
There Pty Ltd (There PL), 3Deep Pty Ltd (3Deep) and The Mark Agency (TMA) were external marketing agencies, for want of a better expression, engaged by the Marketing Team (which is described below at [34]) for specialist expertise in relation to aspects of the Promotional Material, such as the “look and feel”, and content (the content being subject to others’ approval).
Others involved
Christopher Dalton was a purchaser of one of the Units and was called as a witness in the Commissioner’s case.
Peter Micalos was the General Manager of Developments at Geocon Group from April 2012 until December 2019. He reported directly to Mr Georgalis. He was in charge of the Marketing Team, and he approved all of the marketing used for the Development. Mr Georgalis said that Mr Micalos was responsible for managing each of Geocon’s developments for Geocon and was responsible for the marketing functions for the Development.
Thomas Stephens was the other director of GRE in addition to Mr Georgalis. He was a real estate agent licenced under the Agents Act 2003 (ACT) and was an employee of Geocon Group. In substance, Mr Stephens was a director in name only (although that does not excuse him from his legal obligations as a director), in that Mr Georgalis made all significant decisions on behalf of GRE. An example of this passive role is that the first time Mr Stephens saw the Services Agreement between GRE and Geocon Group (an important agreement in this case) was when the solicitors for GRE sent it to him to take instructions for these proceedings.
Adam Morgan was described by Mr Stephens as a Sales Executive of Geocon Group. Mr Morgan had an “@geocon.com.au” email address, and Mr Micalos said that Mr Morgan was an employee of Geocon Group providing services to GRE as a sales agent. In a reply to particulars, solicitors then acting for the first to fourth defendants said that:
Adam Morgan is and was at all material times an employee and representative of Geocon Group Pty Ltd. At the time that the Billboards were posted, Mr Morgan was working for GRE Sales pursuant to a Service Agreement dated 30 June 2018 (“Service Agreement”) under which staff of Geocon Group Pty Ltd provided services to GRE Sales.
Geocon Group had what was called the “Marketing Team”. The members of the Marketing Team were employed by Geocon Group and consisted of:
(a)Peter Micalos, General Manager, Developments;
(b)Melanie Hindson, Marketing Director;
(c)Karen Coe, Marketing and Events Manager;
(d)Alex Dickens, Marketing Coordinator;
(e)Myfanwy Galloway, Marketing Coordinator; and
(f)Adam Gill, Marketing Manager.
Meyer Vandenberg Lawyers is a law firm located in Canberra. Its name appears on the cover sheets of several of the various agreements entered into between the defendants (described later in these reasons) and acted for all defendants for a period of time in dealings with the Commissioner. Meyer Vandenberg is mentioned in the evidence and mentioned in this judgment, but it should be made clear that there is no allegation of wrongdoing by that firm, nor is there any suggestion of wrongdoing by that firm in the evidence.
The main issues and findings in summary
There was no issue that the relevant conduct was the making of representations in the Promotional Material. There was no issue that the Promotional Material was published and its contents communicated to consumers, nor that the Representations were made in trade or commerce.
There was no issue that whatever was on the Billboards, in the Promotional Video and in the Real Estate Websites Advertising, it was communicated to consumers. Their contents were plain to see in person and online.
There was no issue that seven Promotional Emails were sent to consumers (five being admitted on the pleadings, and an additional two being admitted by Messrs Georgalis and Micalos in their evidence).
There was some debate about the exact extent to which the Brochure and the Flyer were communicated to consumers, but it is not necessary for me to resolve those factual issues. There was no dispute that both were given to consumers in some ways by sales agents acting on behalf of GRE, and that admitted fact is sufficient to decide the issues before me.
There was no dispute that the Marketing Team (consisting of employees of Geocon Group) created and published the Promotional Material. That is, with the assistance of the external agencies, the Marketing Team developed and created the content of the Promotional Materials, had them drafted, created, printed, installed, and uploaded as appropriate.
The Commissioner alleged that the Marketing Team did those things on behalf of GRE and thus GRE had engaged in the relevant conduct. Alternatively, the Commissioner alleged that Geocon Group had done those things and had engaged in the relevant conduct.
I have found below that the Marketing Team was hired to GRE by Geocon Group pursuant to a labour hire Services Agreement to undertake the creation and publishing of the Promotional Material. Therefore, I have found that the Marketing Team’s conduct in relation to the marketing matters the subject of this case was done on behalf of GRE. Therefore, when added to GRE’s distribution of the hard copy Brochure and the Flyer, it was GRE that engaged in the relevant conduct for the purposes of ss 18 and 29(1) of the ACL.
The Commissioner described her agency case as having two “tiers”. The Commissioner’s first tier agency case was that what GRE did was done as agent for GZ or Zapari, or both. I have found below that GRE was the agent of GZ for the purposes of marketing but was not the agent of Zapari. Therefore GZ, but not Zapari, is liable as principal for GRE’s conduct.
The Commissioner’s second tier agency case was that BSD, Zapari and Geocon Bowes were the principals of GZ in relation to the relevant conduct and are therefore liable for GZ’s misconduct. The case against Zapari was not pursued and I have not accepted the balance of the second tier agency case. That is, I am not persuaded that BSD or Geocon Bowes were the principals of GZ in relation to the alleged conduct.
Turning to the Representations, the Approval Representation was a representation of past fact. It was conveyed by the Brochure, and I have found that it was misleading, deceptive and false per ss 18 and 29(1) of the ACL.
The Light Rail Location Representations, Travel Times Representations, and Rental Yield Representations were representations with respect to future matters.
In relation to the representations as to future matters, four witnesses gave evidence that they, and therefore GRE, had in their possession and relied on certain facts and circumstances which amounted to reasonable grounds for making these Representations with respect to future matters.
I have not accepted the evidence of those witnesses that they had in their possession and relied on the facts and circumstances asserted. This was because the witnesses’ evidence lacked any contemporaneous, objective, or credible independent corroboration, and because of credit issues.
Alternatively, if GRE did have and did rely on the facts and circumstances asserted, I have found that the facts and circumstances allegedly relied on did not constitute reasonable grounds for the making of the Representations with respect to future matters,
and those Representations were misleading, deceptive, and false per ss 18 and 29(1) of the ACL.
Turning to what Representations were made by which Promotional Materials, I have found that the Billboards conveyed the Light Rail Location and Rental Yield Representations, but not the Approval Representation.
I have found that the Brochure conveyed the Approval, Light Rail Location, and Rental Yield Representations.
I have found that the Flyer conveyed the Light Rail Location and Rental Yield Representations, but not the Approval Representation.
I have found that the Promotional Video conveyed one, but not both, of the Light Rail Location Representations, and conveyed both Travel Times Representations.
Seven Promotional Emails were admitted having been sent. For reasons given later, I have not determined whether any more emails were sent, as the precise number alleged to have been sent was more relevant to penalty than liability. Of the seven admitted having been sent, one email conveyed the Approval Representation, five conveyed both Light Rail Location Representations, and two conveyed one Light Rail Location Representation. Only three emails were alleged to have conveyed the Rental Yield Representation, but I have found that there is insufficient evidence to prove that those emails were ever sent.
I have found that two of the three Real Estate Websites Advertising website listings conveyed one Light Rail Location Representation, and the other website listing conveyed both.
In relation to s 29(1) of the ACL, I have found that the sale of the Units was a “service” within the meaning of that term in the ACL. I have found all four Representations breached s 29(1)(b) and (g) in certain respects as detailed below.
Background
In this part of the judgment, I shall set out those facts which are generally admitted or non-contentious.
In May 2014, Mr Skepev and Mr Georgalis met after a commercial transaction between them, and their acquaintance continued thereafter.
In 2016, Zapari purchased the Land. It completed its purchase on 2 August 2016.
At that time, the improvements on the Land consisted of a commercial office building.
Mr Skepev explored various development options for the Land, including the option of re-tenanting the commercial office building and performing a development to the side of that building. Ultimately, he decided against those options and instead chose a residential development option.
In or about September 2016, the ACT Government announced a proposal to extend the Canberra Metro Light Rail to Woden Town Centre.
That announcement was reported in the Canberra Times on 1 September 2016 and the ABC Online on 2 September 2016. Both of those articles made clear that the proposal was an election policy. That is, the then Government was saying that if re-elected, its policy was to extend the light rail to Woden.
In October 2016, construction of Stage 1 commenced.
On 15 October 2016, polling for the ACT Legislative Assembly election took place.
On 24 May 2017, Zapari lodged a development application for a mixed use 430-unit residential development encompassing the Land (the Original DA).
In or about May or June 2017, the ACT Government first commenced community consultations for the proposed Stage 2.
Following lodgement of the Original DA, Mr Skepev discussed the pricing of the units in the proposed development with employees of LJ Hooker Canberra City (LJ Hooker). LJ Hooker provided him with market rental appraisals dated 25 October 2017 (the 2017 LJ Hooker appraisals) in respect of the proposed development for a one bedroom unit, a one bedroom/study unit and a two bedroom unit. The rentals referred to in the appraisals were for 2017 and not for when the development was expected to be completed.
These 2017 LJ Hooker appraisals were based on the plans submitted as part of the Original DA. Subsequently, after agreement had been reached for the joint venture, an amended development application was lodged and later approved. Whilst the precise changes were not the subject of evidence, Mr Skepev said that one floor was deleted from one tower, the internal layouts and dimensions of the Units changed slightly, and a number of three bedroom Units were added together with at least one penthouse.
These 2017 LJ Hooker appraisals were important documents in the case and so it is worth showing one example. The 2017 LJ Hooker appraisal for a one bedroom unit was in the following form:
The other two appraisals were in identical form and terms except for the line in bold specifying the unit type and the rent. In those other two appraisals they said:
(a)One bedroom/study $420 to $440 per week unfurnished; and
(b)Two bedroom $560 to $590 per week unfurnished.
Mr Skepev thought the appraisals were too cheap and engaged in discussions with LJ Hooker about them. During these discussions, he spoke with Mr Georgalis who had asked him how the Development was progressing. Mr Skepev informed him that he was pricing the Development with LJ Hooker and that, in his view, LJ Hooker had under- priced the Development.
At that time, Mr Georgalis told Mr Skepev that he was expanding his in-house sales and marketing team. I infer that this was a reference to membership of the Marketing Team
and to GRE, the latter having acted as sales agent for a number of earlier Geocon developments.
Mr Skepev was particularly interested in Mr Georgalis’ in-house sales and marketing team because he knew that GRE was looking to recruit two real estate agents (Mr Morgan and Mr Nicholls) whom Mr Skepev thought were two of the highest selling agents in the Woden and Canberra region. Mr Skepev thought that if GRE succeeded in attracting those two agents, then it would be a good reason to use Mr Georgalis' in-house sales team.
Negotiations for a joint venture to develop the Land took place, and as part of the due diligence process, Mr Georgalis was provided with copies of the Original DA and the 2017 LJ Hooker appraisals as well as a range of other documents to enable himself and other Geocon employees to assess the viability of the project.
In or around mid-December 2017, Messrs Georgalis and Skepev agreed to undertake a joint venture in respect of the development of the Land. Zapari would make available the Land, while Geocon entities would take on the roles of builder, development manager and sales and marketing agent, and a special purpose vehicle (GZ) would be incorporated to act as the developer.
To formalise the arrangement, GZ was incorporated on 20 December 2017, and a number of written contracts were entered into two days later on 22 December 2017. Those agreements were:
(a)the Bowes Street Joint Venture Agreement between GZ Developments, BSD, Geocon Bowes, Messrs Georgalis and Skepev (the Joint Venture Agreement);
(b)the Bowes Street Development Management Agreement between Geocon Bowes and GZ (the Development Management Agreement);
(c)the Bowes Street Development Agreement between Zapari, GZ, Pari Pari Pty Ltd, Geocon Bowes and BSD (the Development Agreement);
(d)the Agency Agreement between Zapari, GZ and GRE (the Agency Agreement);
(e)a building contract between GZ and Geocon Constructors (ACT) Pty Ltd.
The terms of some of those agreements are relevant to issues in this case and will need to be considered in more detail later in these reasons, but suffice to say for present purposes that, in general terms, Messrs Georgalis’ and Skepev’s private development
vehicles (BSD and Geocon Bowes) each owned 50 percent of the issued shares in the special purpose development vehicle, GZ. By this mechanism their respective interests would share profits from the eventual sale of the Units.
The Development Agreement was the agreement pursuant to which GZ agreed with the owner of the Land (Zapari) to undertake the Development.
GZ in turn entered into the Development Management Agreement with Geocon Bowes for Geocon Bowes to act as development manager of the Development.
GZ and Zapari also entered into the Agency Agreement with GRE for GRE to act as the marketing (as I have found below) and sales agent in relation to the Development.
What bears mentioning at this point is that under the Joint Venture Agreement there was defined what was called “Project Control Matters”. Those matters were set out in Schedule 1 to the Joint Venture Agreement. There were 13 such matters which concerned, in summary, the appointment of the builder and development manager, staff, consultants, operating account, development applications and plans, construction, sales, units, project finance, additional equity, disposal, legal action and reserved matters.
Under cl 26 of the Joint Venture Agreement, there was to be formed what was called the Project Control Group (PCG). The PCG consisted of one representative of Geocon Bowes and one representative of BSD, with other persons able to attend (but not vote) at its meetings. In short, the PCG was given the responsibility of providing the development manager (Geocon Bowes) with “guidance and direction” in respect of Project Control Matters, and additional responsibilities if delegated to the PCG by Geocon Bowes and BSD. By this mechanism, in substance, BSD was given an equal seat at the table in making decisions about significant matters involving the Development. The clause went on to set out how the PCG was to be informed of relevant matters, how meetings were to be conducted, how any deadlocks could be resolved and like matters.
Mr Skepev was nominated by BSD to be its representative on the PCG. Mr Georgalis was nominated as the representative of Geocon Bowes, although more often than not Mr Micalos attended in his stead (as allowed for under cl 26).
There are two other relevant agreements that should be mentioned at this chronological point.
The second in time was a Service Agreement (the Service Agreement) between Geocon Group and GRE dated 30 June 2018, which had a term of five years. Pursuant to the terms of that agreement Geocon Group agreed to provide appropriately qualified
and trained staff to GRE for a fee. Those staff were to include “clerical, accounting, marketing and legal staff” (emphasis added). In substance, it was a labour hire agreement.
The first in time of these two agreements was, I find, an agreement by conduct between the same entities and on the same terms (except perhaps as to fees). As Mr Georgalis put it, up until 30 June 2018, there had been no “formal” agreement in place for the assignment, sharing or hiring of Geocon Group employees to other Geocon entities, although this was the practice before the signing of the Service Agreement. I infer that the word “formal” meant “in writing”. In cross-examination Mr Georgalis said that whilst the Service Agreement was dated 30 June 2018, the arrangements it sets out were in place prior to that date. Therefore, at the time the suite of joint venture agreements were entered into in late December 2017, and thereafter, there was an agreement in place between Geocon Group and GRE for Geocon Group to provide marketing staff to GRE.
As I find later in this judgment, the Geocon Group Marketing Team was hired to GRE pursuant to these two agreements, and that Marketing Team were the people who created and published the Promotional Material with the assistance of the external agencies.
The Marketing Team commenced their work on the Promotional Materials sometime in January 2018.
By 16 January 2018, plans were afoot to alter the design of the Development.
On 23 January 2018, the development application submitted by Zapari was approved, subject to conditions. The approval was for a mixed-use development comprising two towers (up to 18 and 26 storeys) with 430 units.
By 30 January 2018, a re-design of the Development was progressing which included the addition of the three-bedroom Units and at least one penthouse. The significance of that fact was that the 2017 LJ Hooker appraisals did not include any rental appraisals for those unit types.
The Bowes Street Project Marketing Timeline (the Marketing Timeline), tendered in evidence, set out the general anticipated course of events (confirmed by Mr Stephens).
The marketing campaign spanned a six-month period. It covered a number of phases described by Mr Stephens as the "coming soon" phase, relevant events and public release. Mr Stephens said that during these phases, a variety of marketing assets were developed, published and provided to GRE Sales. These marketing assets included the Billboard, the Brochure, planbooks, investor reports, websites, artists' impressions,
Allhomes and portal listings, social platform marketing, letterbox mailouts, radio ads, tv ads, and physical site display and wayfinding signage.
According to the Marketing Timeline, there would be an ROI (return on inquiry) campaign from 29 January to 12 March 2018, a VIP event on 19 March 2018, followed by a public release of the Units to the market on 26 March 2018. An ROI campaign is where certain selected potential purchasers are sent marketing material and invited to purchase Units before the Development is released to the general public.
An internal Geocon Grand Central Towers Monthly Marketing Report dated February 2018 revealed that digital advertising across a variety of platforms (Facebook, Instagram, the Canberra Times, Allhomes and EDM (electronic direct mails)) commenced in February 2018.
The Marketing Timeline showed that the Billboards were installed on 5 February, the Brochure was printed on 12 March and the balance of the marketing assets referred to in that Marketing Timeline were completed by 19 March. Mr Micalos agreed in cross- examination that the Billboards were erected in early March 2018, the Brochure and Flyer were available (for prospective purchasers) by early March 2018, and (at least) one Promotional Email was sent on 1 March 2018.
On or about 8 February 2018, Mr Stephens asked the Marketing Team to produce some investor collateral. The investor collateral included a calculation of both net yield and gross yield (being annual rental income divided by the purchase price). In respect of the gross yield on all unit types, he said he used a conservative per week rental amount which was less than the 2017 LJ Hooker appraisals (the Stephens Yield Report).
On 12 February 2018, Mr Skepev emailed the 2017 LJ Hooker rental appraisals to Mr Stephens and Ms Hindson.
In or around February 2018, Mr Stephens met with Messrs Micalos and Morgan to set the prices for the Units on release of the Development to the market. A Release Pricing Schedule was generated which contained the release prices for the Units.
Around 15 February 2018 there was email correspondence between There PL and Ms Coe about a draft layout for a ½ page press layout which, in draft form, had the words “7% rental yield” on it. Ms Coe emailed Ms Hindson and said:
With the roll out of the 7% - do we need to say *indicative or anything like that? Or its fine to be simply what it is.
Mr Stephens agreed that about this time there were advertisements prepared which had “seven percent rental yield” written on them. He said he suggested to Ms Hindson and
her direct reports that the statement “seven per cent rental yield” be qualified because Mr Stephens thought that not all “departments within the project” (which I took to mean Units) “would achieve seven per cent”. He said his suggestion was not taken up.
The Billboards were erected on the Land on or about 19 March 2018 and were removed on or about 10 September 2018.
The Brochure was made available to consumers in hard copy between about 22 March 2018 and at least October 2019 and was available in soft copy for about the same period.
The Flyer was made available to consumers between at least March and November 2018.
The Promotional Video was published on about 22 March 2018 and remained available until the last Unit was sold in November 2020, although it was amended to remove the oral representations complained of on 22 August 2019 according to the Commissioner.
Seven Promotional Emails were admitted having been sent. They were sent to consumers on 31 January, 8, 15 and 28 February, 1 March, 12 April and 24 May 2018.
The Real Estate Website Advertising was live from about July 2017 up until (at least) the last Unit was sold in about November 2020.
On 5 April 2018, Mr Duncan Edghill, then Deputy Director-General - Transport Canberra, emailed Mr Nick Merriman, then employed by Geocon as a Development Manager. The email expressed concern about some of the advertising for the Development and said:
Many thanks for your time on the phone a few moments ago. As discussed, it was a courtesy call following feedback we’d received around Geocon advertising and public discussion of Light Rail Stage 2 to Woden. We hope what we discussed (which I’ve outlined below again for your convenience) will enable Geocon to ensure its advertising and discussion of light rail is accurate.
Light Rail Stage 2 from the city to Woden was announced by the ACT Government as its preferred corridor for the next stage of light rail in late 2016. Since early 2017 Transport Canberra has been working on the development of conceptual designs, business case activities and progressing discussions with the Commonwealth.
As with Light Rail Stage 1, there are still a number of important processes we need to go through for Stage 2, including:
* Planning approvals. As the project travels through Commonwealth areas, there are a number of important Commonwealth Government and Parliamentary approvals that are necessary to obtain. These are outside the control of the ACT Government;
* Further community consultation processes;
* Consideration by (and approval of) the ACT Government of a business case for the project; and
* Procurement and detailed design of the system.
Each of the above processes can materially shape the timing, final design, alignment, stop locations and other features of the process. We also received some feedback that light rail travel time was discussed at a Geocon event, but note that the ACT Government has not yet released any travel times for the system (which will be subject to the final alignment, extent of wire-free running, stop numbers and other factors).
As a courtesy, we wanted to draw this to your attention so that you may consider what may be appropriate and accurate in your advertising and public discussion of Light Rail Stage 2.
Please do not hesitate to contact me should you or Nathan wish to further discuss.
Most relevantly, the email noted that there were a number of approvals yet to be obtained for Stage 2, stop locations were subject to change, the ACT Government had not released any travel times for Stage 2, and travel times would be subject to a number of factors.
Mr Merriman forwarded Mr Edghill’s email to Mr Nathan Ross, a Geocon Development Manager, on the same day. Mr Ross forwarded the same email to Ms Hindson and Mr Micalos about 15 minutes later with the comment “General comments from Transport Canberra below. No issues.” Ms Hindson then forwarded the email to Mr Stephens about an hour later. Mr Stephens replied:
Must be kind of serious if we are getting calls from the deputy director general of transport Canberra
On the evidence, neither Mr Stephens, a director of GRE, nor Mr Micalos, the head of the Marketing Team, discussed the matters raised by Mr Edghill, nor sought any changes to the then existing Promotional Material.
In June 2018, several months after the commencement of the publication of the Promotional Material, Transport Canberra published a Light Rail Update. That document said, amongst other things, that the extension of the Light Rail to Woden remained subject to the granting of several statutory approvals, those being approvals required under the Environment Protection and Biodiversity Conservation Act 1999 (Cth) (the EPBC Act), development approval under the Planning and Development Act 2007 (ACT) (Planning and Development Act), works approval by the National Capital Authority under the Australian Capital Territory (Planning and Land Management) Act 1988 (ACT) (the ACT Planning and Land Management Act) and approval by both Houses of the Commonwealth Parliament as required under the Parliament Act 1974 (Cth) (the Parliament Act).
The document said that travel time for the light rail from Woden to the City was anticipated to be between 25-30 minutes, with frequency being every 6 min in peak
periods, at least every 10 min between 7am and 6pm on weekdays and at least every 15 min outside of these hours on weekdays, Saturdays, Sundays and public holidays.
On 31 August 2018, an investigator appointed by the Commissioner wrote letters to Geocon Group and Zapari in identical terms asking a series of questions. Answers were provided (as discussed below) and the investigator subsequently issued a series of s 52 Notices (discussed later). Section 52 is found within Part 5, Division 5.2 of the FTACT, which deals with investigations by the Commissioner in relation to compliance with the FTACT. Section 52 says, inter alia, that an investigator may by written notice require a person or corporation to give the investigator information in writing and any documents as identified in the notice. A person who, without reasonable excuse, fails to comply with a requirement under s 52 commits an offence punishable by the payment of 50 penalty units, imprisonment for 6 months, or both.
In the letters of 31 August 2018, the investigator said that he was concerned about certain representations that had been made in advertising material relating to the Development and the basis for making those representations. In particular, the investigator expressed concern about representations made regarding the location of the future light rail interchange and about rental yield.
The investigator drew attention to the Billboards, a “development brochure” and a website, and, in relation to the location of the stop at Woden and whether Stage 2 was a certainty, said:
The large banners, website, Investment Report and the development brochure state that the Grand Central Towers development site or adjacent area will be the location of a future light rail interchange. The statements and their advertising style create the impression that the future light rail route to Woden and the light rail interchange are certain and will be situated under or adjacent to the development site.
The ACT Government has not settled the route and location of future light rail interchanges for the planned City to Woden corridor and are still in the planning and negotiation phase, as outlined in the ACT Government, Transport Canberra, Light Rail Update, June 2018.
In relation to rental yield, the investigator said:
The advertisement banners on the sides of the building at the 15 Bowes Street development site also state "7% RENTAL YIELD" (attachment marked 'A'). In comparison, the Investor Report, page 5 states that the rental yield for Woden is 5.4% per annum in 2018 (attachment marked 'C'). Page 33 of the Investor Report provides that:
"Influences that may affect the future value, capital growth and rental yields in property investments mean that past performance is no guarantee that targeted returns will be met."
The statement "7% RENTAL YIELD" on the 15 Bowes Street banners infers that 7% is the expected achievable rental yield upon purchasing a property at Grand Central Towers
development. There is no reference to the 7% rental yield in the Investor Report or additional information in the advertisement banners which caveats or explains the apparent inconsistency between the figures to consumer[s].
The investigator sought answers to a number of questions including what the basis was for making the representation of 7 percent rental yield.
Mr Stephens said that Ms Alex Glover, Assistant Development Manager of Geocon, asked him to check the Stephens Yield Report before it was sent to Mr Micalos for his review and before it was sent to Meyer Vandenberg Lawyers to respond to the investigator’s letters of 31 August 2018.
Mr Stephens said that he did as he was asked and recalled being copied into the email to Meyer Vandenberg Lawyers attaching the Stephens Yield Report.
On 11 September 2018, Mr Micalos emailed a solicitor at Meyer Vandenberg which was copied to, amongst others, Mr Skepev, Mr Stephens and Ms Hindson. The email said that Mr Micalos was “happy with this response” (the response was not in evidence). The email continued:
One point –
Alex G can we please issue a rental appraisal report for each unit as at completion (ie 2020) These figures adjusted for inflation will show a 7% Yield on purchase price….
We need to use an independent agency brand.
Mr Micalos then sought and received four rental appraisals from LJ Hooker dated 12 September 2018 (the 2018 LJ Hooker appraisals), them being for: a one bedroom unit; a one bedroom plus study unit; a two bedroom unit; and a three bedroom unit.
Mr Stephens said these 2018 appraisals were obtained for two reasons. First, they were desired to assist with a response to the investigator’s letters dated 31 August 2018. Second, they were desired because the 2017 appraisals were some 12 months old, and the market had moved on.
By letter dated 12 September 2018, Meyer Vandenberg Lawyers responded to the investigator’s letter of 31 August 2018 directed to Zapari. In that letter it was confirmed that the 7 percent rental yield representation related to gross (not net) rental yield. The answer to the investigator’s question about the basis for the representation as to 7 percent rental yield was:
Upon negotiations of the purchase of a unit in Grand Central Towers, potential purchasers are offered entry into a property management agreement with licenced real estate agent
GRE Sales Pty Limited (“GRE Sales”) to exclusively manage the unit on the purchaser’s behalf (“Property Management Agreement”).
Clause 10 of the Property Management Agreement provides a rental guarantee whereby GRE Sales will reimburse the purchaser for the difference between the rent achieved at market and a minimum rent equivalent to 7% gross yield for the subject unit (being 7% of the purchase price divided by 52) for a period of 104 weeks from the date the contract for sale is completed.
Further, in the event that the subject unit cannot be leased for a period of four months after completion of the contract for sale, GRE Sales agrees to pay the purchaser a minimum rent equivalent to 7% gross yield for the subject unit (being 7% of the purchase price divided by 52) monthly in arrears until the expiry of 104 weeks from the date the contract for sale is completed.
A copy of the Property Management Agreement is enclosed.
Our clients also relied upon the following documents in assessing a 7% gross rental yield:
(a) rental appraisals for Grand Central Tower[s] as at 25 October 2017 from Ms Susie Weaver, Executive Property Manager at LJ Hooker Canberra City; and
(b) a price list for units in Grand Central Towers with calculations for expected rental yields for each unit once completed.
A copy of the above documents is enclosed.
For your further reference, our clients have obtained additional rental appraisals for Grand Central Tower[s] from Ms Susie Weaver, Executive Property Manager at LJ Hooker Canberra City for rent as at the date of this letter. A copy of these appraisals is also enclosed.
That answer was incorrect in two respects and notable for a third.
First, the document attached, and said to be “a price list for units in Grand Central Towers with calculations for expected rental yields for each unit once completed”, was not the same document emailed to Meyer Vandenberg which Mr Stephens had exhibited to his affidavit and which he said he recalled being attached to that email. Notably, it used different rental estimates, being the highest rent in the range provided in the 2018 LJ Hooker appraisals for each unit type (whilst Mr Stephens had used rents below those in the 2017 LJ Hooker appraisals).
Second, at the time of that letter, (but not before) the Property Management Agreements mentioned in that response (guaranteeing 7 percent gross yield) had not been offered to any purchasers. They were not offered until November 2018. More will be said about those agreements later in these reasons.
The notable third respect is that the document attached and purporting to be the document relied on as a basis for making the 7 percent rental yield representation calculated yields rounded up to the nearest percent and used rents higher than those set
out in the 2017 LJ Hooker rental appraisals, namely the highest rent in the range provided in the 2018 LJ Hooker appraisals for each unit type.
In a subsequent letter dated 25 March 2019, Meyer Vandenberg, on behalf of Zapari, Geocon Bowes, GZ and GRE, said that that attachment just mentioned had been incorrect. They said that the attachment was a calculation prepared on or about 12 September 2018 (the 12 September 2018 spreadsheet) and was based upon an updated rental appraisal from LJ Hooker on that same day (the 2018 LJ Hooker appraisals) and, to the extent known at that date, the contracted price for the units in the Development.
Meyer Vandenberg then said:
9. The recipients of the Notices - GZ, GBSJV, GRE Sales and ZPBS - say by way of clarification:
…
(b) a calculation of expected yields was undertaken at or about the time of release of the Development to market in February 2018 using the LJ Hooker appraisals dated 25 October 2017 and the asking price for each unit in the Development; and
(c) the calculation referred to immediately above, in paragraph 9(b), was not undertaken on a spreadsheet or, if it was, it cannot now be located.
I shall return to that statement when discussing Mr Micalos’ evidence in which he purported to attach the missing calculation referred to in that letter, but with no explanation as to how it had come to be found.
The letter also withdrew the assertion made in Meyer Vandenberg’s 12 September 2018 letter that one basis relied on for the 7 percent rental yield representation was the Property Management Agreements. Meyer Vandenberg said on behalf of GZ, Geocon Bowes and Zapari that:
…
(b)by way of clarification, the property management agreement underpins the representation on the Updated Website only;
(c)the property management initiative was developed independently of the Grand Central Towers development;
(d)the Updated Website was launched to coincide with the property management service; and
(e)the 12 September 2018 spreadsheet was relied upon in formulating the viability of the 7% guarantee, not the Billboard, Brochure or Investor Report.
The “Updated Website” was a reference to the website for Grand Central Towers, updated after 11 December 2018.
I shall return to that statement when discussing Mr Micalos’ evidence in which he insisted, contrary to Meyer Vandenberg’s letter, that the property management agreements were one basis he relied on for the 7 percent rental yield representation in February 2018.
Having noted that inconsistency, even in the 12 September 2018 spreadsheet there were a number of Units calculated to have gross rental yields of 5 percent or 6 percent, although the majority were calculated to have yields of 7 percent or better.
In about October 2018, the ACT Government split the works required for Stage 2 of the light rail into two parts: Stage 2A and Stage 2B.
From about November 2018, (but not before) Property Management Agreements were offered to some, but not all, potential purchasers of Units by GRE.
There were two Property Management Agreements which differed only in their term. One was for two years, and the other was for five years. The parties to these Property Management Agreements were to be the purchaser of a Unit and GRE. It was a term of the Property Management Agreements that GRE would be retained as the property manager for the relevant Unit, and cl 10 provided that GRE would guarantee a minimum rent equivalent to 7 percent gross yield (being 7 percent of the contract sales price, less any incentive, divided by 52) for two or five years.
Importantly, as GRE properly and fairly admitted in opening submissions, and as Mr Stephens said, the Property Management Agreements were offered to some but not all prospective purchasers, and, of course, could only be taken advantage of by those willing to contract with GRE on the terms offered in the Agreements. Such terms included an obligation to pay a letting fee of two weeks’ rent, a management fee of 8.7 percent of achieved rent, a lease negotiation/renewal fee, a customer care, IT support and administrative fee, fees for ACAT mediations and hearings “at cost”, and fees for overseeing maintenance and repairs at cost. Needless to say, some purchasers may not have considered those terms financially advantageous.
In about April 2019, construction of Stage 1 of the light rail (Gungahlin to the City) was completed and operations commenced.
By an invoice dated 30 June 2019, Geocon Group invoiced GRE $10.6m (incl GST) for labour hire. Both Mr Georgalis and Mr Stephens accepted this invoice related to Geocon Group’s labour hire to GRE, and the only labour hire mentioned in the evidence was that
of the Geocon Group Marketing Team. No defendant led any evidence of any other service that Geocon Group provided to GRE and for which GRE was charged any amount of money.
These proceedings were commenced on 22 August 2019.
On 23 August 2019, an article appeared in the ABC News headed “Geocon accused of breaching consumer laws over Canberra apartment advertising”. The article contained a photo of a Billboard and referred to the commencement of the present case by the Commissioner.
The sale of the last Unit occurred in about November 2020, and the construction of the Development was completed in about December 2020.
The Commissioner’s case on agency and who engaged in the relevant conduct
Who made the representations (or engaged in the relevant conduct)
Up until the first day of the hearing, the Commissioner was relying upon her Third Further Amended Statement of Claim. In that document the Commissioner expressly pleaded that GRE published, or caused to be published, the Billboards, Brochure, Flyer and Promotional Video. There was no express pleading as to who published the Promotional Emails or the Real Estate Website Advertising.
On the first day of hearing the Commissioner applied to amend her pleading to file a Fourth Further Amended Statement of Claim.
The Commissioner submitted that several defendants had, in written opening submissions, adopted positions not consistent with answers given in several responses to investigators’ letters and s 52 Notices. There was some substance to that submission, with several defendants submitting in closing submissions, for example, that some answers provided in responses to s 52 Notices could not be relied on for their accuracy.
1330.One such case was Australian Competition and Consumer Commission v Cornerstone Investment Aust Pty Ltd (in liq) (No 4) [2018] FCA 1408 in which Gleeson J said:
[282]The term “agent” is not defined in the Act or in the ACL. It is thus appropriate to have regard to the meaning(s) of agent at common law.
[283]It has been observed that the word “agent” is one that can cause difficulty because of its potentially wide and varying meaning: Tonto Home Loans Australia Pty Ltd v Tavares [2011] NSWCA 389 (“Tonto”) at [170] per Allsop P (Bathurst CJ and Campbell JA agreeing); NMFM at [512] per Lindgren J; see also Dal Pont, Law of Agency (3rd ed, LexisNexis, 2014) at [1.1].
[284]The key feature of an agency relationship is that the agent acts on behalf of the principal. That this is the key characteristic of agency explains why, in Australian Competition and Consumer Commission v Maritime Union of Australia [2001] FCA 1549; (2001) 114 FCR 472, Hill J at [81] observed that s 84(2) appeared – by its reference to “on behalf of” in addition to “agent” – to have a “double requirement” of agency. In Tonto, Allsop P (with whom Bathurst CJ and Campbell JA agreed) said, at [177]:
Agency is a consensual relationship, generally (if not always) bearing a fiduciary character, in which by its terms A acts on behalf of (and in the interests of) P and with a necessary degree of control requisite for the purpose of the role. Central is the conception of identity or representation of the principal.
[285]His Honour said further at [177]:
It is sufficient to recognise that the essential characteristic is that one party (A) acts on the other’s (P’s) behalf, and that this will generally be in circumstances of a requirement or duty not to act otherwise than in the interests of P in the performance of the consensual arrangement.
[286]It is well established that where a question arises as to whether two persons have a relationship of agency, the label they apply to the relationship, or expressly disclaim, is not determinative of the nature of their relationship. As a result, a term in a written contract between the persons that their relationship is not one of agency will not determine the matter, although such a term must be given proper weight: South Sydney District Rugby League Football Club Ltd v News Ltd [2000] FCA 1541; (2000) 177 ALR 611 at [134]-[135] per Finn J.
[287]As Allsop P observed in Tonto at [178], it should not be controversial that the concept of agency may properly extend to persons whose roles may be described as “canvassers” or “introducing agent”. There, his Honour quoted, with apparent approval, a passage from Bowstead and Reynolds on Agency (19th ed, Sweet & Maxwell, 2010) at [1-019], where the authors observed that such agents may only
introduce a third party to the principal and leave them to enter a contract between themselves. However, such agents often “have authority to receive and communicate information on their principals’ behalf, and in so doing have the capacity to alter their principals’ legal position”.
1331.Her Honour continued:
[302]In the law of agency, the liability of the principal for an agent’s defaults can be explained by the principal’s ability to stipulate an agent’s authority: Dal Pont, Law of Agency [22.15].
[303]The expressions “actual authority” and “apparent authority” are not defined in the Act or ACL. It is therefore useful to have regard to the general law in determining their meaning.
[304]At common law, the principal is civilly liable for an agent’s torts committed by the agent while acting within the scope of his or her actual or apparent (also called “ostensible”) authority: Ex parte Colonial Petroleum Oil Pty Ltd (1944) 44 SR (NSW) 306 at 308. As to the latter, Jordan CJ repeated the following statement from his decision in Bonette v Woolworths Ltd (1937) 37 SR (NSW) 142 at 151:
If an agent is authorised to do a particular class of acts, the principal is liable if the agent does an act of the class authorised notwithstanding that it is done mistakenly, negligently or wrongfully; and a principal cannot escape liability by expressly prohibiting his agent from making mistakes or being careless in carrying out his duties …
Concluding:
A principal is not, of course, responsible, either civilly or criminally, for anything done by a person who is in fact his agent, if it is done by that person on his own behalf and not in the course of the performance of his duties as agent or within the scope of his general authority as agent.
[305]As a matter of interpretation, these principles apply under s 139B so that the conduct of Empower’s agents in selling and promoting Empower’s courses (being conduct of the authorised class) is taken, for the purposes of the ACL, to also have been engaged in by Empower.
[306]This conclusion is consistent with cases in which the principal has been found liable for the misleading or deceptive conduct of its agent: see, for example, Aliotta v Broadmeadows Bus Service Pty Ltd [1988] ATPR 40-873, Transport Accident Commission v Treloar [1991] ATPR 41-123 at 52,819 and Havyn Pty Ltd v Webster [2005] NSWCA 182; (2005) ATPR (Digest) 46-266.
[307]It follows that the conduct of the agents in using any of the alleged marketing methods is, by s 139B, taken to have also been engaged in by Empower.
1332.At [306] (quoted above), her Honour referred to three authorities in which a principal has been found liable for the misleading or deceptive conduct of its agent, being Aliotta v Broadmeadows Bus Service Pty Ltd [1988] ATPR 40-873 (Aliotta), Transport Accident Commission v Treloar [1991] ATPR 41-123 (Treloar, noting that the correct case name is Treloar v Ivory & Anor) and Havyn Pty Ltd v Webster [2005] NSWCA 182; ATPR
(Digest) 46-266 (Havyn). One or more of those three authorities are often cited in other similar cases.
1333.Aliotta involved the question whether a vendor was liable for the representations of a real estate agent. In that case a purchaser of property sued the vendor and the vendor’s real estate agent for misleading or deceptive conduct in relation to representations made concerning a lease over the property. The real estate agent made the representations to the purchaser. As to the vendor’s liability for the real estate agent’s representations, Gray J said at 49, [445]:
As between a vendor and an intending purchaser, the vendor's agent has authority to bind the vendor by any representation made as to the nature or quality of the property, even if it is false, unless some limitation on the agent's authority is known to the intending purchaser. See Mullens v. Miller (1882) 22 Ch. D. 194, and MacCormick & Anor v. Nowland & Ors (1988) ATPR 40-852.
1334.Treloar concerned the sale by Treloar, a licensed motor dealer, of a second hand 1987 model Mercedes 560 SL automatic coupe at an auction. Treloar had imported the car into Australia as a salvage vehicle in a severely damaged state. A new body, including chassis, was fitted and major repairs were done to the engine, new parts were added, and right hand drive conversion was carried out. When Treloar instructed the auctioneer (Broughtons) to sell the vehicle at auction, nothing was said about the car having been involved in an accident nor about it having been rebuilt. Treloar told Broughtons that the odometer reading which showed very low kilometres was correct. The misleading conduct relied upon by the consumer (Ivory) was based on certain advertisements for the sale of the car at the auction which were placed by Broughtons on behalf of Treloar and which were misleading in not mentioning the above facts.
1335.After quoting the passage from Aliotta quoted immediately above, Ipp J (as his Honour then was) said at 52, [817]:
It was not submitted that Broughtons were not Treloar's agents for the purposes for drawing up and placing the advertisements. Nor was it submitted that there was any limitation on Broughtons’ authority in that regard.
In the circumstances, the conduct of Broughtons in drafting and placing the advertisements is deemed to have been engaged in also by Treloar.
1336.The third case cited by Gleeson J, Havyn, concerned a misrepresentation by a vendor in a sales brochure as to size of the property (a block of six units) which was sold to a purchaser. It was the agent who had, for the purpose of marketing the property, prepared the coloured brochure which contained a representation as to size in the following terms: “each flat approximately 63 square metres”. The brochure also contained a small-print disclaimer which read “[t]he information contained herein given has been supplied to us
and we have no reason to doubt its accuracy, however we cannot guarantee it …”. The representation was incorrect and had been obtained by the agent “pacing out” part of one of the units in the block and calculating from that estimate. The misrepresentation was to overstate the size of five units by an average of around 5 percent, and the sixth by about 10.8 percent.
1337.Havyn is not useful in this case because the question of the principal being liable for the misrepresentations of the agent was not in issue in the case, either at trial or on appeal. That is, the principal did not contest her liability for the misrepresentations made by her agent.
GRE was the agent of GZ
1338.As I have construed the Agency Agreement, GZ retained GRE to, amongst other things, market the Development. GRE had been contractually authorised by the Agency Agreement to market the Development. This GRE did. There was consent, GRE had contractually agreed to act on GZ’s behalf and GRE was subject to GZ’s direction.
1339.Clause 4 of the Agency Agreement said that GRE “must act as the Principal’s agent in relation to all matters” involved with the sale of the Units, including marketing.
1340.GRE was directed what it was expressly authorised to do in cls 4.1-4.3, with several instructions as to how things were to be done and several restrictions imposed on how things were to be done.
1341.Clause 4.2(c) said that GZ authorised GRE to communicate information that GZ provided to GRE regarding the Development to prospective buyers and buyers of the Units, unless GZ expressly advised GRE to the contrary.
1342.As some of the defendants correctly pointed out, marketing was not a Project Control Matter (as defined in the Joint Venture Agreement) delegated to the PCG (about which more is said below when discussing whether GZ was the agent of Geocon Bowes and BSD). The inference necessarily follows, on the evidence before me, that marketing was not delegated by GZ to any other person or entity, and therefore any instructions given to GRE (or the Marketing Team) was done by, or on behalf of, GZ.
1343.GZ warranted in cl 4.2(d) that the information that it provided to GRE regarding the Units and the Development was accurate and, per cl 4.2(e), GRE would not be liable for any loss or damage suffered by GZ in connection with the disclosure of information by GRE pursuant to cl 4.2(c) and (d).
1344.Whilst not every independent contractor performing a task for, or for the benefit of, another party will be an agent, the essential characteristic of the Agency Agreement is that GRE was to act on GZ’s behalf in circumstances where there was a requirement or duty not to act otherwise than in the interests of GZ in the performance of the consensual arrangement.
1345.Accordingly, GRE was GZ’s agent in relation to marketing.
1346.No party suggested that if that finding was made, GZ would not otherwise be liable for GRE’s wrongdoing.
GRE was not the agent of Zapari
1347.Zapari was the owner of the land. It was the owner of that which was advertised to consumers. When the development was completed, it was the vendor of each of the units sold, as was evidenced by the contract for sale to Mr Dalton and as confirmed by Mr Skepev in cross-examination.
1348.The Commissioner submitted that the Agency Agreement was “a clear record of GRE Sales’ engagement as agent to market the Development on behalf of GZ and Zapari”.
1349.That submission is incorrect. The terms of the Agency Agreement are clear. The terms expressly record that GZ had agreed to retain GRE to market the property. There is no term of the Agency Agreement which says that Zapari retained GRE to market the property.
1350.It is true that Zapari, which was a party to the Agency Agreement, expressly consented to GZ retaining GRE, but that consent did not have the effect of granting any contractual rights to Zapari to direct or control GRE. That contractual power was given exclusively to GZ.
1351.The Commissioner cited in support some evidence of what certain witnesses thought the position was. As presently advised, that evidence was irrelevant, and I have determined the matter objectively.
1352.The Commissioner submitted that the sale of land contracts executed in respect of each Unit sold in the Development recorded Zapari as being the “Seller” and GRE as being the “Sales Agent”. That was correct, and those facts may have been relevant to determining whether GRE was the agent of Zapari for the purpose of sales, but it is not evidence that GRE was Zapari’s agent for the purpose of marketing. A party may be an agent of another for some purposes, but not others.
1353.There was no other evidence that GRE acted on behalf of Zapari (as distinct from acting on behalf of the developer, GZ) for the purpose of marketing, and did so under the direction or control of Zapari.
1354.Thus, whilst Zapari did consent to GRE marketing the Development, I am not persuaded on the evidence that it was doing so on behalf of Zapari (even though it was Zapari’s land and even though Zapari would benefit from that marketing). The Agency Agreement established that what GRE was doing was on behalf of the developer, GZ, and GRE was subject to GZ’s direction and control and not Zapari’s.
1355.GRE was not the agent of Zapari.
GZ was not the agent of BSD or Geocon Bowes
1356.As I have mentioned earlier, the Commissioner’s pleaded second tier agency case was limited to what arose out of the contractual rights and obligations found in the Joint Venture Agreement and the Development Agreement.
1357.The Commissioner submitted that the structure created by the agreements executed on 20 December 2017 “disregarded corporate boundaries” (whatever that quite means) and GZ was “completely controlled, to the point of having no separate corporate identity” by BSD and Geocon Bowes. In this respect, the Commissioner submitted, this case was similar to Ackers.
1358.The Commissioner’s second tier agency case was, correctly with respect, not based upon control by BSD and Geocon Bowes over GZ by reason of those two companies owning 100 percent of the issued shares in GZ. Rather, the Commissioner’s case was that the necessary incidents of agency (in summary: consent, direction and acting on behalf of the other) between BSD and Geocon Bowes on the one hand and GZ on the other, were found in the Joint Venture Agreement and the Development Agreement.
1359.In terms of the Joint Venture Agreement, the Commissioner submitted that the effect of that Agreement was to shift the decision-making power for GZ from the directors of GZ to BSD and Geocon Bowes, such that GZ acted pursuant to their authority and in the course of their businesses. By being parties to that Agreement, all three corporations consented to those arrangements. The particular clauses relied on by the Commissioner provided that:
(a)BSD and Geocon Bowes agreed to associate themselves as an unincorporated joint venture to carry out the development (cl.2.1);
(b)GZ was appointed as the nominee of BSD and Geocon Bowes (cl.3.3);
(c)GZ agreed to appoint Geocon Bowes as the “Development Manager” (cl.3.4);
(d)GZ agreed to appoint GRE as the “Sales Agent” (cl.3.5);
(e)GZ agreed to appoint a builder in accordance with the recommendations of Geocon Bowes (cl.3.7);
(f)the parties agreed that, in relation to marketing, Geocon and Zapari Group branding would be incorporated into all marketing materials for the development in a manner acceptable to BSD and Geocon Bowes acting reasonably (cl.3.12);
(g)the directors of GZ agreed they would comply with the directions of the PCG in so far as those directions relate to GZ’s role as the nominee (cl.20(c));
(h)the PCG could approve the Development Manager to do things in its own name and in the name of GZ (cl.24.1);
(i)BSD and Geocon Bowes agreed that decisions in respect of Project Control Matters were reserved to the PCG and GZ was required to obtain approval of the PCG prior to undertaking any action in respect of a Project Control Matter (cl.24.2);
(j)the PCG consisted of one representative of BSD and one representative of Geocon Bowes (cl.26.1);
(k)the PCG was responsible for directing the Development Manager in relation to Project Control Matters and BSD and Geocon Bowes could from time-to time delegate additional responsibilities to the PCG and expand its role (cl.26.4).
1360.The Commissioner submitted that four consequences flowed from those provisions.
1361.First, the PCG was comprised, and therefore controlled by, representatives of each of BSD and Geocon Bowes (cl.26.1), and GZ agreed to comply with directions given by the PCG and could not take any actions in relation to “Project Control Matters” without approval of the PCG (cl.20(c) and cl 24.2). Accordingly, the PCG directed what GZ should do and restricted the ability of GZ to undertake any activities without PCG direction.
1362.That submission fails to recognise that marketing was not a Project Control Matter as defined in the Joint Venture Agreement. Under that Agreement the “Participants”, being BSD and Geocon Bowes, were contractually entitled to delegate additional responsibilities or expand the role of the PCG. Thus, BSD and Geocon Bowes were
contractually entitled to delegate marketing to the PCG, but that delegation was not pleaded and was not part of the Commissioner’s pleaded second tier agency case.
1363.The second consequence, the Commissioner submitted, was that Geocon Bowes (as Development Manager) was also directed by the PCG (cl.26.4). In turn, Geocon Bowes could undertake actions in the name of GZ (cl.24.1) and was able to do so without its knowledge or express consent on each occasion. GZ consented to this approach by entering into the Joint Venture Agreement. This was another avenue by which the PCG, via the Development Manager, controlled actions undertaken by GZ Developments.
1364.I do not agree with that submission. Clauses 24.1 and 24.2 of the Joint Venture Agreement said:
24DEVELOPMENT MANAGER
24.1Authority
(a)The Participants agree that, pursuant to the terms of the Development Management Agreement, the Development Manager will be responsible for the day to day management of the Project.
(b)If approved by the PCG, the Development Manager may be given authority to do all things in its own name and in the name of the JV Nominee Company that the PCG considers necessary or desirable in connection with or in pursuance of the Project.
24.2Restriction
The Participants agree that decisions in respect of Project Control Matters are reserved to the PCG. The JV Nominee Company and Development Manager must obtain the approval of the PCG prior to undertaking any action in respect of a Project Control Matter.
1365.Clause 24.1(a) is non-controversial, and no party suggested marketing was within its remit. The operation of cl 24.1(b) was only triggered if the PCG gave approval to grant Geocon Bowes authority to do all things in its own name and in the name of GZ that the PCG considered necessary or desirable, but no such approval was pleaded, and it was not part of the Commissioner’s pleaded second tier agency case. Clause 24.2 reinforced the fact that marketing was not a Project Control Matter.
1366.Further, I agree with Geocon Bowes’ submission that, if the Commissioner’s submission was otherwise correct, Geocon Bowes would have been the agent undertaking tasks on behalf of its principal, GZ, and not the other way round.
1367.The third consequence the Commissioner submitted flowed was that, pursuant to cl 13 of the Development Agreement between GZ, BSD, Geocon Bowes, Pari Pari and Zapari,
GZ was responsible for marketing activities for the Development. However, the Commissioner submitted, GZ’s role in marketing was effectively prescribed by the Joint Venture Agreement, for example, appointing GRE (cl.3.5), and there did not appear to be any general power or control in respect of the Development reserved for GZ in the Joint Venture Agreement.
1368.I do not accept this submission. Cl 13 of the Development Agreement did not say that GZ was “responsible” for the marketing (and therefore the submission was inaccurate), although it can be implied from the terms of that Agreement that the joint venture partners had agreed that GZ, because it was the developer, would prima facie undertake the marketing just as it undertook all other activities for the Development to be constructed and Units sold, and because under the terms of the Agency Agreement, GZ could direct GRE in relation to marketing. However, the next point made by the Commissioner is not made out. There was no prescription on GZ’s role in marketing other than that all parties agreed that GZ was contractually obliged to retain GRE to undertake the marketing. Clauses 13.1 and 13.2 of the Development Agreement said:
13MARKETING & SALES
13.1Appointment of agent
The Developer will engage the Sales Agent to market the Units for sale.
13.2Costs
All commissions, advertising and marketing costs and expenses incurred in engaging the Sales Agent will be Project Costs.
1369.The fourth consequence submitted to have flowed was that directions from the PCG (referred to in the three matters outlined above) related to “Project Control Matters”, the PCG could effectively expand its remit in respect of the development, as desired by BSD and Geocon Bowes, including as to marketing (per cl 26.4 of the Joint Venture Agreement). In the Commissioner’s oral reply submissions it was submitted that:
… clause 26.4, it doesn’t just say the PCG only has power in respect of project control matters. It says project control matters and anything else that PCG agrees to look at. So it’s conferring the authority to the PCG then and there.
1370.The power to expand the PCG’s remit did exist in cl 26.4, but the Commissioner had not pleaded that the Participants, being Geocon Bowes and BSD, had exercised that power and thereby expanded the PCG’s responsibilities to include marketing. I accept, in general terms, that that was the case the Commissioner desired to run if leave had been granted to file the Fifth Further Amended Statement of Claim, but that leave was refused. Hence, I do not accept this submission.
1371.The Commissioner concluded by submitting that from the inception of the Joint Venture Agreement, GZ was controlled by the PCG and, to the extent it was, its actions were prescribed under the Joint Venture Agreement or undertaken by the Development Manager in its name.
1372.I do not accept that submission. Marketing was not a Project Control Matter under the terms of the Joint Venture Agreement. It was not pleaded that the Participants had added marketing to the PCG’s remit. The parties had agreed that GRE would undertake the marketing, and GRE did so by hiring the Marketing Team from Geocon Group for a fee. Under the terms of the Agency Agreement, GZ could direct GRE in relation to marketing, but none of the matters advanced by the Commissioner establish that what GZ was doing vis-à-vis marketing, was on behalf of BSD and Geocon Bowes (putting aside their positions as shareholders), was done by consent, and was done at the direction of BSD and Geocon Bowes (as the members of the PCG).
1373.The Commissioner then made a number of submissions to the effect that marketing had been delegated to the PCG, the PCG was essentially made up of Geocon Bowes and BSD, the PCG made decisions in relation to marketing, the PCG directed GZ what to do vis-à-vis marketing, and GZ in turn directed GRE. I have ignored those submissions because those matters were not pleaded and were outside the Commissioner’s pleaded second tier agency case.
1374.The Commissioner submitted that the present case was analogous to Ackers but I do not agree. The facts are very different.
1375.The Commissioner also cited in support New South Wales Mutual Real Estate Fund Ltd v Brookhouse (1979) 38 FLR 257, Aquilina Holdings Pty Ltd v Lynndell Pty Ltd [2008] QSC 57 and General Accident Fire & Life Assurance Corp v Tanter (The Zephyr) [1984] 1 Lloyd’s Rep 58 (Hobhouse J), and [1985] 2 Lloyd’s Rep 529 for the appeal. I do not find those cases to be of any assistance for the reasons given by Geocon Bowes in its “Note On Commissioner’s Further Cases” dated 7 September 2023.
1376.BSD correctly pointed out that the Joint Venture Agreement contained a no agency clause (being cl 2.5). That clause relevantly said:
2.5 No Partnership or Agency
(a) Nothing contained or implied in this Agreement is intended to create a partnership between the Parties or (except as otherwise provided) establish any Party as an agent or representative of the other.
1377.Such clauses are to be given weight, although they are not determinative. In this case I need not resort to it because the Commissioner’s second tier agency case based on the
contractual rights and obligations failed on the basis that those contractual rights and obligations did not give rise to an agency.
1378.The Commissioner also made a submission to the effect that “Geocon” and “Zapari” “branding” was all over the Promotional Materials and therefore, in a way I do not understand, that was some evidence that Geocon Bowes and BSD were the principals of GZ. The ultimate submission was that a consumer looking at the Promotional Material would think that because the Promotional Materials contained Geocon and BSD branding, the Representations must have been made on behalf of Geocon Bowes and BSD. I fail to see the relevance of what a consumer thought to the second tier agency case as pleaded and do not accept the submission.
1379.Geocon Bowes made an additional submission that, assuming all other matters in favour of the Commissioner, the law did not recognise a chain of agency as the Commissioner suggested. That is, party A could not be liable as principal for party B which was only liable as principal of party C. Geocon Bowes said that the authorities on “sub-agency” were to the effect that party A would be liable directly as principal for the acts and omissions of party C, and there was no pleading to that effect.
1380.As I have dismissed the Commissioner’s second tier agency case, I need not decide that particular submission.
1381.In conclusion, I do not accept the Commissioner’s second tier agency case.
Costs of applications made during the hearing
1382.Costs were sought in relation to the argument on parliamentary privilege. In my view there was nothing about that objection to evidence which should attract a separate order for costs. Costs of that argument should simply be the parties’ costs in the cause.
1383.Costs of the application to file the Fourth Further Amended Statement of Claim were reserved. No party is entirely blameless, and the costs of that application should be the parties’ costs in the cause.
1384.Costs of the application to file the Fifth Further Amended Statement of Claim were reserved. The Commissioner’s application succeeded in relation to some minor matters, but failed on the matter of substance, namely the application to amend the second tier agency case. There is no reason why costs ought not follow the event. The Commissioner should pay the costs of that application.
1385.As for the costs of the proceedings, I have not heard from the parties and will give them the opportunity to do so.
Submissions required on orders to be made
1386.This hearing was on liability only, and some of the parties submitted that I should not make any orders at this stage, not even declarations giving effect to my findings in this judgment, prior to what was called the penalty hearing.
1387.I presently don’t see why I could not or should not make declarations giving effect to my findings in this judgment at this point in time, but I shall give the parties an opportunity to address that issue.
1388.Should the parties be in agreement that there is no reason why I should not make declarations giving effect to my findings in this judgment at this point in time, they should attempt to agree on those orders.
1389.I shall allow the parties a short time to consider this judgment and shall list the matter for mention in order to make directions so as to chart a path forward to determine all remaining matters.
I certify that the preceding one thousand three hundred and eighty-nine [1389] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Curtin
Associate:
Date: 11 March 2025
**************
Amendments
11 March 2025 In [327], replace "his Honour" with "her Honour"
11 March 2025 In [577], replace "three second image of text" with "two second image of text"
11 March 2025 In [840], replace "to Canberra City would take five minutes" with "would take ten minutes"
11 March 2025 In [1189], omit "for" in "whom the Geocon Group Marketing Teams was acting for"
11 March 2025 In [1363], omit "Developments" in "in the name of GZ Developments"
11 March 2025 In [1373], omit "GZ" and substitute with "GRE" in "in turn directed GZ".
265
2
0
0