Dainford Ltd v Sanrod Pty Ltd

[1984] FCA 435

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CATCHWORDS

Trade Practices - misleadinu conduct - purchase of home unit - representation as to view from unit - unit

buildlnq not constructed at date of contract -

subsequent erection of obstruction to view - plans

available for inspection - not inspected by purchaser

- whether purchaser entitled r ly to upon

misrepresentation

Trade Practlces Act 1977, 5.52

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DAINFORD LIMITED v. SAJJROD PTY. LIMITED.

HENRY JOHN JAGO and BEATRICE ELEANOR JAGO

No. 670 of 1984

CORAM: NORTHROP. MORLING and SPENDER. JJ.

13 Octcber 1984

BRISBANE.

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If1 THE FEDERAL COURT OF AUSTRALIA	)
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PUEENSLAND	DISTRICT	REGISTRY	)	No. G70 of 1984
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GENERAL DIVISION )

BMTWEEN : DAINFORD LIMITED

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Appellant

AND: SAI'IROD PTY. LIMITED

First Respondent

AND: HENRY JOHN JAGO and

BEATRICE ELEANOR JAGO

Second Respondents

O R D E R

JUDGES MAKING	ORDER	Northrop, Morling and Spender JJ.
DATE OF ORDER	1 2 October 1984
L?RWE MADE	Brisbane

THE COURT ORDERS AS FOLLOWS:

1. Appeal dismissed.

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2 . Appellant to pay the respondents' costs.

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IN THE FEDERiX COURT OF AUSTRALIA	)
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QUEENSLAND DISTRICT	REGISTRY	)	No.	G70	of	1984
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DIVISION GENERAL )

BETWEN: DAINFORD LIMITED

Appellant

AND : SANROD PTY. LIMITED

First Respondent

AND: HENRY JOHN JAGO and

BEATRICE ELEANOR JAGO

Second Respondents

I	CORAM:	Northrop, Morling and Spender JJ.	12 October 1984
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! REASONS FOR JUDGMENT

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I	NORTHROP J:	I	would ask Mr Justice Morling to express his
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opinion first.

MORLING J: This is an appeal from a decision of a judge of

the Court in proceedings in which the appellant was found liable to pay damages to the first respondent arising out of misleading conduct which the learned judge found the respondent

had engaged in contrary to the provisions of s.52 of the Trade

I Fractices Act.

2 .

The proceedings arose out of the purchase by the first

respondent from the appellant of a home unit in a proposed

building to be known as "Imperial Surf" which was to be

constructed by the respondent. The second respondents, who

are husband and wife, guaranteed the performance of the first

respondent's obligations under the contract of purchase. The

second respondents were directors of the first respondent. The

orders made by the learned trial judge included declarations

that the contract of purchase and the guarantees given by the

second respondents were void.

No serious challenge was made to the findings of fact

I	made by his Honour and the following account of the facts is
I	taken from his Honour's judgment. The contract in respect of
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Unit 2B in "Imperial Surf" was dated 24 August 1981. On the
same day the first respondent, to which I shall refer hereafter
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as "Sanrod", also agreed to purchase Unit 1B in a building
known as "Peninsula", another building to be constructed by the
appellant, to which I shall refer hereafter as "Dainford".

The negotiations in respect of each purchase had

occurred on 11 and 12 August 1981. These negotiations took

place between the second respondents, Mr and Mrs Jago, and Mr

! David Heaney, an employee of P.R.D. Realty Pty. Limited. That

company carried on the business of a real estate agent at

Surfers Paradise and was engaged by Dainford to sell units in

"Imperial Surf". Mr Heaney was a real estate salesman

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3.

employed by P.R.D. Realty Pty. Limited and was authorised by

his employei and Dainford to make representations	in relation
to the sale of units in "Imperial Surf".

The market for new units on the Gold Coast was

buoyant in August 1981 and there was a heavy demand for units

in "Imperial Surf" and "Peninsula". "Imperial Surf" is a

large building of about 40 storeys. The land on which it is

constructed has a frontage to the Esplanade, which abuts the

beach front at Surfers Paradise. Units in "Imperial Surf" went

on sale at the end of July 1981 before the construction of the

building was commenced.

On 11 August 1981 Unit 2B was the only unsold two

bedroom unit which was to be constructed at the front of the

proposed building facing the Esplanade. Unit 2B 1s on the

first floor above ground level and immediately above the main

entrance to "Imperial Surf l'.

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As was always intended by Dainford. a large canopy or

porte-cochere has been constructed over the driveway at the

main entrance to the "Imperial Surf" building. Although there

are still extensive water views from Unit 2B. the porte-cochere

is a significant obstruction to the view and it also has other

disadvantages for the owner of Unit 2B.

4.

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Sanrod and Mr and Mrs Jago allege that they were

induced to- enter into the contract and the guarantee by

misrepresentations made for that purpose. The misrepresent- finding should be made.

ations were alleged to have been fraudulently made. I should

say at once that there was no finding of fraud made by his

I In substance, the misrepresentation alleged was that there would be uninterrupted water views from Unit 2B in

"Imperial Surf". It was alleged that Dainford had no intention

at any material time of so constructing "Imperial Surf" that

Unit 2B would have uninterrupted water views. It was alleged

that "Imperial Surf" had in fact been constructed with a

porte-cochere which substantially restricted views of the water

from Unit 2B.

The respondents' primary case at the trial was that

Dainford's conduct constituted a contravention of s.52(1) of the Trade Practices Act. It was further alleged that, in any

I	event, and irrespective of whether the alleged misrepresent-
ations were fraudulent or innocent, the respondents were
entitled to rescind the contract.

After August 1981, and in 1982, there was a sharp

down-turn in the market for new units on the Gold Coast and a

sharp decline in the value of units, including those in the

5.

"Imperial Surf" and "Peninsula" buildings. Both buildings

were then still in the process of constuction.

In the events that happened. Sanrod did not complete

the purchase of Unit 2B. It is unnecessry to refer in any

detail to the events that transpired between August 1981 and 1

February 1983 when the solicitors for Dainford, pursuant to a

notice given in December 1982, required settlement on 1

February 1983. It is sufficient to say that on 11 January 1983

Sanrod's solicitors wrote to Dainford's solicitors expressing

concern at the porte-cochere, and requesting advice whether

Dainford intended to offer compensation in respect of it.

Dainford's solicitors replied on 25 January 1983

denying that the porte-cochere would affect the value or

quality of-unit 2B. asserting that the porte-cochere had always

been within the contemplation of Dainford, and that it did not

intend to offer any compensation to Sanrod.

There was no attendance at settlement by or on behalf

of Sanrod on 1 February 1983. Instead its solicitors informed

Dainford's solicitors of their clients' unwillingness to

complete the contract and requested a return of the deposit

pald under the contract. It seems to have been common ground

at the trial that Dainford elected to accept the repudiation of

the contract by Sanrod. Dainford subsequently resold Unit 2B

for $165,000, which was some $55,000 less than the purchase

price that Sanrod had agreed to pay.

6.

The contract for the purchase of Unlt 2B contained a

recital in these terms:

"(b) The Vendor intends to construct a

multi-storey building to be called

Imperial Surf' the on land in

accordance with plans and specifications

to be prepared by Vendor's architect".

However, there was no plans annexed to the contract showing in

detail the exact nature and extent of the building to be

erected or giving any indication of the proposed porte-cochere

at the front of the building.

There was considerable conflict at the trial as to

what was said in the discussions between Mr a d Mrs Jaao and Mr

Heaney which preceded the signing of the contract to purchase

the unlt. It is plain from the judgment under appeal that the

learned trial judge did not accept any of these witnesses as

wholly reliable. He described Mr Heaney as a "most

unconvincing witness". He also said that he did not

unreservedly accept the evldence of either Mr or Mrs Jago.

The trial judge found that prior to the signing of the

contract to purchase Unit 2B Mr and Mrs Jago had produced to

them a brochure on the "Imperial Surf" building. One sheet of

the brochure was a photograph taken from the sea looking

towards the land upon which "Imperial Surf" was to be

constructed. Superimposed on the photograph was an artlst's

lmpression of the proposed building. The building was shown as

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being about 40 storeys high with an entrance to the ground

floor of the building on the Esplanade side of the site. A

structure of some sort is shown above the entrance but it is

not posslble to tell its exact nature from the artist‘s

Impression. In particular, it is not possible to deduce from

the artist’s impression what is the height above ground level

of the structure or what is the extent to which it protrudes

from the facade of the building.

Another sheet of the brochure was described as “Site Plan and Floor Plan levels P, E, and 1”. This sheet indicated

a “canopy” over the entrance to the bullding on the facade

facing the Esplanade. The plan makes it clear that there was

to be a canopy of one kind or another constructed over the

driveway in front of the building.

The part of the ground floor which is immediately

adjacent to the canopy is described on this plan as “entry reasonably clear to me from the plan that the canopy extends

foyer“ as to part and, as to another part, “reception“.

over the whole of the entry drive in front of the main entrance

to the building. However, there is no information on the plan from which it is possible to calculate the height of the canopy.

8.

The learned trial judge did not accept evidence given

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by Mr and Mrs *Jag0 that the copy of the brochure given to them

on 11 August 1981 did not include a copy of the "Site Flan and

Floor Flan levels P, E and 1". However, he found that they did

not advert to the reference to the canopy in the plan and that

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their attention was not drawn to it. He further found that the canopy referred to on the plan was not the same structure as

the porte-cochere that was in fact constructed.

His Honour was satisfied that as at 11 August 1981

Dainford did intend to construct a porte-cochere similar to,

although not identical with, the one that was constructed. He

said that it was clear that Mr Heaney and Mr and Mrs Jago did

not have any discussions which might have indicated to the

Jagos that the view from Unit 2B would or might be obstructed

by another- structure on the site. In the course of	his
judgment his Honour said:

"The pre-contractual negotiations related to

the purchase of a unit to be constructed one floor above ground level at the front of a building facing

towards the Esplanade and the beach. The obvious

expectation of an intending purchaser in the absence

of information to the contrary would be of views

from that unit unimpeded by some structure erected

on that site between the unit and the Esplanade.

E'urther, in the course of the negotiations between

the second applicants and Mr Heaney, there was

discussion of the views which would be enjoyed from

Unit 2B. The tenor of those discussions was to

confirm the ordinary expectation of Mr and Mrs Sago

of unobstructed views consistent with the height of

the unit. No attempt was made to disclose to them

that the respondent then intended to erect any

structure which would or might impede such views.

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9.

There was no mention of a 'canopy' nor were they

referred to the relevant part of the material plan

in the "Imperial Surf" brochure and, even if they

had been, it would not have adequately disclosed the

nature and extent of what was intended, althouuh it

would have alerted them and provided an opportunity

for further inquiry."

His Honour found that what was said and done in the

course of the negotiations leading up to the signing of the

contract to purchase Unit 2B conveyed a false impression when

viewed in the context of the subject matter of the negotiations

and constituted misleading conduct within the meaning of

s.52(11 of the Act. He further found that the respondents were

influenced to sign the contract and the guarantee by Dainford's

misleading conduct, and granted the respondents the relief to

which I have already referred.

Counsel for Dainford submitted on the hearing of the

appeal that the learned trial judge's decision was erroneous in

two respects. First, it was submitted that the evidence did

not support the finding that Dainford's conduct was misleading

within the meaning of s.52 of the Act. Secondly, it was

submitted that there was insufficient evidence to show that the respondents were induced to enter into the contract to purchase Unit 2B by the alleged misleading conduct.

Whilst I am of the opinion that there is much force in

the appellants' first submission I do not think that it should

succeed. Had the case for the respondents depended only upon

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the evidence that they were shown, and relied upon, the

brochure, that they expected to enjoy uninterrupted water views

from Unit 2B; and that the porte-cochere as constructed

partially obstructed such views, I would not have thought that

a case of misleading conduct was established.

In my view, the brochure made plain to intending

purchasers that there was to be a substantial canopy erected

over the entrance to the building. The brochure also made it

clear that the canopy would be of considerable width and would

protrude above ground level at that part of the building at

which Unit 2B was located.

There was no information in the brochure to indicate

the height of the canopy r the extent to which it miqht impede

views from-Unit 2B. In the absence of any discussions between

Mr Heaney and Mr and Mrs Jaqo, I do not think the latter could

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reasonably have interpreted the brochure as conveying to them

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I that there would be uninterrupted views of the water from Unit

2B. It WAS simply not possible to tell from the brochure that that would be the case or not.

However, the trial judge found that the tenor of the discussions prior to the signing of the contract "was to

confirm the ordmary expectations of Mr and Mrs Jag0 of

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I	unobstructed	views	consistent	with	the	height	of the	unit".
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I	Mr	and Mrs Jago gave evidence that	Mr	Heaney told them in
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positive terms that “you will have an unobstructed view“. Mr

Heaney denied making any such statement, and no specific

finding in respect of it was made in the learned trial judge’s

reasons.	I think that counsel for Damford was correct in his
submission	that the trial judge did not find that this

statement was made by Mr Heaney.

But that is not the end of the matter. There was much

other evidence in the case to the effect that Mr and Mrs Jag0

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believed that there would be uninterrupted water views from

Unit 2B, and that they communicated that belief to Mr Heaney.

It is unnecessary to refer to that evidence, but some of it may

be seen at pages 43, 95 and 126 of the record. It is also

clear on the evidence that Mr Heaney did not positively tell Mr

and Mrs Jaqo that the views from Unit 2B would be interrupted

to any extent by the canopy. Indeed, Mr Heaney gave evidence

that even he did not appreciate the extent of the obstruction

which the porte-cochere would cause to the view from Unit 2B.

However it is beyond dispute that in August 1981 plans

had been prepared which included provision for a porte-cochere

which would indeed necessarily obstruct, to an extent, the

views of the water from Unit 2B. The plans which were Exhibit

18 in the case include a plan showing a canopy with a solid

masonry or concrete surround, some 1,100 mm. in height, around

the permeter of the canopy. This surround would inevitably

affect the views from Unit 2B.

12.

As I have already said, Mr Heaney did not appreciate

the extent or the obstructions of views from the porte-cochere

as shown on the plans which were in existence at the time h

had his discussions with Mr and Mrs Jago, but Dainford cannot

rely upon his ignorance in that respect, since he was its agent

for all relevant purposes. Thus the situation was that he knew

that Mr and Mrs Jag0 believed that the views from Unit 2B would

be unobstructed and he had discussions with them "the tenor of

which was to confirm that belief". That being the case, I

think that his Honour was correct in finding, as he did, that

what was said and done in the course of the negotiations

leading up to the signing of the contract to purchase Unit 2B

was misleading. Mr Heaney omitted to inform Mr and Mrs Jag0 of

the extent to which the views from Unit 2B would be obstructed.

Conduct may Include not only acts. but omissions, see S.

4(2)(a) and (c) of the Act. Reference may also be made to the

numerous cases cited by Spencer-Bower and Turner on Actionable

Misrepresentation. 3rd ed. p. 95 et seq.

I have earlier referred to the circumstance that the

contract referred to plans and specifications to be prepared by them to rely upon any misleading conduct that otherwise might

the architect, and to the fact that detailed plans showing the

porte-cochere were in existence at the time the contract was

signed. Counsel for Dainford argued that the failure of Mr and

have occurred. I do not think that this is the case. The

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contract did not refer to any specific plans but merely to

plans "to be prepared by the vendor's architect". It is true

that Mr and Mrs Jago might have enquired whether such plans

existed but I do not think their failure to do so negatived

what was otherwise misleading conduct on the part of Dainford

through its agent, Mr Heaney.

Counsel for Dainford relied upon Tamplin v James

(1880) 15 Ch. D. 215 as authority for the principle that a

purchaser who chooses to buy a property fully described in

plans which he chooses not o look at cannot later complain on

the footing that he did not look at the plans. Whatever the application of such a principle to cases arising under 5.52 of

the Trade Practices Act, the decision in Tamplin v James can

have no application in the present case, since the contract for

the sale of Unit 2B did not identify any plans in which the

unit was fully describe. Tamplin's Case was a case in which

the contract itself contained an accurate description of the property sold. Moreover, there was a complete absence of evidence in that case that the vendor did anything that could

be construed as misleading. It was a simple case of failure by

a purchaser to inspect plans.

For the reasons I have given, I think that the learned

trial judge was not in error in finding that the respondents

had made out	a case of misleading conduct on the part of
Dainf ord.

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14.

The appellant's second arqument can be disposed of

more briefly. His Honour referred in some detall to the

evidcnce from which it might have been held, on one view of the

facts, that any misrepresentation as to the porte-cochere did

not act as an inducement to the respondents to enter into the

contract. He referred, for instance, to the market conditions

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which obtained at the time, to the anxiety of Mr and Mrs Jag0

to purchase units for the purpose of resale for profit, and

other matters. He then said:

"However, it is necessary to consider the

particular transaction which was entered into.

There were other units for sale on the Gold Coast

with other advantages and disadvantages and at other

prices, including other units in 'Imperial Surf'

although there was no other two bedroom unit on the

front of 'Imperial Surf' available. The second

applicants wanted such a unit.

The applicants' purpose was to acquire further

Gold Coast units in the expectation that their value

would increase. Their reasons for wanting a two

bedroom unit on the front of 'Imperial Surf' were

related to that purpose. They selected features

which they considered important, according to their

perception of what affected present value and

potential future increase in value. Their desire

for a unit on the front in 'Imperial Surf' was

directly related to the expected views and their

significance to value. I am not prepared to reject

the second applicants' evidence to the point of

concluding that they would have caused the first

applicant to contract to purchase the unit at the

price ven if the respondent had made full

disclosure concerning its proposal to erect the

porte cochere which has been constructed. On the

contrary, I find that the applicants were influenced

to sign the contract and guarantee and to make the

payments by the respondent's misleading conduct to

which reference has already been made."

15.

I do not think that any valid criticism can be made of

this reasoning. Given the finding of misleading conduct, I

think it was correct to find on the evidence that Mr and Mrs

Jag0 were influenced to enter into the guarantee and the

company was influenced to enter into the contract by that

misleading conduct. I would dismiss the appeal with costs.

NORTHROP J: I will ask Mr Justice Spender to express his opinion.

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SPEhTDER J: I agree with the judgment of Mr Justice Morling.

There is one short observation I want to make. While it is not

possible to conclude the exact dimensions of the structure

dcpicted on the artist's impression in the brochure, in my view

it is quite clear that what is depicted there is not a porte-cochere or anything like one. The picture which is part of the sales brochure used to sell units in "Imperial Surf"

conveys a completely different impression from what was in fact

built, and what was intended to be built by Dainford at the

time of the discussions which preceded the sale of Unit 2B to

Mr and Mrs Jago.

That impression was an important part of the

pre-contractual conduct, the entirety of which has to be

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considered in determining whether that conduct may properly be

characterized as misleading or deceptive.

NORTHROP J: I likewise agree with the opinion and reasons

given by Mr Justice Morling, and would a l s o adopt the views

I	expressed by Mr Justice Spender. At the trial the learned
trial ludge, having found for the then applicants on the
misleading conduct point, did not find it necessary to consider the other bases upon which the then applicants based their claims. We have stopped counsel for the respondent making
submissions on those bases, and accordingly we do not express
any opinion OR those matters. In the result, the appeal is
dismissed with costs to be taxed.

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