Fu v Bondi Junction Prime Pty Ltd
[2024] FedCFamC2G 513
•6 June 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fu v Bondi Junction Prime Pty Ltd [2024] FedCFamC2G 513
File number(s): SYG 3407 of 2018 Judgment of: JUDGE GOODCHILD Date of judgment: 6 June 2024 Catchwords: CONSUMER LAW – Misleading and deceptive conduct – representation of “top floor” of apartment building at time of contract of sale for apartment sold ‘off-the-plan’ – subsequent additional floor added – identification of nature of representation – whether representations were misleading or deceptive – representation as to “future matters” within meaning of s.4 of the Australian Consumer Law – whether respondents had reasonable grounds for representations – whether applicant entitled to recover the deposit – application dismissed. Legislation: Australian Consumer Law, ss.4, 18.
Competition and Consumer Act 2010 (Cth), s.86, Schedule 2.
Conveyancing Act 1919 (NSW), s.55
Federal Circuit Court of Australia Act 1999 (Cth), s.76.
Cases cited: Arnautovic v Cvitanovic (2011) 199 FCR 1; [2011] FCA 809; BC201105460
Australian Competition and Consumer Commission v Telstra [2007] FCA 1904; 244 ALR 470
Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640
Bill Acceptance Corporation Ltd v GWA [1983] FCA 280; 50 ALR 242
Bill Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242
Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592
Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304
Cargill Australia Ltd v Viterra Malt Pty Ltd (No 28) [2022] VSC 13
Celermajer Holdings Pty Ltd v Kopas (2011) 16 BPR 30,735
Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367
Culjak v Akrawe [2022] NSWSC 949
Cummings v Lewis (1993) 41 FCR 559
Dentown Pty Ltd v PWI Group Pty Ltd (as trustee of the Australia No. 1 Group Trust) (2019) 141 ACSR 330
Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599; [1999] HCA 15; BC9901532
Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15
Fubilan Catering Services Limited (Incorporated in PNG) v Compass Group (Australia) Pty Ltd [2008] FCAFC 53
GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32
Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82
Global Sportsman v Mirror NewspapersPty Ltd (1984) 2 FCR 82
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd(No 1) (1988) 39 FCR 546
Lin v Zheng [2023] NSWCA 174
Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674
Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475
Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233
Seamez (Australia) Pty Ltd v McLaughlin [1999] NSWSC 9
SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50
Start Typing Cases Cited
Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963
Watson v Foxman (1995) 49 NSWLR 315
Division: Division 2 General Federal Law Number of paragraphs: 148 Date of hearing: 30 and 31 October 2023 Place: Sydney Counsel for the Applicant: Mr Ireland KC Solicitor for the Applicant: DC Balog & Associates Counsel for the Respondents: Mr Hand Solicitor for the Respondents: StevenVuaran Lawyers Table of Corrections 26 September 2024 Paragraph 56 has been deleted and the contents moved to the end of paragraph 55. 26 September 2024 Paragraph 82 has been deleted. 26 September 2024 In paragraph 103 the word “purchases” has been corrected to show “purchasers”. 26 September 2024 In paragraph 120 the word “or” has been added between the words “prediction” and “opinion”. 26 September 2024 In paragraph 125 a comma has been added after the word “subsequently” and also after the number “2017”. ORDERS
SYG 3407 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: CHAO BIN FU
Applicant / Cross Respondent
AND: BONDI JUNCTION PRIME PTY LTD
First Respondent / Cross Claimant
PARK COAST REALTY PTD LTD
Second Respondent
ORDER MADE BY:
JUDGE GOODCHILD
DATE OF ORDER:
6 JUNE 2024
IT IS DECLARED:
1.That the first respondent/cross claimant is entitled to keep and recover the deposit in the sum of $160,000 paid by the applicant/cross respondent.
THE COURT ORDERS:
2.That the Applicant’s Application filed 6 December 2018, Amended Application filed 28 February 2019, Defence to Amended Statement of cross-claim and Statement of Claim filed 6 February 2023 are dismissed.
3.That the first respondent/cross claimant shall prepare a draft short minute of order to reflect these reasons for judgment.
4.That the proceedings be stood over for a hearing, if required, of any submissions about the nature and content of the orders, the amount payable to the second respondent under indemnity in the agency agreement and submissions on the question of costs.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Amended pursuant to r.17.05(2)(e) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) on 26 September 2024
JUDGE GOODCHILD:
A. INTRODUCTION
On 3 June 2015, the applicant, Chao Bin Fu (“Mr Fu”) entered into a standard form contract with the first respondent, Bondi Junction Prime Pty Ltd (“BJP”) by which Mr Fu agreed to purchase from BJP a proposed apartment 1103 “off the plan” for $1,600,000.
The parties agree that at the date of exchange of contracts on 3 June 2015, BJP was the registered proprietor of the whole of the land contained in certificates of title Folio Identifiers 112/B/9763867; 113/B/976386; 116/B/976386; 114/75977 and 1/711730 located at 344-354 Oxford Street, Bondi Junction in the state of New South Wales. The proposed apartment was one contained in a development of land known as the Diamond development.
BJP was a development company constructing the Diamond development. The second respondent, Park Coast Realty Pty Ltd (“PCR”) is a licensed real estate agent, appointed as the vendors agent in respect of the marketing and sale of the apartments.
The contract between Mr Fu and BJP was for the purchase of the proposed apartment 1103 in Lot 65 in Strata Plan 989344.
In accordance with the contract, Mr Fu paid a deposit of $160,000 which BJP accepted. The parties agree that the contract was not completed on the completion date of 19 November 2018 and has never been completed. On 6 September 2019 BJP terminated the contract.
By his Further Amended Application filed 22 December 2022, Mr Fu seeks orders pursuant to s.86 of the Competition and Consumer Act 2010 (Cth) (“the CAC Act”), that the contract of sale be set aside.
Mr Fu seeks reimbursement of the $160,000 deposit (and any interest accrued on that deposit), contending misleading and deceptive conduct by both the BJP and PCR.
By way of a cross-claim filed on 24 September 2019, BJP seek a declaration that they are entitled to keep and recover the deposit paid by Mr Fu under the contract and he pay damages for his breach of contract as well as interest on any damages awarded.
In summary, the primary issues I must determine are:
(a)Whether the contract for sale was procured by misleading or deceptive conduct on the part of BJP and PCR as alleged by Mr Fu; and
(b)To whom the deposited monies should be paid – either to Mr Fu as a remedial consequence if the Court is satisfied that he was misled, or, as BJP claims, to BJP as a result of Mr Fu’s failure to complete the contract.
B. SUMMARY OF RELEVANT FACTS
The 2015 sale
On 3 June 2015 BJP hosted a “VIP launch event” (“the VIP launch”) for the proposed Diamond development apartment building containing, at that time, eleven floors. The launch event took place at a display presentation office owned by PCR.
Attendance to the VIP launch was by invitation only. To secure a place in the event, attendees were required to provide a fully refundable registration fee of $10,000.
Mr Fu attended the VIP launch event with his wife, Ms Angela Mao (“Ms Mao”) and two of his close friends.
On the day of the VIP launch, representatives of BJP and PCR were present, including Mr Felix Milgrom (“Mr Milgrom”) who was one of two directors heading the development project and Mr Paul Mystriotis (“Mr Mystriotis”) who was a salesperson employed by PCR assisting BJP with the marketing of the project.
At the VIP launch, Mr Fu entered into a contract with BJP for the purchase of apartment 1103 – one of three ‘off-the-plan’ apartments located on the eleventh floor of the proposed apartment building (“the apartment”). The agreed purchase price was $1,600,000.
To secure the purchase, the Mr Fu paid BJP a deposit of $160,000, being 10 percent of the agreed purchase price (“the deposit”). These monies were placed in an interest-bearing account in accordance with the contract.
At the launch event, Ms Mao also entered into a contract for sale with BJP. She purchased apartment 403.
The events leading up to the parties entering into the contract for the sale of apartment 1103, and the circumstances surrounding this transaction, are disputed by the parties. These are significant matters to which I will return.
The change in construction
As at early 2018, construction of the Diamond development building was not yet complete.
Mr Fu states in his affidavit that on about 16 May 2018 he inspected the construction of the apartment building “from the outside” and suspected the construction of an additional twelfth floor. That same evening, he instructed his solicitor at the time to send an email to BJP’s solicitor querying whether an additional level was being added to the development.
By way of response email dated 17 May 2018 (“the May 2018 notification”), BJP’s solicitor confirmed with the applicant’s solicitor, the following:
I confirm that pursuant to Section 96 application DA-101/2014/B, the vendor is constructing a 12th storey at Diamond Bondi Junction.
Mr Fu stated that this was the first time he learnt of an additional level to the building.
On 3 September 2018, Mr Fu emailed a BJP project manager (“the project manager”) who, on several occasions previously, had been corresponding with Mr Fu about the progress of the apartment’s construction. In this email Mr Fu expressed concern about the addition of a twelfth storey with reference to conversations he said took place between he and Mr Mystriotis and ‘the developer’ at the VIP launch.
Further emails were exchanged between Mr Fu and the project manager in the balance of September 2018, including an email from Mr Fu dated 11 September 2018 in which he elaborated on what he said both Mr Mystriotis and the developer had promised him at the VIP launch. In this email, Mr Fu conveyed that the “serious change” in the building structure caused him and his wife “financial damage” and affected the apartment’s value to them. He stated that he was no longer interested in the apartment and requested to rescind the contract and to have his deposit (and interest on the deposit) returned to him with a further sum of $6,000 by way of compensation. On 17 September 2018, the project manager replied:
…
I have sent the email to the developers and spoken with them as well.
I have been instructed that the vendor has the right to make changes to the strata plan and they have complied with their obligations under the contract and expects the purchaser to comply with their obligations under the contract in terms of settling the property.
I think you may have to speak with your solicitor as this is now a legal matter and I am unable to advise you on this as the developer is not accepting any negotiations on the property.
Events of late 2018
On 3 October 2018 BJP’s solicitor notified Mr Fu’s then solicitor that the strata plan for the apartment building had been lodged with the relevant registry. That email also discussed steps to be taken by both parties – as vendor and purchaser – to facilitate the settlement of the property.
At around this time Mr Fu changed lawyers and retained the solicitor who is currently representing him in these proceedings. On 6 November 2018, this solicitor sent correspondence to BJP’s solicitors asserting, in summary, the following matters on Mr Fu’s behalf:
·That at the time of entering into the contract for sale it was represented to Mr Fu that the apartment he was acquiring was a “penthouse” i.e. on the top floor of the apartment building.
·That the addition of an extra storey to the apartment building has meant that what is being sold to Mr Fu is an apartment below the top floor and as such, could not be described as a “penthouse”.
·That, whilst Mr Fu accepts that under the contract for sale variations to the plans and specifications to the building may be applicable in certain circumstances, BJP and PCR did not communicate to Mr Fu the “substantial deviation” from that which was represented to him which had led him to enter into the contract for sale in the first place.
·That in the circumstances, statements made by BJP and PCR to the effect that Mr Fu would be acquiring a “penthouse” were false or misleading statements which would entitle him to make an application to have the contract of sale set aside.
·That, if it were otherwise suggested that Mr Fu is bound by the terms of the contract in the sense that BJP could add the additional floor without any consent or variation of the contract of sale, such terms would amount to “unfair contract terms” that would similarly entitle the Mr Fu to seek orders that the contract be set aside.
·That it was Mr Fu’s intention to occupy the apartment following completion and the question of it being the “penthouse” was a “major motivating factor” in him entering into the contract for sale.
BJP’s solicitor replied the next day, 7 November 2018, requesting Mr Fu provide copies of any marketing material or other literature which described the apartment as a “penthouse”. Importantly, the correspondence asserted the following:
…
There is no dispute that, at the time contracts for Apartment 1103 were entered into, Level 11 was represented in the sale contract as the top floor of the Diamond Bondi Junction development.
Our client denies, however, that the apartment was marketed by any of its representatives or agents as a “penthouse”. That term, as well as describing the level of the apartment, also imports connotations of more luxurious appointments than those found elsewhere in the building, and suggest that the apartment occupies an entire floor of the building.
Apartment 1103 is one of three on level 11, shares exactly the same layout as three other apartments in the building, and the same standard finishes as every other apartment in the building. It does not meet the ordinary interpretation of the word “penthouse”, and would never have been marketed as such.
As you have observed in your correspondence, the vendor has relatively broad scope to effect changes to its plans and specifications during the course of development of its land. This is standard industry practice, and delivers the vendor essential flexibility, without which it would be unable to attract construction finance or complete its development.
The correspondence also noted that clauses in the contract for sale apply to negate both Mr Fu’s claims about certain pre-contractual representations made and the objections raised by him to the modification or alternation of the development.
The correspondence concluded by stating that BJP did not agree to set aside the contract, and that the date of completion was 19 November 2018.
On 19 November 2018, Mr Fu did not complete the contract.
The next day (20 November 2018) BJP’s solicitor served a Notice to Complete providing for completion of the purchase at 12.00pm on 6 December 2018.
Mr Fu did not complete the purchase.
On the new date on which completion of the contract was to take place (6 December 2018), Mr Fu instituted these proceedings.
Termination of the contract for sale
In early 2019, BJP filed a Defence denying that representations were made to Mr Fu as alleged. BJP also filed a cross-claim initially seeking specific performance of the contract and damages for breach of contract.
The contract for sale was terminated by BJP by way of email sent to Mr Fu’s solicitor on 6 September 2019 (“the Termination Notice”).
In that Termination Notice, BJP stated that it was entitled to terminate the contract in accordance with Clause 9 of the contract, and that as a result of the termination BJP was also entitled to keep or recover the deposit. BJP also informed Mr Fu that, in the circumstances, BJP no longer sought specific performance of the contract but pressed its claim for damages for Mr Fu’s breach of contract.
On 24 September 2019, BJP amended its cross-claim to reflect the relief sought and included an order that the Court make a declaration that BJP is entitled to keep and recover the deposit paid by Mr Fu under the contract.
As Mr Fu did not proceed with the purchase, on 11 November 2019, the apartment was resold for $1,490,000.
In respect of the deposit, it remains in the trust account of BJP’s solicitor, with interest earned, such that the total amount held in the account at time of hearing was $171,521.83.
C. RELIEF SOUGHT BY MR FU
Mr Fu seeks the following orders:
(a)That pursuant to s.86 of the CAC Act, the contract for the sale of the apartment be set aside;
(b)That BJP pays Mr Fu his deposit of $160,000 together with any interest that may have been earned on that deposit;
(c)That further, or in the alternative, Mr Fu be paid the whole of the deposit of $160,000 or any such part of it as the Court sees fit, pursuant to s.55 of the Conveyancing Act 1919 (NSW) (“the alternative claim”); and
(d)That damages, interest and costs be awarded to Mr Fu.
The gravamen of Mr Fu’s case is that he says BJP and PCR made various representations, as well as engaged in conduct, that was both misleading and deceptive, or likely to mislead or deceive.
In particular, Mr Fu argues that in conversations with him and by showing him plans and a model of the proposed apartment building prior to the entry into the contract of sale (“the apartment plans” and “the apartment model”), BJP had represented to him that the apartment being purchased would be a “penthouse” upon completion and thereby the “top floor” of the apartment building being constructed.
As enumerated at [14] of his Statement of Claim filed 6 February 2023, Mr Fu contends that at the VIP launch (on 3 June 2015, when the contract of the purchase of the apartment was entered into), the following representations were made to him by both Mr Mystriotis and the developer on behalf of BJP and PCR:
a.That an apartment in the proposed Development was now available to be located on the “top floor” of the building which the First Respondent was going to construct on the Site;
b.That the available apartment on the top floor was the one numbered 1103 on the Plans shown that day to the Applicant;
c.That the top floor or “penthouse” would be the 11th Floor of the building consistently with its location shown on the Model;
d.That an apartment on the top floor or “penthouse” of the building was being offered by the First Respondent at a discounted price that day;
e.That there would be only three apartments on the top floor of the building of which Apartment 1103 would be one;
f.That it would be possible to walk out of the door of Apartment 1103 and from there to see the garden;
g.That the Brochures, the Plans and the Model accurately depicted the location of Apartment 1103 on the top floor of the building to be constructed by the First Respondent;
h. That the asking price for Apartment 1103 that day was $1.6 million; and
i.That in the event that the Applicant exchanged contracts to purchase Apartment 1103 from the First Respondent that day then the First Respondent would include in the sale one “free” car space.
Mr Fu elaborated at [15] of his Statement of Claim that, together with the documentary information concerning the location of the apartment within the apartment building (as depicted in brochures, photographs and the apartment plans and model made available to Mr Fu ), the above representations constituted “a statement to the effect that Apartment 1103 was to be located on the top level of the apartment building to be constructed by the First Respondent on the Site”.
At [16] of his Statement of Claim, Mr Fu contends that BJP and PCR made representations to him with respect to “a future matter”, namely that upon completion the apartment building would comprise eleven floors of apartments; and that the apartment being purchased would be located as one of three apartments at the very top level of the building. Mr Fu adds that BJP and PCR did not have reasonable grounds for making these representations as BJP had “no settled intention” to construct the building as one with eleven floors and did not otherwise “make clear” to him that the configuration of the apartment building might be such that the apartment would not be located on the top floor.
In the circumstances, Mr Fu says that the conduct of BJP and PCR was misleading and deceptive “within the meaning of S.18 of the ACL”. He says, but for such representations and the conduct of BJP – by itself and by PCR as agent – he would not have entered into the contract of sale.
With respect to his alternative claim under s.55 of the Conveyancing Act 1919 (NSW), Mr Fu relies on the same propositions as pleaded above. It is his case that the matters contended constitute circumstances in which the Court should exercise its accrued jurisdiction to order that the deposit, and interest accrued on it, be returned to him.
In response, BJP disputes the claims advanced by Mr Fu, and also seeks relief against him.
D. BJP’S DEFENCE AND CROSS CLAIM
By way of a Defence to the Statement of Claim filed on 5 July 2023, BJP denies that representations were made to Mr Fu as alleged by him, with the exception of a representation that the asking price for the apartment was $1,600,000; and representations made about the construction of the apartment building (including any representations arising from the apartment model or other documents) which would have “necessarily been” representations in relation to future matters. In relation to the latter matter, it suggested by BJP that this cannot be disputed in circumstances where, as at 3 June 2015, the building had not yet been constructed.
To the extent that Mr Fu can prove the making of any representation concerning a “future matter”, BJP pleads that BJP had reasonable grounds for making such representation.
BJP also pleads that Mr Fu’s “reliance” on any purported representation, is inconsistent with several terms of the contract of sale, including in particular clause 10.1.5 and special conditions 38, 49 and 51. Briefly, those terms provide:
10 Restrictions on rights of purchaser
10.1The purchaser cannot make a claim or requisition or rescind or terminate in respect of –
…
10.1.5a promise, representation or statement about this contract, the property or the title, not set out or referred to in this contract;
…
38Entire agreement and Marketing Material
38.1The Purchaser acknowledges that this Contract constitutes the entire agreement of the parties about its subject matter and any previous agreements, understandings and negotiations on that subject matter cease to have any effect on and from the date of this Contract.
38.2The Vendor discloses and the Purchaser acknowledges that any information or material or disclosure made in Marketing Material does not form part of this Contract.
38.3The Vendor does not warrant the accuracy or correctness of any information or material or disclosure made in Marketing Material and the Purchaser warrants that it has not relied upon such Marketing Material in entering into this Contract.
38.4In particular, the Vendor discloses and the Purchaser acknowledges that there may be discrepancies between the Marketing Material and this Contract with respect to the Property (including without limit with respect to the area of the Property, its configuration and the draft Strata Plan) in which case the disclosures in this Contract apply.
38.5The Purchaser shall not be entitled to make any objection, requisition, claim or delay completion of or rescind or terminate this contract as a result of, or in relation to or arising out of the disclosures in this clause 38.
…
49Representations, warranties and acknowledgments by Purchaser
49.1The Purchaser represents and warrants that:
49.1.1The purchaser was not induced to enter into this contract by and did not rely on any representations or warranties made by the Vendor, the Vendor’s agent or persons on behalf of the Vendor about the subject matter of this contract (including, without limitation, representations or warranties about the nature or the fitness or suitability for any purpose of the property or about any financial return or income to be derived from the property) except those representations and warranties set out in this contact; and
49.1.2In entering into this contract the Purchaser has relied entirely on enquiries and inspections relating to the property made by the Purchaser or on the Purchaser’s behalf; and
49.1.3The Purchaser has obtained appropriate independent advice on and is satisfied about:
(a) The Purchaser’s obligations and rights under this contract; and
(b)The nature of the property and the purposes for which the property may be lawfully used; and
(c) The Purchaser’s entitlement (if any) to claim income tax deductions under the Income Tax Assessment Act 1997 for depreciation of any plant or equipment in the Building or in connection with the cost of construction of the Building; and
49.1.4The Purchaser was not introduced to the Vendor or the property directly or indirectly through or by any real estate agent other than a real estate agent referred to in item 1 on page 1.
49.2The Purchaser acknowledges that a copy of the Plans and Development Approval are available for inspection at the Vendor’s office and that the Purchaser is satisfied with all aspects thereof. The Purchaser is not entitled to make any objection, requisition, claim or delay completion of or rescind or terminate this Contract as a result of, in relation to or arising out of the Plans and Development Approval.
…
51Purchaser’s entitlements
51.1The Purchaser is not entitled to make any objection, requisition, claim or delay completion of or rescind or terminate this Contract as a result of, in relation to or arising out of:
51.1.1 the purpose for which the Property may be used (except residential use).
51.1.2any modifications or alternations to the Plans or Development approval.
51.1.3subject to clause 54.4, any alternation in any item or finish referred to in clause 54.3.
51.1.4any alteration, variation or discrepancy between:
(a) the total number of lots;
(b) the numbering of lots or apartments;
(c) the allocation of car and storage spaces;
(d)the positions of lots or part of the lots (other than that part of the Property comprising the habitable apartment);
(e) the apartment entitlements of the lots;
as shown on the draft Strata Plan annexed hereto and those shown on the Strata Plan as registered.
51.1.5subject to clause 61.3, the contents or passing of, or any alterations to the By Laws.
51.1.6Any matter disclosed in this Contract.
So far as Mr Fu’s alternative claim under s.55 of the Conveyancing Act 1919 (NSW) is concerned, BJP says that, while the proceedings relate to a claim for the return of a deposit, s.55 of the Conveyancing Act 1919 (NSW) has no application either to the claims made by Mr Fu, or at all. It is submitted on behalf of BJP that if Mr Fu fails to prove that there was misleading or deceptive conduct on the part of BJP and PCR, then no circumstances would exist that would justify the Court “thinking fit” that the deposit should be returned.
By its cross-claim filed on 24 September 2019, BJP pleads various matters, including the following:
·Mr Fu neglected and/or failed to complete the contract on 19 November 2018 (or at any time thereafter), despite being served with written notice on 5 November 2018 that the strata plan for the apartment building had been registered;
·Mr Fu had failed to pay interest to BJP as required by the contract which stipulates that, if completion did not take place on or before the completion date due to the fault of Mr Fu, Mr Fu is liable to pay 10 percent interest on the balance of the purchase price calculated from the completion date until completion;
·The terms of the contract disentitle Mr Fu to make the claims in relation to pre-contractual representations not set out or referred to in the contract; and
·By making such claims, Mr Fu has breached “essential respects” of the contract which in turn entitled BJP to terminate the contract.
Against this background, BJP seeks the Court to make the following orders:
(a)A declaration that BJP is entitled to keep and recover the deposit paid by Mr Fu under the contract;
(b)That damages be awarded for breach of contract;
(c)That interest be awarded on damages in accordance with s.76(3) of the Federal Circuit Court of Australia Act 1999 (Cth); and
(d)Costs.
Mr Fu defends the cross-claim by his Defence filed 16 October 2019.
In that Defence, Mr Fu, in summary, relies on facts and matters set out in his substantive application and otherwise argues that any contract provisions relating to promises, representations or statements contained in the contract for sale do not override or circumvent the provisions of the Australian Consumer Law (“the ACL”) and its operation.
The parties agreed that if Mr Fu succeeds with his substantive application, the cross-claim falls away.
E. RELEVANT LAW
Misleading or deceptive conduct
Section 18(1) of the ACL contained in Schedule 2 of the CAC Act relevantly provides that “a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.
Consideration of an alleged contravention of s.18 of the ACL involves a two-stage process:
(e)Firstly, a determination of whether the alleged representation is made (or what, if any representation is made) by the statement or conduct impugned; and
(f)Secondly, whether the representation is misleading or deceptive or likely to have those effects: Australian Competition and Consumer Commission v Telstra [2007] FCA 1904; 244 ALR 470 at [14]-[15] per Gordon J.
It is well settled that whether conduct is misleading or deceptive or is likely to mislead or deceive is a question of fact that must be answered with reference to all the relevant circumstances. As explained by McHugh J in Butcher v Lachlan Elder Realty Pty Limited (2004) 218 CLR 592 (“Butcher”) at [109]:
109.… the task of the court is to examine the relevant course of conduct as a whole. It is determined by reference to the alleged conduct in the light of the relevant surrounding facts and circumstances. It is an objective question that the court must determine for itself. It invites error to look at isolated parts of the corporation’s conduct. The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct.
(Citations omitted)
Conduct is said to be misleading or deceptive, or likely to mislead or deceive, if it is capable of inducing error: Australian Competition and Consumer Commission v TPG Internet Pty Ltd (2013) 250 CLR 640; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 (“Campbell”). When characterising conduct as ‘misleading’ or ‘deceptive’, such a task generally requires consideration of whether the impugned conduct, viewed as a whole, has a tendency to lead a person into error: French CJ at [25] of Campbell. The person claiming to have been misled or deceived need not to establish that a person engaging in misleading or deceptive conduct intended to mislead or deceive.
Importantly, and as a separate question, it must be determined that the loss or damaged claimed to have been suffered, results from the conduct said to be misleading or deceptive.
That is, the complainant must establish a causal link between the impugned conduct and the loss that he or she claims. Where the alleged contravening conduct occurs in dealings between individuals (as opposed to involving the public), determining whether the necessary causal link exists depends on analysing the defendant’s conduct in relation to that complainant alone. The majority in Butcher, comprising of Gleeson CJ, Hayne and Heydon JJ, usefully summarised at [37] that:
37.…it is necessary to consider the character of the particular conduct of the particular agent in relation to the particular purchasers, bearing in mind what matters of fact each knew about the other as a result of the nature of their dealings and the conversations between them, or which each may be taken to have known.
Often, establishing causation when what is argued to be ‘misleading or deceptive’ are representations made, involves proving reliance upon those representations. In this regard, a contractual disclaimer of reliance may be relevant, but as observed in Campbell (at [31]):
31. … In many cases…will not be taken to evidence a break in the causal link between misleading or deceptive conduct and loss. The person making the declaration may nevertheless be found to have been actuated by the misrepresentations into entering the contract. The question is not one of law, but of fact.
See also Clark Equipment Australia Ltd v Covcat Pty Ltd (1987) 71 ALR 367 at 371; Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd(No 1) (1988) 39 FCR 546 at 561 and Cargill Australia Ltd v Viterra Malt Pty Ltd (No 28) [2022] VSC 13 at [4357] (Elliot J) as authorities for the general principle that disclaimers and exclusion clauses cannot be relied upon to exclude the operation of the ACL.
That said, terms of a contract can nevertheless form part of the “relevant circumstances” to which regard must be had when deciding, as a question of fact, whether conduct is misleading or deceptive: Butcher; Campbell.
Where the representation alleged is as to a ‘future matter’, s.4 of the ACL applies which raises the presumption that a representation with respect to any future matter without reasonable grounds is misleading. Here, evidence must be adduced to establish reasonable grounds: see Lin v Zheng [2023] NSWCA 174 at [34]-[36].
Put another way, a representation concerning a future matter will not be misleading or deceptive where a promise, or prediction, or opinion does not eventuate, provided that at the time of their making, the maker had reasonable grounds for so expressing the promise, prediction or opinion (see, for example, Bill Acceptance Corporation Ltd v GWA [1983] FCA 280; 50 ALR 242 at 178-179 per Lockhart J; and SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 at [18]-[21] per Buchanan J).
It is to be highlighted that the relevant time at which a representation should be assessed as being ‘misleading’ or ‘deceptive’, is the time the representation is made: Global Sportsman v Mirror NewspapersPty Ltd (1984) 2 FCR 82.
F. THE REPRESENTATIONS – WHAT WAS SAID?
The Court must first determine whether the alleged representations are made (or what, if any representation is made) by the statement or conduct impugned.
In any consideration of the available evidence concerning what was said and whether it was misleading and deceptive, regard must be had to what McLelland CJ said in Watson v Foxman (1995) 49 NSWLR 315 (“Watson”):
… Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not … attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”.
Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s 52 of the Trade Practices Act 1974 (Cth) … in the absence of some reliable contemporaneous record or other satisfactory corroboration.
In Ventouris Enterprises Pty Ltd v Dib Group Pty Ltd [2010] NSWSC 963 Slattery J at [87] stated as follows:
87.The principal conduct of the defendants that [the plaintiff] alleges was misleading or deceptive was the speaking of words in the course of a series of conversations. Special considerations apply when assessing alleged misleading and deceptive conduct in such a context. It is necessary that the words spoken be proved with a degree of precision sufficient to enable the Court to be reasonably satisfied that they were in fact misleading in proved circumstances: Watson v Foxman (1995) 49 NSWLR 315 at 318 per McLelland CJ in Eq. In assessing whether spoken words were misleading the Court may have to examine relatively subtle nuances flowing from the use of one word, a phrase or a grammatical construction rather than another or the presence or absence of some qualifying word, phrase or condition: Watson v Foxman (1995) 49 NSWLR 315 at 31. The fallibility of human memory and the overlaying of memory with perceptions of self interest leading to sub conscious re-construction are all hazards of ordinary human experience to which a Court must be alert in assessing whether particular spoken words are misleading or deceptive: Watson v Foxman (1995) 49 NSWLR 315 at 319. Ultimately each element of the cause of action must be proved to the reasonable satisfaction of the Court which means that the Court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not obtained or established independently of the nature and consequences of the fact or facts to be proved”, including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.
In affirming Watson, when recently considering evidentiary issues in historical sexual assault proceedings, the High Court in GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32 per Kiefel CJ, Gageler J, and Jagot J stated the following (at [59]):
59.… Watson v Foxman is frequently cited because of its continuing importance in identifying that ordinary human experience exposes that human memory is “fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time”.
Mr Fu relied upon an affidavit affirmed 17 April 2020. Ms Mao relied upon and affidavit affirmed 5 May 2020.
Mr Fu and Ms Mao had previously purchased an investment property “off the plan” in July 2014. On the occasion of the proposed purchase the subject of these proceedings, they were looking to acquire a property that was new, in which they could live. They received an email from Ray White inviting then to the VIP launch of the proposed development. They paid the refundable $10,000 deposit.
Many people attended the VIP launch. It was described as “successful”. Mr Fu and Ms Mao were provided with copies of a Project Brochure, document titled Diamond Executive Summary, plans for the proposed building, photographs of the listing of the building and a schedule of finishes. That material was in evidence before the Court. An Architectural Scale Model of the proposed development was also on display at the VIP launch. Ms Mao provided a photograph of the display room showing the model. All of these documents and the scale model showed Level 11 to be the top floor of the Diamond Bondi Junction development.
There was no contest between the parties that what was on display and available for purchase on 3 June 2015 were apartments within a development comprising of 11 floors.
Mr Fu deposes to the following conversation with Mr Mystriotis:
24. During discussions with Paul Mystriotis he said to me:
He said:
“are you interested in looking at any other units as we have a penthouse on the 11th floor, which is the top floor, at a discounted figure from the list price on the basis that it is a penthouse”
I said:
“I am interested in this because it is on the top floor and I would like to live in a building on the top floor.”
Paul said:
“Because we got apartment 403 in Diamond and you introduced your friends to Ray White he can ask the developer to give to me huge discount on the penthouse. “
Paul said:
“Do you want buy top floor penthouse with a view.”
I said:
“If we can get huge discount on top floor penthouse with view, I will think about buying second property. It must be top floor penthouse with view.”
(As per original)
Ms Mao deposes to the above exchange between Mr Fu and Mr Mystriotis in identical terms.
Mr Fu then deposes to the following:
25.I cannot remember the precise words that might have been said by the developer representative, but it was clear on my observation that he adopted either by gesture or language what was being told to me by Paul Mystriotis.
26.Paul Mystriotis and the representative of the developer both pointed to model in the middle of the launch and said: “this is the top floor penthouse will you buy”. “There are only three properties on the penthouse level and you are closest to the common area of garden on the penthouse level”. “If you open the door you can walk about ten seconds and see the garden”.
27.Soon after this conversation was continued with the representative of the developer when I was shown plans and materials relating to what I now understand to be Lot 65 and unit 1103. It was in the circumstances that the materials referred to in the next paragraph were provided to me.
28.It was after this conversation took place, it having occurred in the showroom that I said to them, Paul Mystriotis and the representative of the developer “what is the price for the top floor penthouse?”
Paul said:
“The penthouse price was $1,650,000 and I can ask the developer to give you a huge discount”
I said:
“Yes. I am interested please ask the developer”
Paul Mystriotis went away and came back a couple of minutes later and said:
Paul said:
“The apartment will be $1,600,000 and will give you one free car space if you buy it today. You have to make a quick decision now and do it now. There are a lot of people here who would be interested”
I said:
“I will purchase of the top floor penthouse at the price of $1.600.000 with the free car space. I will give you the deposit now.”
(As per original)
Again, Ms Mao deposes to the above exchanges between her husband and Mr Mystriotis in identical terms, including the grammatical solecisms.
In his affidavit, Mr Fu says that English is his second language. He says that he can understand written English and has some difficulty with oral English. In her affidavit, Ms Mao says that she speaks English with moderate fluency, but her first language is Mandarin. She said that many of the conversations she has with her husband are in the Mandarin language. She said that she was with her husband at all times during the discussions on the day of the launch and where necessary, provided assistance by way of translation to him, “on the run”.
‘Cut and paste’ evidence
Exhibited by BJP and PCR was a document which identified evidence given by Mr Fu and Ms Mao as identical, including the paragraphs identified above. BJP and PCR submit that the Court would reject that evidence on the basis that the identical exchange attributed to Mr Mystriotis and Mr Fu by both Mr Fu and Ms Mao are a product of copy and paste techniques rather than a product of accurate recollection.
BJP says that in the circumstances where:
(a)Neither Mr Fu nor Ms Mao deposes to having any note of what was said by Mr Mystriotis;
(b)Mr Fu acknowledges that his English is limited; and
(c)The relevant conversation is said to have occurred between Mr Fu and Mr Mystriotis, in English (despite Mr Fu self-acknowledging limitation in that language and the extent of any translation which was interposed by Ms Fu being entirely unclear);
it is in the highest degree unlikely that witnesses doing the best they could to set out their independent recollections, who came to make affidavits nearly five years after the conversation, would produce recollections which were in identical terms (including identical grammatical infelicities).
I accept that submission.
In cross examination neither Mr Fu nor Ms Mao could offer an explanation as to how the evidence of the crucial conversations came to be identical in their respective affidavits. Ms Mao said that she did her own affidavit on her own memory.
In cross-examination Mr Fu gave evidence that he could understand some English in some paragraphs and not in others. His recollection of events that took place on 3 June 2015 some seven years previously was, not surprisingly, very poor.
Mr Fu agreed in cross-examination that he saw a solicitor and received legal advice. He could not clearly recall the circumstances of the preparation and execution of his affidavit. He said that he prepared some of the conversations in Mandarin and had some of them translated by way of Google translate.
In Seamez (Australia) Pty Ltd v McLaughlin [1999] NSWSC 9 at [36] and [40], Sperling J pointed out that a high degree of “similarity in content, detail, terminology and sequence” between the affidavits of three witnesses shows direct or indirect collaboration, and means one of two similar accounts cannot be a genuine recollection and may be worthless. In Macquarie Developments Pty Ltd v Forrester [2005] NSWSC 674, Palmer J expressed the view that such identity of language between the affidavits of separate witnesses devalues the evidence of the witnesses involved, even if it may not render it worthless (at [89]-[91]). In Celermajer Holdings Pty Ltd v Kopas (2011) 16 BPR 30,735 at [186], Ward J (as she then was) expressed the same view, pointing out it is unlikely that two deponents would have a precisely identical recollection, uninfluenced by the recollections of others, of shared experiences.
In Re Colorado Products Pty Ltd (in prov liq) (2014) 101 ACSR 233, Black J considered these authorities and at [16] expressed the view that it did not matter whether the identical passages in affidavit evidence was the result of collusion between the witnesses personally, or was the result of adopting evidence that had been copied from the affidavit of another, or a witness adopting evidence that had been copied from another’s affidavit. Ultimately, “each substantially devalues both witnesses’ affidavit evidence where no explanation has been given of what occurred”. Black J stated that it is not possible for the Court to be satisfied in such a situation, that the witness’ evidence reflects a genuine recollection of events: see also Dentown Pty Ltd v PWI Group Pty Ltd (as trustee of the Australia No. 1 Group Trust) (2019) 141 ACSR 330 at [16].
Having regard to the “similarity in context, detail, terminology and sequence”, I am not satisfied that the evidence given by Mr Fu and Ms Mao of the exchange between Mr Fu and Mr Mystriotis reflect a genuine recollection of the conversation.
I reject paragraphs 21 and 24 to 31 of Mr Fu’s evidence. I reject paragraphs 16, 23 to 30 of Ms Mao’s evidence.
I propose to record my further misgivings of the evidence given of the exchange between Mr Fu and Mr Mystriotis.
Mr Mystriotis was not called to give evidence by either party. BJP and PCR relied upon an affidavit from Lachlan Macinnes, employed solicitor at the firm acting for BJP and PCR with the day-to-day carriage of the matter for BJP and PCR. This affidavit went to the attempts by BJP and PCR to engage with Mr Mystriotis to give evidence in the proceedings.
During the hearing, the parties agreed that the failure by either party to subpoena Mr Mystriotis was to be treated neutrally by the Court. Neither party was seeking the Court to draw an inference adverse to the other party by that party’s failure to ensure Mr Mystriotis was available to give evidence and be cross-examined in these proceedings.
No other evidence was tendered that supported Mr Fu’s and Ms Mao’s evidence.
Despite what he says in his affidavit about the competency of his understanding of oral English, Mr Fu does not depose to requiring the conversation with Mr Mystriotis interpreted. Ms Mao does not depose to interpreting any of the conversation between her husband and Mr Mystriotis.
Mr Fu gave evidence that English is his second language, that he had some difficulty with oral language in the English language. It was not clear if the “some difficulty” was speaking English, understanding English or both. Both affidavits from those translating his affidavits depose to translating the English into Mandarin and Mr Fu advising any changes in Mandarin. In light of his evidence as to his difficulty with the English language, I find it improbable that he was able to engage in the conversation recorded in his affidavit.
Ms Mao gave evidence that she speaks English with moderate fluency. She said that many of the conversations she had with her husband were in the Mandarin language. She said that she was with her husband at all times during the discussions on 3 June 2015 and where necessary, provided assistance by way of translation to him “on the run”. She does not depose that she was required to translate any of the above conversations to her husband. Mr Fu does not depose that he required his wife to interpret any of the exchanges identified. The impression left is that Mr Fu and Mr Mystriotis had a conversation in English in front of Ms Mao. For the reasons given, I find it improbable that the account given by Mr Fu and Ms Mao is a genuine recollection of the exchange between Mr Fu and Mr Mystriotis.
Was the word ‘Penthouse’ used?
On the evidence as a whole, I am not persuaded that the word ‘penthouse’ was used by Mr Mystriotis as asserted by Mr Fu and Ms Mao.
None of the written material provided to Mr Fu and Ms Mao refers to any of the apartments on the eleventh floor as ‘penthouse’ apartments.
It was put to Mr Fu in cross-examination that the term ‘penthouse’ was not used on 3 June 2015. Mr Fu’s responded as follows:
From today’s recollection, I cannot clearly remember … from my judgement today it is not possible, because if it was not the case all the contract wouldn’t have occurred later on.
Mr Milgrom deposed to being present at the beginning of the VIP launch of the Diamond development. He did not have any recollection of speaking to Mr Fu. He did not recall being introduced to any prospective purchasers and believes that he did not speak directly to any purchases on that day.
He denied a conversation with Mr Fu using the word ‘penthouse’ and he said that he would not use the word ‘penthouse’ because his understanding of a penthouse is an apartment which occupies the whole of the top floor of the building. He was aware that apartment 1103 did not occupy the whole top floor of the Diamond development and accordingly he says he would not use the word ‘penthouse’ to describe apartment 1103. He said that if he had heard Mr Mystriotis using the word ‘penthouse’, he believes that he would have spoken to him about the use of the word.
Further, where there is a long lapse between the date of disputed conversations and the date of the trial, judges tend to “place primary emphasis on the objective factual surrounding material and the inherent commercial probabilities, together with the documentation tendered in evidence”: Effem Foods Pty Ltd v Lake Cumbeline Pty Ltd (1999) 161 ALR 599; [1999] HCA 15; BC9901532 at [15] quoting the trial judge. See also Arnautovic v Cvitanovic (2011) 199 FCR 1; [2011] FCA 809; BC201105460 per Katzman J at [73].
In assessing the evidence and making my findings, I have had regard to the parties apparent self-interest and the frailty of human memory and placed more weight on the contemporaneous documents (to the extent they are available), the objective surrounding facts and the inherent probabilities and improbabilities of events.
One final matter supports the caution with which I have approached the evidence of the purported representations and conversations in this case. A peripheral issue arose concerning Mr Fu’s affidavit evidence as to what car spaces were included in the purchase of the apartment and whether a “free car space” was included as an inducement. Mr Fu in his affidavit stated that Mr Mystriotis said to him the following:
28. …
The unit will be $1,600,000 and will give you one free car space if you buy it today …
In cross examination it was put to Mr Fu that no one said to him on 3 June 2015 that there would be a free car space. He was taken to the draft strata plan, which was attached to the contract for sale, which showed that there were two car spots allotted to the apartment that he purchased that day.
Mr Fu could not remember the conversation recorded at paragraph 28 of his affidavit. Nor could he remember whether or not the agent had said something to him about a free car space. He said:
My understanding of what I was buying on that day was a two-bedroom, two-bathroom, two-car space unit and the price was reduced from 1.65 million to 1.6.
On the face of the contemporaneous documents, no “free car space” was available, as apartment 1103 was offered with two car spaces.
Future matters
I have rejected the evidence of Mr Fu and Ms Mao concerning the conversation between Mr Fu and Mr Mystriotis.
I have found that there was no representation made that the top floor was referred to as a “penthouse”. Counsel for Mr Fu submitted that whether or not the apartment was called a penthouse or not, misdescribed the question and “doesn’t decide the case”. He submitted that the question is “… was it sold as the top floor of that building off the plan”. I agree.
Having regard to all of the relevant surrounding facts and circumstances, including the documents such as a Project Brochure, a document titled “Diamond Executive Summary”, plans in relation to the proposed building, photographs of the proposed completed building, a schedule of finishes and an architectural scale model that was displayed in the middle of the launch – there is no dispute that at the time the contract of sale was entered into, Level 11 was represented in the sale of contract as the “top floor “of the apartment building. Indeed this was the position confirmed by BJP in correspondence to Mr Fu on 7 November 2018 (see paragraph 26 of these reasons).
I find that on 3 June 2015, BJP and PCR represented that the apartment building when constructed by BJP would comprise of 11 floors of apartments.
The representations in the Statement of Claim are pleaded as “future matters” as follows:
(a)That the apartment building when constructed by BJP would comprise of 11 floors of apartments; and
(b)That apartment 1103 would be located as one of the three apartments on the top level of the building.
BJP admits that any representation made about the construction of the apartment building as at 3 June 2015 would necessarily have been representations in relation to future matters, in circumstances where the apartment building had not, as at 3 June 2015 being constructed. BJP otherwise denies that the representations pleaded were made.
Mr Fu particularises the “lack of reasonable grounds” for making the representations as follows:
(a)BJP had no settled intention to construct the building as one with 11 floors of apartments; and
(b)BJP did not make clear to Mr Fu that the configuration of the apartment building to be constructed might be such that apartment 1103 would not be located on the top level of the apartment building.
BJP contends that if the court finds that the representations concerning the future matter were made, it had reasonable grounds for making those representations.
Section 4 of the ACL facilitates proof in false, misleading or deceptive representation cases involving representations as to future matters. Section 4 provides that in the case of a representation with respect to a future matter, unless evidence is adduced to the contrary, the person making the representation is taken not to have had reasonable grounds for making it, with the result that the representation will be taken to be misleading. Additionally, the person will not be taken to have reasonable grounds merely because such evidence is adduced. The fact that a person may believe in a particular state of affairs does not necessarily mean there are reasonable grounds for that belief: Cummings v Lewis (1993) 41 FCR 559 at 565 per Shepperd and Neaves JJ.
A representation concerning a future matter will not be false, misleading or deceptive where a promise, or prediction, or opinion does not eventuate, provided that at the time of their making, the maker had reasonable grounds for so expressing the promise, prediction or opinion; (Bill Acceptance Corporation Ltd v GWA Ltd (1983) 50 ALR 242 at [179] per Lockhart J and SPAR Licensing Pty Ltd v MIS QLD Pty Ltd [2014] FCAFC 50 at [18]-[21] per Buchanan J).
In Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 2 FCR 82 (“Global Sportsman”), a Full Court of this Court stated (at 88):
The non-fulfilment of a promise when the time for performance arrives does not of itself establish that the promisor did not intend to perform it when it was made or that the promisor’s intention lacked any, or any adequate, foundation. Similarly, that a prediction proves inaccurate does not of itself establish that the maker of the prediction did not believe that it would eventuate or that the belief lacked any, or any adequate, foundation. Likewise, the incorrectness of an opinion (assuming that can be established) does not of itself establish that the opinion was not held by the person who expressed it or that it lacked any, or any adequate, foundation.
The applicants argued that, nevertheless, the statement of an incorrect opinion is misleading or deceptive or likely to mislead or deceive merely because it misinforms or is likely to misinform. An expression of opinion which is identifiable as such conveys no more than that the opinion expressed is held and perhaps that there is basis for the opinion. At least if those conditions are met, an expression of opinion, however erroneous, misrepresents nothing.
In Mobil Oil Australia Ltd v Wellcome International Pty Ltd (1998) 81 FCR 475, the Full Court said (at 521):
It is, of course, not sufficient to establish that a representation was made as to a future event and that a contrary decision was made some time afterwards. If it is established by the respondents that at the time a representation was made there were reasonable grounds for making it, it cannot be described as “misleading” or “deceptive”
In Fubilan Catering Services Limited (Incorporated in PNG) v Compass Group (Australia) Pty Ltd [2008] FCAFC 53, the Full Court said (at [91]):
It is clear that to make a promise which is not performed or a prediction which is not fulfilled is not, without more, misleading or deceptive: Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984) 1 FCR 82, at 88, per curium; Bill Acceptance Corporation Pty Ltd v GWA Ltd [1982] FCA 269; (1983) 50 ALR 242.
In oral closing submissions, Counsel for BJP and PCR said that one has to “travel back as it were, to 3 June 2015”.
BJP and PCR have sought to establish reasonable grounds through the evidence of Mr Milgrom, one of the two directors of BJP at the relevant time. In his affidavit evidence, Mr Milgrom said that as of 3 June 2015 his company had approval for the construction of a building with 11 residential floors and accordingly the promotional material exhibited at the time was true and correct. He says that subsequently, on 30 June 2017, the construction approval was varied to permit construction of the twelve floor. Construction of the Diamond Development commenced in or about December 2017 and the Strata Plan for the Diamond Development (which triggered the obligation on the part of purchases of units in the Diamond Development to complete their contracts) was registered on 5 November 2018.
This was the exchange in cross-examination:
But what prompted that, that’s what I’m trying to understand, if I may? You had designed a building and presented it to the public of 11 stories or 11 levels.
Suddenly, out of the blue two years later we have approval to add one; what was it that prompted that change? --- Developers amend plans constantly.
I am asking what it was that prompted that change, could you please explain? More money? --- Yes, of course.
So it’s an economic decision? --- It’s an economic decision.
It was not suggested that Mr Milgrom was not someone without personal knowledge of the development. There was no cross-examination of Mr Milgrom suggesting that as at June 2015 BJP had no settled intention to construct the building with 11 floors of apartments. It was not suggested to Mr Milgrom that BJP did not have the intention to construct the Diamond development with 11 floors nor that BJP did not have the ability to do that.
I accept Mr Milgrom’s evidence.
The reasonable basis of making the representation as at 3 June 2015 that the Diamond development apartment building when constructed would comprise 11 floors of apartments, so says BJP and PCR, is that on 3 June 2015 it was intended to construct a building in accordance with the draft strata plan. Further, BJP and PCR submit that under the contract variations can be made and that is what BJP did by seeking approval for an additional floor. Consistent with that entitlement, it served a replacement notice of the Strata Plan on 3 October 2018.
In the circumstances, Mr Milgrom’s evidence, coupled with the documentary material referred to, including the draft strata plan attached to the sale contract, demonstrates that as at June 2015 BJP had the intention of constructing the Diamond development with 11 Levels and that Level 11 would be the top floor. I find that BJP had, at the time of making the representations, reasonable grounds for making the representations.
G. SECTION 55(2A) CONVEYANCING ACT 1919 (NSW)
Mr Fu pleads as an alternative claim that s.55 of the Conveyancing Act 1919 (NSW) (“the Conveyancing Act”) applies to entitle him to recover the deposit. The applicant relies particularly upon s 55(2A), which provides:
Right of purchaser to recover deposit etc
…
(2A)In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon.
The relevant principles governing s.55(2A) were recently summarised by Darke J in Culjak v Akrawe [2022] NSWSC 949 at [84]-[87], where his Honour said (with reference to other relevant authorities):
84.As explained by Santow JA in Havyn Pty Ltd v Webster (2005) 12 BPR 22,837; [2005] NSWCA 182 at [137], s 55(2A) created a jurisdiction to relieve against forfeiture of a reasonable deposit that was hitherto unknown to courts of equity (see also Luu v Sovereign Developments Pty Ltd (2006) 12 BPR 23,629; [2006] NSWCA 40 at [24]).
85.In Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268, Street CJ in Eq stated at 272:
It is one thing to recognize that there is a wide discretion conferred upon the court under this section; it is another thing to determine the guidelines for the exercise of that discretion. The section was designed to provide relief to a purchaser against an unjust and inequitable consequence of forfeiture of a deposit. It is clear enough that at law a vendor’s right to forfeit a deposit to himself in the event of a purchaser’s default bears no necessary relation to the damages actually suffered by a vendor. At law a forfeited deposit could result in a vendor making a profit which in justice and equity he ought not to be permitted to enjoy at the purchaser’s expense. In a complementary sense, an order for the return of the deposit does not necessarily affect the vendor’s right to sue a defaulting purchaser at law and recover against him such damages as the vendor can prove. The jurisdiction under s 55(2A) does not give to a court an overall discretionary supervision of monetary adjustments between parties to a contract under which a deposit was paid but which has been terminated. A vendor who forfeits a deposit in strict enforcement of his legal rights is not to be deprived of it under s 55(2A) unless it is unjust and inequitable to permit him to retain it.
86.It is not necessary to demonstrate special or exceptional circumstances in order to justify an exercise of the discretion under s 55(2A) (see Harkins v Butcher; Butcher v Lachlan Elder Realty Pty Ltd (2002) 55 NSWLR 558; [2002] NSWCA 237 at [77]; Havyn Pty Ltd v Webster (supra) at [149]). However, a proper approach to the discretion must appreciate the legal context of the established nature of a deposit as an earnest of performance in conveyancing transactions (see Havyn Pty Ltd v Webster (supra) at [150]–[151]).
87.As Santow JA stated in Havyn Pty Ltd v Webster (supra) at [155]:
For these reasons, I do not consider that there is anything controversial in the submission of the vendor that the grounds in support of an application to repay the deposit must be sufficient to warrant a departure from holding the purchaser to its obligations under the contract. Indeed, this goes to the “justice and equity” of the case, drawing on the observations of Street CJ in Eq in Lucas & Tait. That conclusion must be correct, if the notions of justice and equity conditioning the discretion are to have some meaning drawn from the purpose of a deposit and the circumstances in which it is forfeited. The purchaser must therefore do more than merely show that the deposit has been forfeited, and that it will thus result in a ‘windfall’ to the vendor as will usually be the case. The Court should not take an approach to ordering the return of deposits under s 55(2A) which weakens the proper function of a deposit in providing a sanction so that purchasers treat the making and completing of contracts with due seriousness: Wilson v Kingsgate Mining Industries [1973] 2 NSWLR 713 at 735, Fraser v L O’Malley & Sons Pty Ltd (1975) 2 BPR 9133 at 9139–40. In so saying, I am not to be understood as putting a gloss upon the plain words of s 55(2A), but merely highlighting the critical importance of a judge exercising the wide discretion according to its plainly beneficial purpose to consider ‘justice’ and ‘fairness’ in their proper context.
See also the observations of Kirby J regarding the important role played by the payment of deposits in contracts for the sale of land in Romanos v Pentagold Investments Pty Ltd (2003) 217 CLR 367; [2003] HCA 58 at [54].
In summary, where an applicant seeks relief under s.55(2A) of the Conveyancing Act, the Court is to look at all relevant factors to see whether it is fair and conscionable to give that applicant relief, and the finding of special or exceptional circumstances is not a precondition for granting such relief: see observations made by Young J in Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15 at 189.
The Notice to Complete was made on 20 November 2018, making 6 December 2018 the Completion Date. Completion did not occur on that date. In the circumstances where Mr Fu failed to complete the contract by 6 December 2018 and thus, failed to comply with the contract or a notice under it in an essential respect, BJP had an entitlement under clause 9.1 of the contract to terminate the contract and to recover the deposit. BJP exercised the right of termination by Notice of Termination given on 6 September 2019. The focus now becomes whether there are circumstances that would justify giving Mr Fu relief against forfeiture of the deposit.
Mr Milgrom gives evidence that on 30 June 2017 construction approval was varied to permit the construction of a twelfth floor to the Diamond development. Construction commenced around December 2017 and the Strata Plan was registered on 5 November 2018.
On 3 October 2018, the legal representatives for Mr Fu received the notice of the lodgement of the Strata Plan. Prior to receiving the notice of the lodgement of the Strata Plan Mr Fu had been on notice of the proposed Level 12 since May 2018. He instructed his solicitor at the time to write to the solicitors for the developer to confirm that an additional level was proposed.
Throughout the latter part of 2018 Mr Fu and Ms Mao had been exchanging emails with both the legal representatives for the developer and Ray White. Mr Fu sought a meeting with the developer which was refused. Mr Fu agreed in cross-examination that at this point he considered “that there was now a serious problem because there was 12th storey on the building”. He agreed in cross-examination that by email dated 11 September 2018, he requested to “rescind” the contract and he agreed that that meant to “cancel the contract”. He agreed that at that time he considered that the construction of the twelfth story was an important difference between the draft plan and the building as constructed, and that he had a proper basis upon which to seek to rescind or cancel the contract.
Mr Fu elected to not rescind the contract. He said, “He was hesitating about it”. He said that he had been trying to negotiate but the developer refused.
BJP and PCR submit that Mr Fu’s loss of his deposit arises from the exercise of a contractual right to vary the strata plan. His election to “live with that” and not to rescind the contract having formed the view that there was a difference detrimentally affecting the property to a substantial extent, does not afford an opportunity for repayment of the deposit.
I agree with the submissions of BJP and PCR. Taking all of the circumstances into account, it would not be appropriate to make an order for the return of the deposit. It has not been shown that BJP would make a windfall or profit that in “justice and equity” they would not be permitted to enjoy.
The deposit was forfeited due to the failure of Mr Fu to perform his obligations in accordance with a Notice to Complete. It has not been shown that this failure was relevantly caused or contributed to by conduct on the part of BJP and PCR. Mr Fu was well aware of the options available to him by the contract of sale and he chose not to exercise those options. It is not unjust and inequitable for BJP to insist on the due performance of the contract and, in default thereof, to forfeit the deposit.
BJP’s cross-claim
The apartment was resold on 11 November 2019 for $1,490,000. Clause 9.3.1. of the Contract of Sale allows BJP to sue the purchaser to recover the deficiency on sale (and the reasonable costs and expenses) under a contract made within 12 months after the termination.
In the circumstances, BJP is entitled to judgement for the deficiency on resale of $110,000, plus the agent’s commission on resale itemised in the Cross-Claimant’s Schedule of Cross Claim damages as $25,254.55.
Credit should be given for the amount of the deposit paid.
It was argued on behalf of BJP that there should be interest payable by Mr Fu for the failure to complete in accordance with clause 42.4 of the Contract of Sale. In the circumstances, BJP is entitled to $114,805.48 as interest on $1,440,000 at the rate of 10 percent payable between 19 November 2018, the date of completion and 6 September 2019 when the contract was terminated.
BJP seeks legal fees of AMW lawyers of $1,638.23 (excluding GST) and $241.50 (excluding GST) on resale itemised in the Cross-Claimant’s Schedule of Cross Claim damages.
BJP seeks the amount payable to PCR under indemnity in the agency agreement of $16,495.
H. CONCLUSIONS
Mr Fu’s application against BJP and PCR is dismissed.
The cross-claimant is entitled to a declaration that it is entitled to keep and recover the deposit of $160,000 paid by the cross-respondent under the contract.
I shall direct BVJP and PCR and cross claimant to prepare draft short minutes of order to reflect these reasons for judgment and stand the matter over for a hearing of any submissions about the nature and content of the orders, the amount payable to the PCR under indemnity in the agency agreement and submissions on the question of costs.
I certify that the preceding one hundred and forty-eight (148) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Goodchild. Associate: SC
Dated: 6 June 2024
3
37
4