Gardiners (SA)P/L & Duffield v Sanderson & Maroske No. Scgrg-98-103 Judgment No. S6658

[1998] SASC 6658

GARDINERS (SA) PTY LTD and DUFFIELD  v  SANDERSON and MAROSKE

Magistrates Appeal
Bleby J

This is an appeal against the decision of a stipendiary magistrate by which he awarded damages on a claim brought by the respondents for damages for misrepresentation and breach of contract.  The genesis of the dispute concerned was the purchase by the respondents of a house and land situated at Macclesfield.

The first appellant, Gardiners (SA) Pty Limited, (“Gardiners”), was the real estate agent instructed by the vendors to effect a sale of the house.  The second appellant, Michael Duffield, was the salesman employed by Gardiners in the sale of the house.  The vendors of the house, Mr and Mrs Gully, were also sued as defendants in the original action, but because they were to be indemnified by Gardiners and Mr Duffield, judgment was not entered against them.  In broad terms the respondents alleged that they had suffered loss at the hands of the appellants and Mr and Mrs Gully as a result of a series of written and oral representations made by the two appellants relating to the construction of the house and the area of the land which was the subject of the sale.  The learned magistrate dismissed the respondents’ claims based on the alleged misrepresentations concerning the construction of the house, and as there is no cross appeal against that finding, it is not necessary to revisit that issue.

The following causes of action were pleaded as alternatives:

1. Damages for misrepresentation pursuant to ss7(1) and 7(3) of the Misrepresentation Act 1972.

1. Damages in tort for misrepresentation

1. Damages for misleading and deceptive conduct contrary to ss52 and 53A(b) of the Trade Practices Act 1974 (Cth), and ss56 and 59(1)(b) of the Fair Trading Act 1987.

1. Damages for breach of contract.

The claims for misleading and deceptive conduct were not pressed at the trial and do not call for consideration in this appeal.

The respondents are husband and wife.  Prior to 1991 they had for some years resided in Leigh Creek.  In 1991 they decided to move to Adelaide.  They initially rented a flat in Camden Park, whilst looking for a house of their own.  They were attracted to the Adelaide Hills.  Ms Maroske said in her evidence that she and her husband wanted a place which would enable them to keep chickens as well as two horses which they had acquired in Leigh Creek, and which would lend itself to the establishment of a successful garden.  At no stage did either respondent stipulate what area of land they believed would be required to give effect to those purposes.  Indeed when Ms Maroske was asked whether she knew what size of allotment would be required to accommodate the keeping of two horses she replied that she did not know.  In any event both of the horses that the respondents were interested in retaining were sold prior to settlement without any replacements being purchased.

In March of 1991 Mr Sanderson was alerted to the property at Macclesfield through a newspaper advertisement.  The advertisement was relevantly headed, “SOLID HOME - TWO ACRES”.  The asking price was at that stage $130,000.  Other details contained in the advertisement described various characteristics of the house and land, but they are not pertinent to this appeal.  They did not qualify the representation that the area of the land was two acres and that the house was of solid construction.  Similar advertisements containing the same representation appeared on other occasions.

In response to the advertisements Mr Sanderson telephoned Gardiners and spoke to Mr Duffield.  He was sent a brochure about the Macclesfield property which again contained the assertion that it was two acres in area.  Some time later both respondents conducted independent inspections of the property.  Mr Sanderson was the first to visit the property.  He did so in the company of Mr Duffield.  He was given a perfunctory tour of the house, after which he was shown the property itself.  Significantly, the four corners of the property and relevant boundaries were pointed out to him.  Ms Maroske visited the premises with Mr Duffield some time later and was given a thorough tour of the property by one of the vendors, Mrs Gully.  During the course of this tour Mrs Gully pointed out to Ms Maroske the outlines of all the boundary fences and Ms Maroske was able to see, albeit from different vantage points, the four corners of the property.  No mention of the size of the property was made during the inspection, however on the return journey Ms Maroske claimed that Mr Duffield had assured her that the property was “near enough to two acres”.  Mr Duffield conceded in evidence that he may have said that, but maintained firmly that there were two occasions prior to the signing of the contract when he informed the respondents clearly that the property was not two acres.  The respondents denied that they had been so informed.

On 6th of May 1991 the parties signed a contract for the purchase of the property which was described in the contract as “Allotment 4 Section 104 Hundred Macclesfield Whole of the land in Certificate(s) of Title Register Book(s) Volume 4193 Folio 650 Being Improved Land situated at Lot 4 Wirrinilla Drive Macclesfield”.  The purchase price was $123,000.  Included in the contract were the following clauses:

“8..... The Certificate of Title or other document of title issued pursuant to the Real Property Act 1886 as amended in the name of the Vendor is accepted by the Purchaser as conclusive evidence of title.

9...... The Land is believed by the Vendor to be and shall be taken by the Purchaser as correctly described.  No error, omission, or misdescription of the Land shall invalidate this contract, but, if discovered and notice is given thereof by one party to the other before settlement (but no afterwards), the Vendor or the Purchaser (as the case may require) is entitled to compensation from the other party for the error, omission or mis‑description.”

.................. On the same day the respondents signed an endorsement on a copy of the certificate of title acknowledging that they had satisfied themselves that the details and description contained in the certificate of title was for the land intended to be purchased by them and described in the contract note.

.................. In fact there was no error or mis‑description of the land in the contract note, but in June of 1993 Mr Sanderson was informed by Gardiners that the land area was in fact 1.4 acres and not 2 acres.  Some eighteen months or more later, in early 1995, he was informed by another real estate agent that he and his wife could bring an action against the appellants and advised him to seek legal advice.  It was apparently as a result of that conversation that the proceedings were ultimately commenced.

.................. The learned magistrate noted that it was not in dispute that the area of the property was in fact 1.4 acres.  He found that Gardiners and Mr Duffield had, both orally and in writing, represented that the area of the property was two acres, that those representations subsisted without correction until the signing of the contract, and that the acknowledgment signed by the respondents did not change the fact that the respondents were under the mistaken belief that the property was two acres in area.  Although the learned magistrate considered the evidence of Mr Duffield that he had informed the respondents prior to the signing of the contract of the true area of the property, he was not persuaded by it and preferred the respondents’ evidence on that topic.  He seems to have inferred, without giving reasons, that the respondents relied upon the misrepresentations.  Turning his mind to the issue of the liability of the appellants in contract, he found that the representations, despite the fact that they were not embodied in written contract entered into by the parties, amounted to a warranty as to the area of the property, being contractual and promissory in nature, and being made for the purpose of inducing the respondents to act upon them.  He held that they had become incorporated as a term of the contract for the sale of the land.  Mr and Mrs Gully were in breach of their contract, and he awarded damages of $11,764.50 on that basis.

.................. Many of the grounds of appeal related to alleged inconsistencies in the learned magistrate’s findings, and challenged his acceptance of evidence given by the respondents in preference to that given by or on behalf of the appellants on a number of topics.  One of the factual disputes related to whether the representation that the property was two acres in area was corrected by Mr Duffield before the contract was entered into.  For the purpose of resolving this appeal I do not need to enter into that controversy, and in any event there are substantial hurdles for an appellant to clear before an appellate court will interfere with findings of fact based on the credibility of witnesses: Devries and Anor v ANR Commission (1992-1993) 177 CLR 472. Of course, the reversal of such findings is not impossible when the findings are quite at odds with other unchallenged or unchallengeable evidence, and I make no observations on the strength of the appellant’s argument based on such factors. I do not need to resolve it. I am prepared to assume that the representations stood uncorrected until after the contract was signed.

.................. The learned magistrate held that the representation was incorporated as a term of the contract.  In my opinion, he was wrong in so doing.  The effect of so holding is that the parties had contracted to buy and sell a piece of land that was two acres in area.  Whatever representation had been made to that effect, there was no disagreement that all parties signed a written contract for the sale and purchase of the land which was dated 6 May 1991.  I have already referred to the detailed description of the land contained in that contract.  On the same day the purchasers signed an endorsement on a copy of the certificate of title referred to in the contract, whereby they acknowledged that they had satisfied themselves that the details and description contained in the certificate of title was for the land intended to be purchased by them and described in the contract note.  The copy of the certificate of title bearing that endorsement, besides containing a full description of the land and copies of all endorsements on the title, included a plan of the land indicating its shape and dimensions and also indicating that it was 5,698 square metres in area.  By simple arithmetical conversion, that amounts to almost exactly 1.4 acres.  What the respondents had agreed to purchase could not have been more clearly or unambiguously expressed.

.................. Therefore, whatever the appellants’ representation about the area of the land was, it was not contractual in nature.  It was inconsistent with the contract entered into.  It could not be enforced as a contractual term: Hoyt’s Pty Ltd v Spencer (1919) 27 CLR 133 at 139, 147-148; Cutts v Buckley (1933) 49 CLR 189 at 201; Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507 at 518; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 per Gibbs CJ at 5 and per Mason, Wilson and Dawson JJ at 10-11.

.................. The respondents relied on Ellul and Ellul v Oakes (1972) 3 SASR 377. That involved a contract for the sale of a house which had been represented to be sewered, but which in fact was not. Although the purchasers had signed an agreement, it was never executed by the vendor. Settlement was completed and a transfer was registered. It was held that the representation amounted to a warranty forming part of the contract, for breach of which the purchasers were entitled to damages, being the cost of sewering the house. The only reason that it was found that the representation had become contractual or promissory in nature was because there was no written contract between the parties, and the court had to do the best it could to ascertain from other material what the terms of the contract were. Those were held to constitute the terms discussed orally by the parties and by reference to the agency listing form (of which the plaintiffs were aware) which contained the representation about sewerage. That is a very different case from this one where there can be no doubt about what the parties actually agreed. Reliance on Ellul v Oakes does not therefore assist the respondents.

.................. The learned magistrate was therefore wrong in proceeding on the basis that the respondents had established a breach of contract by the appellants and in proceeding to assess damages on that basis.  For that reason the appeal must be allowed.

.................. However, having decided the matter on that basis, the learned magistrate did not direct his mind to the other causes of action pleaded by the respondents. Leaving aside those which had been abandoned, the respondents relied on alternative claims by way of damages for misrepresentation pursuant to s7 of the Misrepresentation Act 1972, and by way of further alternative that the representations were made negligently or recklessly in circumstances where there was a breach of the appellants’ duty of care to the respondents. If the resolution of those claims depended on determination of disputed questions of fact I would have no hesitation in remitting the matter to the Magistrates Court to determine those questions. However, if the matter can be resolved without determining such questions then it is in the interests of justice and a speedy resolution of the matter that it should be resolved in this Court. I believe that it can be so resolved, and I therefore proceed to consider the outstanding causes of action.

.................. Once again, it is not necessary to descend into areas of disputed evidence and findings based on credibility of witnesses.  I am prepared to assume that the representations as alleged were made and in the case of the second alternative claim, that the appellants owed the appropriate duty of care to the respondents.  In the case of the cause of action based on the Misrepresentation Act, the respondents were required to prove that they had been induced to enter into the contract by the misrepresentation, or in other words that they relied on the representation in entering into the contract.  In the case of a negligent misrepresentation they also had to show that the representation was relied on and was the cause of their loss, assuming for the moment that they sustained a loss.

.................. Nowhere in the proceedings before the learned magistrate is there any evidence by either respondent that they relied on the representation in entering into the contract or that they were induced to do so by the representations.  Neither respondent ever said as much explicitly.  The nearest that one of the parties came to any such assertion was the first respondent at p81 of the transcript:

“Q.What were you relying on at the time of the settlement of the property for your understanding of the size of the property.  What did you rely on.

A.On the written material that I had received.

Q.Did you rely in any way on what Mr Duffield had told you.

A.Well he confirmed that it was - he told me it was two acres and a solid home.”

There is no confusion in the first question asked, and taken in its context, that passage can only have related to the first respondent’s belief at the time of settlement.  Neither respondent was asked any such question in relation to their entry into the contract.

All the other indications are that the respondents indeed did not rely upon the representations.  On their own case, both the respondents had independently inspected the property.  The first respondent’s visit included going to two vantage points where the boundaries and corners of the allotment were pointed out.  The second respondent met the vendors, and Mrs Gully pointed out to her the outlines of the boundary fences.  The second respondent asserted that she could see all the four corners of the property from different vantage points.  Neither respondent was therefore under any illusion as to the identity and layout of the property they were intending to purchase.

I have already referred to the only evidence of what the respondents intended to do with the land.  Besides living on it, they wanted to run at least two horses, a small number of poultry and to do some gardening on the land.  There was no evidence that they required a particular area in which to carry out any particular economic or recreational activities.  The only inference that can be drawn is that they were satisfied that what they saw would accommodate their intended use for the land.  The second respondent even went as far as to say that she did not know what sort of area they would need to maintain two horses (Transcript p6).

Not only was there no indication in their oral evidence of any form of reliance on the representations, but the respondents signed the contract and the copy of the duplicate certificate of title in the circumstances which I have described, thereby acknowledging an understanding of the precise area and description of the land at the time they entered into the contract.

The respondents moved into the property and no doubt became very familiar with it.  The first respondent’s evidence was that he first learned of the true size of the property almost two and a half years after settlement.  It was not until at least another eighteen months after that that the first respondent was informed by another land agent of his right to sue by virtue of the misdescription of the property.  The failure to appreciate the true area for such a long time after living on the property, and having ascertained the actual area, not being moved to do anything about it for a further eighteen months, and then only when it was suggested by someone else, merely confirms, in my opinion, the lack of any reliance on the representations at the time when the contract was entered into.

Therefore, if the learned magistrate had directed his mind to the alternative causes of action he would inevitably have to have found that there was no reliance on the representations, and that they did not cause any loss on the part of the respondents.  It follows that the respondents’ claim based on the alleged misrepresentations should have been dismissed.

I should add one further note about the assessment of the respondents’ damages.  Having held that the representation became a term of the contract, the learned magistrate assessed the damages on the basis that the respondents had received .6 of an acre less than they bargained for, and that the measure of their damages was the cost to them of acquiring the additional area, represented by the value of the extra land.  By making use of the evidence of two valuers who were called, he established that the approximate value of .6 of an acre of land in that area was $11,764.50, and that was the measure of the respondents’ loss.  Having approached the case on the basis that he did, there is no error of principle in the learned magistrate’s approach to the assessment of damages.  However, I have held that there was no justification for awarding damages on the basis of a breach of contract.  If the respondents had succeeded on either of their alternative claims, the measure of damages would have been very different.  In a case such as this it would be represented by the difference between what the respondents paid for the land and its true value at the time of entering into the contract.  The purchase price paid was $123,000.  The only evidence of value of the property in the state in which it was at the date of purchase was that of Mr Hawkins, who placed a value on the property of $121,000.  The most that the respondents could therefore have recovered, even assuming that they had succeeded in either of their alternative causes of action, was the sum of $2,000.  However, as those causes of action do not succeed, it is not necessary to venture further into questions of damages.

The appeal must therefore be allowed.  The judgment in favour of the respondents must be set aside, and judgment must be entered for the appellants.