Goldrange Pty Ltd v Peter William Stewart and Wendy Margaret Stewart
[2002] WADC 54
•20 MARCH 2002
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: GOLDRANGE PTY LTD -v- PETER WILLIAM STEWART AND WENDY MARGARET STEWART & ANOR [2002] WADC 54
CORAM: JENKINS DCJ
HEARD: 29 OCTOBER- 2 & 8 NOVEMBER 2001
DELIVERED : 20 MARCH 2002
FILE NO/S: CIV 1639 of 1995
BETWEEN: GOLDRANGE PTY LTD
Plaintiff
AND
PETER WILLIAM STEWART AND WENDY MARGARET STEWART
First DefendantsLYON DAVEY PTY LTD T/AS DAVEY REAL ESTATE
Second Defendant
Catchwords:
Torts - Negligence - Misrepresentations - Trade and Commerce - Breach of statutory duties - Misleading and deceptive conduct - False or misleading misrepresentations - Real estate transaction
Legislation:
Fair Trading Act 1987 (WA), s 10, s 12(2)(b), s79
Result:
Judgment against the first defendants. Claim against the second defendant dismissed
Representation:
Counsel:
Plaintiff: Mr M H Zilko SC
First Defendants : Mr P Mendelow
Second Defendant : Mr I A Morison
Solicitors:
Plaintiff: John Eller
First Defendants : Dod Price & Assoc
Second Defendant : Lawton Gillon
Case(s) referred to in judgment(s):
Argy v Blunts & Lane Cove Real Estate Pty Ltd (1996) 26 FCR 112
Astley v Austrust (1999) 73 ALJR 403
Henville v Walker [2001] HCA 52
JEB Fasteners v Marks Bloom & Co [1983] 1 All ER 583
Lambert v Lewis [1982] AC 225
March v E & M H Stramare Pty Ltd (1990‑1991) 171 CLR 506
Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556
Pownall v Conlan Management P/L (1995) 12 WAR 370
Richardson v Norris Smith Real Estate Ltd & Ors (1977) 1 NZLR 152
San Sebastian Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340
Tepko Pty Limited v Water Board [2001] HCA 19
Thompson v Henderson & Partners Pty Ltd v Bromberger (1989) 51 SASR 431
Voss Real Estate Pty Ltd v Schreiner (1997) 70 SASR 545
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Case(s) also cited:
Barrett v J R West Ltd [1970] NZLR 789
Demagogue Pty Ltd v Ramensky (1992) 110 ALR 608
Gardam v Geo Wills & Co Ltd (1998) 82 ALR 415
Gates v City Mutual Life Assurance Society Ltd (1985-1986) 160 CLR 1
Gould v Vaggelas (1983-1985) 157 CLR 215
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83
Henville v Walker (2001) 75 ALJR 1410
John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41-249
Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 107 ALR 291
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1981-1982) 149 CLR 191
Plenty v Argus [1975] WAR 155
Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492
Rawlinson & Brown Pty Ltd v Witham & Anor (1995) A Tort Rep 81-341
Roots v Oentory Pty Ltd [1983] 2 Qd R 745
Sharp v Ramage (1995) 12 WAR 325
W B Anderson & Sons Ltd v Rhodes (Liverpool) Ltd [1967] 2 All ER 850
Yorke v Lucas (1985) 158 CLR 661
JENKINS DCJ: On 16 August 1994 the plaintiff purchased a block of land in Wanneroo from the first defendants for $480,000. It claims that prior to completion of the purchase the defendants made representations to it the effect of which were that the whole of the property was above the adjoining Lake Joondalup and was available for development.
It claims that after settlement it discovered that approximately 5000m2 of the land was under water ("the submerged land") and was therefore unsuitable for development. It alleges that it then discovered that the Department of Environmental Protection would require a 50m2 strip along the lake's edge as a buffer ("the buffer") thus further depriving the plaintiff of a further part of the land for development.
The plaintiff claims damages in negligence from the first defendants, Mr and Mrs Stewart, the former proprietors of the property, and damages in negligence and for breach of statutory duty from the second defendant, Lyon Davey Pty Ltd, the proprietors’ real estate agent.
The Pleadings
The amended substituted statement of claim ("the statement of claim") alleges that during the course of its purchase of the land 4 representations were made to the plaintiff. The details of these are given in the following table.
| Representation | Date made | Where made | By whom | |
| 1 | That the land was an approved commercial development site, a prime location, eight and a half acres in size and beautifully situated for entertainment/tourism purposes | On various dates including 7, 14, 18 and 21 May 1994 | In a series of advertisements in the West Australian Newspaper | The second defendant, on behalf of all the defendants |
| 2 | That if the plaintiff purchased the land it would be able to use the whole of the land for a commercial development | April 1994 | At the land | The firstnamed first defendant on behalf of all the defendants. |
| 3 | That a dry area of the land to which Mr Jackson, the plaintiff’s director, was directed was the approximate rear boundary of the land | April 1994 | At the land | The firstnamed first defendant and Mr Brandenburg, the second defendant's employee. |
4 | That if the plaintiff purchased the land it would be able to use the whole of the land for a commercial development | 23 May 1994 and shortly before the execution of the contract for sale/purchase | Not stated | The second defendant on behalf of all the defendants, through its employee Maxwell Brandenburg, |
Paragraph 10 of the statement of claim alleges that, induced by the representations, the plaintiff entered into a contract to purchase the land for $480,000.
Paragraph 11 of the statement of claim alleges that the representations were false in that;
(a)An area of approximately 5,000 m2 of the land was and remains under water and is therefore unusable for a commercial development;
(b)The rear boundary of the land was and remains under water;
(c)The Department of Environmental Protection1 required and still requires any commercial development to be constructed not less than 50 metres from the land under water.
The statement of claim includes an allegation that the first defendants made the representations in breach of their statutory duty. This plea was abandoned at the start of the trial. Paragraphs 15 and 16 of the statement of claim also contain allegations that the second defendant aided and abetted the first defendants or was knowingly concerned in the first defendants' breach of statutory duty. As a consequence of the abandonment of the plea against the first defendants, these pleas must also fall.
That leaves a plea in paragraphs 12-14 of the statement of claim that by making the representations the second defendant engaged in conduct in the course of trade and commerce which was misleading and deceptive or likely to mislead or deceive the plaintiff contrary to s 10(1) and s 12 (2)(b) of the Fair Trading Act 1987 ("the Act").
Further and in the alternative it is alleged against all the defendants that they breached a common law duty of care owed to the plaintiff to take
_______________________________
1The statement of claim refers to the Department of Conservation and Land Management but the parties
presented their cases on a common understanding that the correct Department was the Department of
Environmental Protection. Consequently I am content to read the latter Department for the former in the
statement of claim.
reasonable care to ensure that the representations were correct. Paragraph 19 alleges that the defendants were negligent in that in breach of their duty the defendants failed to make any reasonable enquiries as to;
(a)The true boundaries of the land and whether any part of the land was under water;
(b)Any requirements of the Department of Environmental Protection or any other government department or local authority which might affect the plaintiff's ability to use the whole of the land for a commercial development.
In respect of all the claims the plaintiff says it has suffered loss of $120,000 which is the difference between the amount paid for the land and its true value at the date of purchase.
The first defendants by their defence do not admit the first and fourth representations and deny the second and third representations. In relation to the second and third representations they deny that Mr Stewart, the first named first defendant accompanied Mr Jackson and Mr Brandenburg on the site inspection as alleged by the plaintiff.
The first defendants deny that any representations which are proved to have been made were made on behalf of the first defendants. In respect to the fourth representation they deny that Mr Brandenburg had any authority to make it.
The first defendants allege that the results of a feasibility study undertaken by Chisholm Holdings Pty Ltd ("Chisholm") to investigate possible commercial developments on the land is to be imputed to the plaintiff. Thus the first defendants claim that if the representations were made the plaintiff did not rely upon them in entering into the contract to for sale of the land.
The first defendants also allege that the plaintiff has contributed to any loss it has suffered by its own negligence. The particulars of such negligence being:
(a)failure to make any or any sufficient enquiries of the Department of Conservation and Land Management and any other government department or local authority whose requirements might affect the purchaser's ability to use the whole of the Land for a commercial development of for the particular commercial development proposed by the Plaintiff or Mr Jackson or Chisholm Holdings;
(b)if the Plaintiff was unaware of the true boundaries of the land as at 15 August 1994, failure to instruct Automated Surveys or some other surveying firm to report on the location of the boundaries before settlement, or alternatively, failing to ensure that the Plaintiff understood any such report received prior to the settlement before proceeding to settlement;
(c)failing to confirm during the period between 2 May 1994 and 23 May 1994, further or alternatively the period between 23 May 1994 and 15 August 1994 that the development which the Plaintiff planned to undertake on the property would be possible and permissible by reference to the boundaries and features of the Land.
The second defendant admits that it was engaged to act as the first defendants' agent for the promotion and sale of the land from 23 February 1994 to 15 August 1998 and that Mr Brandenburg was employed by it as a sales representative from November 1993 to May 1996.
It admits the first representation and denies the second, third and fourth representations. It pleads that if Mr Brandenburg made the fourth representation he did so within the scope of his employment with the second defendant and on behalf of the first defendants.
The second defendant denies that the plaintiff was induced by or acted in reliance on the representations in entering into the contract for sale of the land. The second defendant further says that the plaintiff relied upon a survey conducted on its instructions by Automated Surveys in relation to the location of the boundaries of the land.
In par 12 of its defence the second defendant says that a commercial development of the type appropriate for the land might include areas under water as a feature of the development such that the land under water could properly be considered part of the development site.
In par 13 the second defendant does not admit that the representations it made were in trade or commerce or in breach of any statutory duty. In the alternative it pleads that if its conduct would otherwise have been misleading or deceptive it was not because;
(a)Mr Brandenburg told Mr Jackson that he did not know where the boundaries were and that Mr Jackson would have to ascertain that information from the first defendants;
(b)At the same meeting the second defendant provided a flyer which contained a disclaimer;
(c)At the same meeting Mr Jackson was orally advised to make his own enquiries to verify the written information provided to him; and
(d)The first named first defendant told Mr Jackson during an April inspection of the land that ½ to ¾ of an acre of the property was underwater.
In relation to the plaintiff's alleged loss the second defendant says that the land was purchased below market value.
In relation to the plaintiff's claim in negligence, at par 22 of the defence the second defendant recites various enquiries it made in regard to the land and otherwise denies the allegations.
The second defendant also alleges that the plaintiff contributed to any loss. The particulars of its contributory negligence are identical to those alleged against the plaintiff by the first defendants.
In par 27 of its defence the second defendant also claims that the plaintiff has failed to mitigate any loss by failing to make reasonable efforts to sell or develop the land and to carry out a conditional contract it had with another party for sale of the land. In its reply the plaintiff says that this party failed to pay a deposit to the plaintiff.
The defendants have also issued notices of indemnity and/or contribution against each other.
Issues between the Parties
The primary issues with respect to the action between the plaintiff and the first defendants are:
1. Did the first defendants make the representations as alleged?
2. If so, were they false?
3. If so, did the plaintiff rely upon the representations?
4. If so, were the first defendants negligent in making such false representations? This involves a consideration of duty and breach of duty.
5. If so, what is the measure of damages?
6. Did the plaintiff contribute to its loss by its own negligence?
The primary issues with respect to the actions between the plaintiff and the second defendant are:
1. Did the second defendant make the representations as alleged?
2. If so, were they false?
3. If so, did the plaintiff rely upon the representations?
4. If so, was the second defendant in breach of a statutory duty not to make such a false representations?;
5. In the alternative, was the second defendant negligent in making such false representations? This involves a consideration of duty and breach of duty.
6. If so, what is the measure of damages?
7. If the second defendant is liable in negligence, did the plaintiff contribute to its loss by its own negligence?
Depending upon the answers to the above issues, there are then indemnity and/or contribution issues between the defendants.
The Factual Background
The evidence establishes that on 23 July 1993 the first defendants purchased the land referred to in Certificate of Title Vol 1532 Folio 91 known as 1397 Wanneroo Road, Wanneroo ("the land") together with two other persons for the sum of $347,500. They intended to develop the land into a restaurant and tourist park but due to business problems with the co‑purchasers this did not occur.
However when the proposal was still on foot, the first defendants made application to the City of Wanneroo for approval to commence development. On 27 August 1993 the City of Wanneroo sent the first named first defendant a letter stating that City had resolved to support the development but that it required revised plans to address 12 particularised issues ("the approval").
None of the issues required the setting aside of any of land from development due to it being either part of Lake Joondalup or required as a buffer between the lake and any development. Paragraph (ix) required the fencing of the Metropolitan Region Scheme Park boundary but except to the extent that this indicated that the land had a boundary with the park boundary there is nothing to indicate in the approval that part of the land is submerged in the lake or that any part of the land would be required as a buffer between the lake and future development on the land.
The relevant Department of Environmental Protection file includes a letter from the City of Wanneroo seeking comments on the first defendants' application. The Department responded to the City by letter stating that the proposal had already been referred to it by the first defendants and was being assessed informally. Mr Darren Walsh, an officer from the Department, gave evidence that the departmental file appeared to be incomplete as there was no subsequent letter finalising the matter and providing advice. This may be the reason why the approval did not refer to any requirement of the Department to protect the submerged land from development.
Due to the breakdown of the relationship with their business partners, on 5 May 1994 the first defendants had title to the land transferred to them as tenants in common. As a consequence of their inability to develop the property by themselves and the break‑up of their marriage they decided to sell the land.
Mr Stewart contacted Maxwell Brandenburg, a friend and business associate who was also a licensed real estate agent. The first defendants signed an authority to sell the property through the real estate agency which then employed Mr Brandenburg.
On the day the property was listed for sale Mr Stewart and Mr Brandenburg inspected the land. According to Mr Stewart they discussed how much of the southern portion of the land was submerged and Mr Brandenburg, using his experience as a former farmer, estimated that half to three‑quarters of an acre of the property was under water at the high water mark. According to Mr Stewart, the matter was discussed and agreed to between them.
Mr Brandenburg says that it was Mr Stewart who told him that half to three‑quarters of an acre was submerged land. Under cross‑examination he denied having thought that as opposed to being told that by Mr Stewart. Logic dictates that it would have been Mr Stewart who told Mr Brandenburg how much land was under water as Mr Brandenburg would not have had any idea where the boundary was.
Whichever is the case it is clear that from the day in 1993 when the land was first listed for sale Mr Stewart and Mr Brandenburg both thought that half to three‑quarters of an acre was under water but neither had anything other than their own or each other's estimates to rely on in this respect.
Mr Brandenburg was subsequently employed by the second defendant and on 23 February 1994 Mr Stewart signed an Exclusive Authority to Sell agreement on behalf of the first defendants appointing the second defendant their exclusive listing agent for a period of 60 days and agreeing to pay to the second defendant a settling fee prescribed by the Real Estate and Business Agents' Act 1978. The agreement stipulated that at the end of 60 days the second defendant could continue as a non‑exclusive agent until the first defendants terminated the agency in writing. There is no evidence that the agreement was terminated.
The agreement stated that the land area was 8½ acres and that it had Council approval for development. There was no reference to the submerged land.
On 12 April 1994 the first and second defendants entered into an Authority to Auction agreement. The auction was set for 28 May 1994.
In April, sometime after that agreement was entered into, Mr Raymond Jackson, a local land developer, was driving past the land and saw a sign on it advertising the sale by auction of 8½ acres of commercial property. The sign identified Mr Brandenburg as the sales representative.
Mr Jackson contacted Mr Brandenburg and they had a meeting in Mr Jackson's office. Mr Jackson gave evidence that whilst the land was discussed Mr Brandenburg did not mention any of it being under water or any limitations on its use. Mr Brandenburg did not dispute that. Mr Brandenburg showed Mr Jackson the approval.
Mr Jackson was interested in purchasing the property for a commercial development but he did not know where the southern boundary of the property was situated. He telephoned Mr Brandenburg and Mr Brandenburg told him that he should visit the site and speak to Mr Stewart. Consequently Mr Jackson said that a site meeting was arranged for a Saturday in late April 1994. Mr Brandenburg on the other hand says that after the contract for sale was entered into on 2 May 1994 he and Mr Jackson had another meeting at which time Mr Jackson asked whether he could inspect the property. Mr Brandenburg said he said yes and that he then arranged it. I do not find it necessary in light of the subsequent site meeting to resolve these conflicts of evidence except that I am satisfied that the meeting which did then occur on site took place in late April, that is prior to any contract being signed.
The April site inspection
It is in issue between the parties as to whether Mr Stewart accompanied Mr Jackson and Mr Brandenburg on their inspection of the land on this occasion and what was said during the meeting. Unfortunately there is little agreement between those who are alleged to have attended the site meeting as to what occurred at the meeting.
Mr Jackson gave evidence that he arrived first and introduced himself to Mr Stewart at the house on the land. He then waited in the car for Mr Brandenburg to arrive. Mr Brandenburg then went and got Mr Stewart and the three men walked down the block to a point on the southwestern boundary of the block. Mr Jackson did not recall the exact words used but he says that Mr Stewart said that "this is where the rear of the section was" or words to that effect and that Mr Brandenburg then agreed that this was where the back of the block was. At the time they were standing on dry land. (The alleged third representation) He said that the lake could be glimpsed through the trees a good 30‑40 metres away. Mr Jackson said that there was no reference to any of the land being unusable. Under cross‑examination he said he could not recall Mr Stewart using a hand gesture to indicate the boundary but if a hand gesture was used it was to indicate a land boundary that was where the group was standing not 50‑60 metres away.
Mr Brandenburg said that he arrived at the land before Mr Jackson. Mr Jackson arrived about 10 minutes later. He then knocked on Mr Stewart's door and asked if Mr Stewart could accompany he and Mr Jackson. Mr Brandenburg introduced Mr Jackson and Mr Stewart and those two men started to discuss various matters. The three men then walked out the back gate, down the eastern boundary to the soak and then across to the western boundary.
He said he recalled as clear as day Mr Stewart explaining that there was half to three quarters of an acre under water as they walked from the western boundary to the eastern boundary. He said
"And he (i.e. Mr Stewart) told him quite clearly then that - and pointed out that half to three quarters of an acre of the land was under water and when asked where the boundaries were, the usual thing, "About there" and I'm quite sure Mr Stewart never knew where the boundaries were."
Mr Brandenburg said that as they stood at a point on the western boundary they could quite clearly see water.
Under cross‑examination he said that Mr Jackson asked "where are the boundary pegs?" and Mr Stewart indicated with his hand to a point in the water which seemed quite close but definitely was not where they were standing. He said he thought that the gesticulation was not as far as 50‑60 metres away and was more like 10‑15 metres away but he "had no idea".
Mr Stewart denied having gone on the site inspection at all. He said that he recalled Saturday 23 April 1994 when Mr Brandenburg rang and asked if he could show someone over the land. At approximately 4.00 pm he said that Mr Brandenburg came to the house and said that his client would be late. He said that Mr Brandenberg sat and had a cup of tea and a chat until Mr Jackson arrived. He said that Mr Brandenburg went outside to meet Mr Jackson and that they went to inspect the property. He said that he was not introduced to Mr Jackson and he remained inside the house.
He said that his friend Leno Gugiatti arrived about 5‑10 minutes later to pick up a tractor he had lent him to clear the land. At about 5.25 pm he said that he said goodbye to Mr Gugiatti. He then got some wood for the chip heater, went inside, took his shoes off and went to the toilet. Whilst he was in the toilet his son who had recently arrived home from work told him that Mr Brandenburg was at the door and wanted to speak to him. Mr Stewart said he went to the front door. He then had a conversation with Mr Brandenburg and Mr Jackson on the front veranda. He said that he did not leave the veranda because he only had socks on. Mr Jackson asked why they were selling but there was no discussion about what Mr Jackson planned to do with the property if he purchased it.
Mrs Stewart also gave evidence on this point. She said she recalled a day when Mr Brandenburg visited around 4.00 pm. She said she made him and Mr Stewart coffee and after half to one hour she heard another car arrive. She said that Mr Brandenburg left and Mr Stewart stayed inside with her. She said she saw Mr Brandenburg and another man walk past the house. She said that her son Bradley came home from work about 5.10‑30 pm. She said that Mr Stewart went out the front door after Mr Brandenburg and his client. She heard motor vehicles and a tractor. She did not see the Gugiattis although she recalls that they were expected. She heard a knock on the door and her son went to answer it. She said that she later went to the front door and turned on the veranda light. She said she peered through the fly screen door so she could get a look at the prospective purchaser.
Bradley Stewart, now 24 years of age, was called to give evidence. He confirmed Mr Stewart’s story from the time he arrived home at about 5.30 pm. He said that Mr Stewart was inside the house when the two men arrived on the front veranda. After he called Mr Stewart from the toilet to the front door he could not hear his father’s voice and he didn't recall when he saw him again that evening. He did not give evidence that he saw the two men’s vehicles at the front of the house when he arrived home.
Mr Leno Gugiatti gave evidence that as a consequence of hearing that the land was going to be auctioned he decided to pick up a tractor he and his father had lent to Mr Stewart. On a Saturday morning in April 1994 he called Mr Stewart and arranged to pick it up that afternoon. He said that he and his father arrived at the land at sometime between 5.00 and 5.30 pm. He noticed two vehicles outside the home. One was a light coloured Commodore which he thought he recognised as belonging to Max Brandenburg. He asked Mr Stewart if he had visitors and Mr Stewart said that Mr Brandenburg and Mr Jackson were visiting. In this last respect either Mr Gugiatti is reconstructing events or Mr Stewart's evidence is not to be believed as according to Mr Stewart's evidence he had not met Mr Jackson at this point and did not know him as anything other than a client of Mr Brandenburg. He said it took 20‑30 minutes to jump-start the tractor and leave. He did not see the visitors or, apparently, Bradley Stewart during this time. He then left.
Mr Gugiatti said that he had been asked to recall these events in 2001. He denied having discussed the case with Mr Stewart despite Mr Stewart's evidence that they had done so. He was very clear on the events at the land on the day in question but very vague with respect to the details of events on other days, when there was no reason for such differences. For example he had little recollection of events on the day he loaned Mr Stewart the tractor or the day he first spoke to Mr Stewart’s solicitor. I found his evidence to be unsatisfactory in these respects and that reflects poorly on his credibility. Consequently I am not prepared to rely on his evidence as being corroborative of Mr Stewart’s evidence that Mr Brandenburg and Mr Jackson were inspecting the block on their own.
In my opinion neither the evidence of Mrs Stewart nor the evidence of Bradley Stewart corroborates Mr Stewart's evidence that he did not inspect the land with Mr Brandenburg and Mr Jackson. It is possible that the occasion they gave evidence of was not the date of inspection. Even if it is the right occasion, it is possible that Mr Stewart accompanied the two other men on the inspection when he went outside the house and was not in view of either Mrs Stewart or Bradley Stewart. I acknowledge that this scenario would not be consistent with either Mr Bradenburg's or Mr Jackson's evidence as to how the three men met each other on the day. However my recitation of the evidence is sufficient to demonstrate that there are considerable discrepancies between the different accounts. This is not surprising after a period of over 7 years. As a result of the time lapse I do not believe that it is reasonable to expect that witnesses, even if they are trying to honestly recall events, will be able to recall peripheral details such as times and who arrived at a meeting first.
I accept the evidence of Mr Jackson and Mr Brandenburg that Mr Stewart accompanied them on the inspection. As a matter of common sense in the absence of any survey or survey markings the presence of the owner of the property would be required on such an inspection. I also take into account that there is no evidence that Mr Jackson and Mr Brandenburg colluded in this respect and it seems unlikely that both would independently recall that Mr Stewart was present if in fact he wasn't. A further matter is the fact that at the subsequent site meeting in September (discussed later in these reasons) Mr Stewart had a golden opportunity to deny that he was at the April site inspection. I am not satisfied as to his explanation for not doing so. I find his behaviour on that occasion is consistent with my opinion that he was present at the April site inspection.
As to what was said during the inspection, there is no evidence to justify a finding that the alleged second representation was made.
In respect to the alleged third representation, I cannot resolve some of the conflict between Mr Jackson and Mr Brandenburg. However I accept that Mr Jackson did ask where the boundary was or boundary pegs were and Mr Stewart did say words to the effect that the boundary was here and that at the time he was either indicating the boundary to be on the point the men were standing (Mr Jackson's version) or at the most a point 10-15 metres in front of them (Mr Brandenburg's version), certainly not a point anywhere close to the actual boundary which must have been about 40‑50 metres in front of the men. I find that it was not obvious that the point that Mr Stewart indicated was not dry land. In fact it appeared to be dry land. This is apparent because neither Mr Jackson nor Mr Brandenburg said that the land they were standing on was damp. Neither do they relate any discussion about the extent of inundation on the land. Something I feel sure that Mr Jackson would have raised if the inundation was apparent.
I accept that at the time and immediately after that representation Mr Brandenburg did not say anything to dispute what Mr Stewart said. This finding is based on Mr Brandenburg's evidence. He did not say that he had contradicted Mr Stewart. Secondly under cross examination he expressed a view that he thought it was the purchaser's business to find out what was going on in regards to the boundaries as he wasn't a surveyor, he was a real estate agent.
Further I accept Mr Jackson's evidence that Mr Brandenburg actually expressed agreement with Mr Stewart. This is because I am of the opinion that when Mr Brandenburg and Mr Stewart had originally inspected the property and discussed the location of the boundary, they would have agreed upon its likely location. It would have been natural then for Mr Brandenburg, who was very keen to progress the sale, to express concurrence with Mr Stewart when Mr Stewart identified the same general area to Mr Jackson.
The second defendant’s case is that at this inspection Mr Stewart told Mr Jackson that ½ to ¾ of an acre of the land was underwater. I am not able to find that that was said. First it would be contrary to Mr Stewart's own evidence as he says that he was not present. Secondly it would be contrary to Mr Jackson's evidence. I accept that that was what he may have intended to convey at the meeting with the gesture of his hand but Mr Jackson's behaviour after that meeting is simply inconsistent with him having been explicitly told that ½ to ¾ of an acre of the land was under water.
I accept that Mr Brandenburg was a witness who was on most occasions genuinely attempting to the recall conversations that took place at the relevant times. However his demeanour in the witness box, including his sometimes needless aggression when he was being questioned, means that I am reluctant to accept his evidence where it conflicts with other evidence and the logical inferences that flow from that evidence. In making this finding I have made appropriate allowances in his favour for his admitted hearing disability. Nonetheless this disability is relevant to my assessment as to whether his evidence as to what was said on particular occasions is reliable.
Mr Jackson said he accepted what Mr Stewart said and continued with the purchase. On 2 May 1994 Chisholm entered into a contract to purchase the land for $480,000. Mr Jackson was a director of Chisholm as well as the plaintiff. That contract was subject to the purchaser having 21 days from the date of acceptance to carry out a feasibility study to investigate possible commercial developments to the plaintiff's satisfaction.
Whilst the feasibility study was being prepared the first defendants were free to and did continue to advertise the property for sale by auction in The West Australian newspaper.
The property was advertised on 7, 14, 18 and 21 May 1994. The advertisements are identical in that they advertise the property as being;
"8½ Acres Council Approved
Commercial Development
Beautifully Situated For
Entertainment/Tourism
Enterprise Presents A
Rare Opportunity To
Acquire a Substantial
Land Holding in Heart of
Rapidly Expanding Areas."
The advertisements then said for full details contact Max Brandenburg.
Mr Jackson says, and I accept, that he read these advertisements close to the dates upon which they were published (the alleged first representation).
Meeting on 23 May 1994
On 23 May 1994 the plaintiff entered into a contract to purchase the land for the sum of $480,000. In effect Mr Jackson and his associate, an accountant, Mr Brian Godfrey decided for various reasons that are not relevant to the issues, to substitute the plaintiff for Chisholm as the purchaser because the plaintiff would be a better corporate entity to use to purchase the land .
The contract was signed during a meeting on 23 May, held in Mr Jackson's office. Mr Jackson, Mr Godfrey, then a newly appointed director of the plaintiff, and Mr Brandenburg were present. Mr Jackson gave evidence that there was general discussion about the project the plaintiff intended to put on the land including use of the full area of land, putting on a reception centre and mini golf course. In cross-examination he did not give any further details.
Mr Godfrey gave evidence that there were general discussions with regards to the project. He said that a schematic site plan of the development was shown to Mr Brandenburg. He said that the schematic drawing showed on the front section of the block the proposed restaurant-motel area, function centre and so forth. He did not think that the rear section showed the detailed golf course because the detailed plan was not received until after 23 May. Rather he thought something along the lines of the words "Proposed golf course" were on the drawing. He said he thought that Mr Jackson made it quite clear that they were using all the land that was available, except for a road reserve at the very front section. He said that the discussion went on for 10-15 minutes before the contract was written up. Later in his evidence he said that the discussion took 5‑10 minutes. He said that Mr Brandenburg did not say anything about a problem with using all the land and that he had commented that the proposed development "seemed pretty good".
In cross-examination he said that he recalled Mr Jackson saying that they would be using the total land. He said that 7 years is a long time, but he did recall it.
Mr Brandenburg also gave evidence about the 23 May meeting. He said that he had spent the day anxiously waiting for Mr Jackson to call as to that date the sale was his largest. He denied that he had been shown the plan of the development prior to the contract being signed. He said that either later that day or a day or two later Mr Jackson had shown him the plan.
In cross-examination he said that when he was shown the plan he knew that the plaintiff intended to use the whole of the property. He said that "alarm bells" did not ring about the plan because as far as he was concerned Mr Jackson knew that there was some of the land under water. After that evidence there was a confusing exchange between the plaintiff's counsel and Mr Brandenburg. The result of it was that Mr Brandenburg could not recall specifically telling Mr Jackson that a portion of the land was under water but if he hadn't he knew that Mr Stewart had told him in April on the day of the site inspection. As I have already said I do not accept that evidence. I believe it is more likely that Mr Brandenburg was not aware that the ½ to ¾ of an acre of land that he thought may be submerged would impact on the use of the whole of the land for the proposed development. This is because the plan he was shown had no detail of the golf course which was to be situated on the southern third of the land.
A review of this evidence discloses that the witnesses did not say, as the statement of claim alleges, that Mr Brandenburg "orally advised" Mr Jackson and Mr Godfrey that it would be able to use the whole of the land for commercial development. Neither is there evidence from which I could infer that this was said or implied. There is thus no evidence that I can identify as supporting the alleged fourth representation.
The completed Contract for Sale of Land by Offer and Acceptance compromising one page written on both sides was admitted into evidence. The terms were for a purchase price of $480,00 with settlement to take place on 12 August 1994. This contract incorporates the 1991 Joint Form of General Conditions for the Sale of Land. This latter document is not in evidence and no party sought to rely upon any part of it to establish or exclude liability.
I have earlier referred to a feasibility study. This was for the development of a reception centre, accommodation, restaurant and leisure facilities including a par 2 golf course on the land. This was Chisholm’s and subsequently the plaintiff's proposal for the development of the land. The evidence I heard established that the plaintiff planned to construct a par 2 golf course on the southern portion of the land closest to Lake Joondalup, with the remainder of the development on the land to the north.
A feasibility report was commissioned from Brian A. Miles & Associates ("Miles") and according to the date on the report delivered to the plaintiff on 25 May 1994, 2 days after the contract for sale was entered into. It says that it is a "feasibility report and valuation". Somewhat surprisingly the report does not disclose that any of the land was under water. It says:
"The block slopes very gently from the road frontages down to Lake Joondalup reserve. The sandy nature of the soil provides a well drained building site."
There is reference to a par 2 golf course being part of the proposed development. However the attached plan does not show where this is to be situated on the land.
The plaintiff also obtained very general cost estimates from a golf course designer for 3 golf course options as part of the proposed development of the land. I note that the estimates do not refer to any of the land needing to be resumed from the Lake prior to its development.
The Contour Survey
In addition the plaintiff commissioned Automated Surveys Pty Ltd ("Automated Surveys") to complete a "detail/feature survey" of the land. This was more commonly referred to by witnesses as "the contour survey" and I will also use this term to distinguish it from "the repeg survey" which was carried out some months later. The contour survey was completed and received by the plaintiff on or about 3 June 1994. I am satisfied that Mr Jackson received it close to that date. The survey consists of a single page survey showing the external boundaries and the physical features of the land, including large trees, buildings, fences and the dam shown in outline. Significantly the survey contains contour lines running across (approximately east-west) the property from the northern boundary down towards the southern boundary. The contour lines finish about ¾ of the way down the land and thereafter the survey of the land is blank except for the words "PAPERBARK TREES/DIA 0.1-0.3/ON EDGE OF SWAMP". These words are typed a third of the way between the last contour line and the southern boundary of the land. Paperbarks are not mentioned as growing on any other part of the land. I accept that paperbarks are commonly known as being trees that grow near water.
Several issues arose with respect to the contour survey. The defence case is that once Mr Jackson received this survey he must have been on notice that the southern portion of the land was under water. Their argument is that this is, in effect, what the survey says. They point out that for a significant portion of the length of this action the plaintiff failed to discover the survey or acknowledge its existence. This the defendants say shows that the plaintiff was aware of the logical inference arising from the survey.
Mr Jackson says that although he received the survey he did not appreciate that a portion of the land was submerged. He said that when he looked at it he thought that it was incomplete because it stopped 90 per cent down the page. He said he thought that the surveyor had not been able to complete the survey because Mr Brandenburg had telephoned him and asked him to remove the surveyors from the site. He said that he assumed that the first defendants did not want the surveyors on the land prior to completion of the sale. He said that he had contacted the surveyors and asked them to leave.
There was evidence that in fact the first defendants had not requested that the surveyors leave but merely that they should request permission to go onto the land prior to doing so. This is an understandable misunderstanding between Mr Jackson and the first defendants.
As to the failure to discover the survey, Mr Jackson's evidence was that he discovered whatever was asked for. This does not appear to be the case as Mr Godfrey's evidence is that he spoke to Mr Jackson when the issue of discovery of the contour survey was raised and Mr Jackson told him that the survey was incomplete. Mr Godfrey appears to have assumed from that comment that a survey document had not been produced. It was only because the defendants were able to insist that one did exist because of proof of that fact in related documents from Automated Surveys that eventually Mr Jackson produced the survey.
Mr Jackson's evidence in this regard is unsatisfactory. I am satisfied that Mr Jackson did not want to discover the survey. The only reasonable inference open to me is that that was because he believed that it did not assist the plaintiff's case. I am not prepared to draw the added inference that it was because he was trying to hide the fact that he knew of the submerged land when he received the survey in June 1994.
This finding reflects adversely on Mr Jackson's honesty. However generally Mr Jackson's evidence as to what was said at the times the alleged representations were made and at the September site meeting (referred to later in these reasons) is reliable. There are two reasons for this. First his conduct, which was in most cases proved by objective evidence, was consistent with what he said was represented to him over the course of the purchase of the land. Secondly there was no indication in his evidence that he was attempting to exaggerate or embellish the representations that the plaintiff alleges were made to it.
I accept Mr Jackson's evidence that he failed to appreciate when he received the survey in June 1994 that a portion of the land was submerged. The reasonableness of that view is an issue that I will discuss later. The reason why I accept that evidence is because, if he did appreciate or suspect that, subsequent events suggest that he would have taken steps to complain to the first defendants and extricate the plaintiff from the purchase. The fact that he continued with the sale and did not complain until he received the repeg survey after settlement strongly suggests that before then he was not aware of the submerged land.
The defendants submit that Mr Jackson's behaviour is none the less consistent with knowledge of the existence of the submerged land in that Mr Jackson believed that the plaintiff was purchasing the land at a discounted price because of the submerged land. The valuation evidence does not convince me that the plaintiff believed that it was buying the land at a discounted price.
The absence of the mention of any submerged land in any documents produced by the plaintiff prior to the receipt of the repeg survey and its vociferous and timely complaints after the receipt of that survey persuades me that the plaintiff, and particularly Mr Jackson, did not know of the existence of the extent of the submerged land after the April site inspection and prior to the receipt of the repeg survey. I am satisfied that Mr Godfrey was also ignorant of the submerged land until the plaintiff received the repeg survey.
After receiving the contour survey the plaintiff continued to prepare documentation for investors and its application to local government for development approval.
At the beginning of August 1994 Mr Godfrey instructed Automated Surveys to remark the boundaries of the land ("the repeg survey"). Under the apprehension that the plaintiff was not permitted to allow surveyors onto the land until after settlement he gave instructions that the survey was to be done after 12 August, the proposed settlement date. Other problems then delayed the completion of the survey. The plaintiff did not insist upon the survey being completed prior to settlement.
The purchase was completed on 16 August 1994.
On or about 17 August 1994 the plaintiff submitted an application for development approval to the local government. The application did not refer to the submerged land but showed an outline of a proposed 5-hole par 2 golf course and practice range on what is now known to be submerged land.
On or about 2 September 1994 the plaintiff received the repeg survey. This document clearly showed that on the western boundary approximately 45 metres of the land was under water and on the eastern boundary approximately 60 metres was underwater. The certificate did not attempt to indicate where the waterline was on the remainder of the land. I accept that the water line will alter with the seasons and the rate at which the surrounding area is developed. It will also alter across the property depending upon the contours of the land. However I am of the opinion that as the evidence is that the land falls gradually from north to south and the contours of the northern half of the land are fairly uniform from east to west there is unlikely to be more than this 15 metre variation in the water line across the property.
The effect of Mr Jackson's evidence was that it was only when he received the repeg survey that he realised that the southern portion of the land was under Lake Joondalup. He said that if he had known this at the time he would not have entered into the contract "for that sort of money". He said that he didn't know whether the plaintiff would have proceeded with the purchase at all. Mr Godfrey said that if he had known about the submerged land the plaintiff would not have entered into the contract "at that point of time". He said, "If we had been aware of that then we would have had to redo all our feasibilities to see whether it was worth doing anything, and obviously not at the price that we paid for it."
The 29 September 1994 site meeting
Upon discovering the existence of the submerged land, Mr Jackson contacted Mr Brandenburg to arrange another site meeting. It apparently was delayed because somebody was on holidays and eventually took place on or about 29 September. Present were Mr Jackson, Mr Godfrey, Mr Brandenburg, Mr Stewart and Mr Levitt who was also a representative of the second defendant. Later Mr Davey, the second defendant's principle arrived.
Mr Jackson said he said to Mr Brandenburg, that he wanted to "go back to where we were shown." They were taken back to the point on the block they had been at on the April site inspection. Mr Jackson said he said to Mr Brandenburg, "How come the boundary is out in the lake system?" He said there was no real answer given to him. He said that everybody was in agreement that was the spot that they had gone to on the April site inspection. Mr Davey, said, "Put it in writing to us." They all then left.
Mr Godfrey essentially confirmed Mr Jackson's version of this meeting. He said that Mr Stewart had said that, "This is where I thought it was," meaning the boundary and the spot they were standing.
Mr Stewart said that he was requested by Mr Brandenburg to attend a site meeting on 29 September 1994. He agreed that the above named people were present. On the way to the back of the block he asked Mr Brandenburg what the problem was. He said there was a problem with the back boundary. They all then walked to the bore, which on my assessment must be just north of the waterline slightly to the south west of the old dam shown on the contour survey, and they then walked to the western boundary. Mr Stewart said Mr Jackson presumably indicating south into the lake said, "What would you say if I said the back boundary was approximately 40 to 50 metres out that way?" Mr Stewart said he did not say a word and he didn't take much notice of what anybody said after that.
In cross examination it was put to Mr Stewart that he was asked by Mr Jackson "You told me that's where the peg was," and that Mr Stewart had said in response "I always thought it was around there somewhere." Mr Stewart said that Mr Jackson might have asked that but that he did not offer any response positive or negative.
Mr Brandenburg said they all walked down to the south west corner and Mr Jackson said, "Now, where are the boundaries, Peter?" Referring to Mr Stewart. Mr Stewart then made the same gesture as on the April site inspection (that is gesturing to an area 10-15 metres in front of him) and said, "I always understood they were about there." Mr Jackson then said, "They're a long way from there, mate." Mr Stewart responded, "I always thought they were about there."
In cross-examination he said he recalled Mr Jackson saying, "it's about 50 metres out there." He said Mr Stewart looked shocked.
That same day the plaintiff wrote to the second defendant. The letter says in part,
"Mr Stewart's comment that he thought the boundary was in a particular position is acknowledged, however this does not alter the fact that that we now have approximately 4,500 square metres of unusable property. This is in contrast with the representations made on sale of the property whereby Mr RJ Jackson was advised that the property was some 8 ½ acres and that the area in its entirety consisted of usable land."
The letter went on to request Mr Davey's comments as to how the plaintiff's problem, that is its inability to effect the development proposal in its entirety, could be rectified.
The letter was passed onto the first defendants and they replied to the second defendant on 29 October 1994. The letter referred to having received advice from the then Ministry of Fair Trading. It then said,
"Advertised as a property for auction, the onus is on the prospective purchaser to satisfy himself of all aspects pertaining to the property concerned. As a purchaser via private treaty prior to auction the onus lies with the advertiser that the property is as advertised. Your company advertised the property the property so if Mr Jackson and his company feel any misrepresentation has taken place then they must take the issue up with you."
What is notable is Mr Stewart's concession in evidence that Mr Jackson may have put to him at the September site meeting that he, Mr Stewart, had made a previous representation about the position of the boundaries. Mr Stewart's evidence is that he had not made any such representation. Despite this he said in evidence that he did not reply to Mr Jackson's allegation. This alone is difficult to understand. A normal reaction would have been to immediately say that he had never made such a representation, if that was the truth. If there was any uncertainty as to what Mr Jackson was referring to it would have been natural to clarify the allegation with him. But Mr Stewart says he did not do that; rather he says he remained mute.
Then again in his reply to the plaintiff's letter of 29 September Mr Stewart did not refute the allegations made therein. His reply was essentially an attempt to blame the second defendant for whatever problems had been created by the plaintiff’s misunderstanding as to the location of the boundaries rather than a denial that the misunderstanding existed.
I find Mr Stewart's explanation for his failure to deny the allegations levelled at him unbelievable. Whilst there may be some reluctance to get involved in an argument about who said what and when, a complete failure to even attempt to put what he now says is his side of the story is a great deal more difficult to understand. The inference that I draw is that in fact Mr Stewart knew at the time of the September site meeting that he misstated the location of the boundaries during April site inspection and that he also knew that he had as good as acknowledged this during the September site meeting. These are matters that I have taken into account in determining what occurred during both site meetings.
After receiving the repeg survey, the plaintiff advised the local government that it was deleting the proposed golf course from its development application. The local government sent the development application to the Department of Environmental Protection for its comment. On 22 October 1994 the Department replied with a recommendation that the buffer or a strip which extends from where the southern boundary is to one metre above the highest known water level around the lake wetlands should be provided for. A number of reasons were given for this recommendation all of which were related to the location of the proposed development to the wetlands. This letter was sent to the plaintiff and that was the first time it became aware of the likely condition for a buffer on the development approval. It appears to be common ground that the development application was subsequently refused although no formal proof of that or the reasons for the refusal were tendered in evidence. Ultimately the plaintiff did obtain development approval for a commercial development on the land.
Subsequently the plaintiff has put the land up for sale and auction. It has been on the market for 4 or 5 years and there has been little interest in it from prospective purchasers. It was auctioned at one stage but no genuine bids were received. Mr Jackson gave evidence that a company called Hebbard Nominees did enter into a contract to purchase the land but it did not pay a deposit or complete the purchase. The plaintiff has considered other schemes to develop the land but has "shied away from them".
The Law
Negligence
Negligent misrepresentation causing purely economic loss is actionable as a breach of a tortious duty of care.
Such a duty of care will only arise where there is a special relationship between the person who makes the misrepresentation and the person who receives it. In the leading case of Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 569‑572 Barwick CJ said that in order for such a duty of care to exist:
"the speaker must realise or the circumstances be such that he ought to have realised that the recipient intends to act upon the information or advice in respect of his property or of himself in connection with some matter of business or serious consequence".
Barwick CJ also said:
"the circumstances must be such that it is reasonable in all the circumstances for the recipient to seek, or to accept, and to rely upon the utterance of the speaker. The nature of the subject matter, the occasion of the interchange, and the identity and relative position of the parties as regards knowledge actual or potential and relevant capacity to form or exercise judgment will all be included in the factors which will determine the reasonableness of the acceptance of, and of the reliance by the recipient upon, the words of the speaker."
These principles were recently affirmed by the High Court in the case of Tepko Pty Limited v Water Board [2001] HCA 19.
Thus it can be seen that these principles are more easily satisfied when the information or advice is requested rather than volunteered. Such a duty is not usually imported where information is provided to the community at large; San Sebastian Pty Ltd v Minister Administering Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340. Neither is it usually imported in respect to commercial advertising; Lambert v Lewis [1982] AC 225 at 264.
The law does not require representations to be true – only that the maker takes reasonable care not to mislead. In this respect the law does not require the maker to make adequate enquiries before making a statement. Rather the question is whether the maker gave the recipient reason to believe he had made such enquiries or whether in the circumstances it was reasonable for the recipient to believe that the maker had made adequate enquiries before providing the information.
As to what constitutes a misrepresentation, silence may constitute a misrepresentation in a situation where only an incomplete disclosure is made. However this will only be true where the criterion to which I have already referred exist. That is the speaker must have assumed responsibility to supply the information and the recipient must have relied upon him doing so.
Any negligent misstatement must be proved to have caused the recipient's loss. That is the reliance must be both foreseeable and also actually occur. Relevantly this will not be the case where the recipient would have acted no differently if he had known the true situation; JEB Fasteners v Marks Bloom & Co [1983] 1 All ER 583. The negligent misstatement may not have been the sole inducing cause of loss. It is sufficient so long as it plays some part in contributing to the loss.
Breach of statutory duty
Section 10(1) of the Act states that a person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Section 12(2)(b) of the Act states that a person shall not, in trade or commerce, in connection with the disposal, or the possible disposal, of an interest in land or in connection with the promotion by any means of the disposal of an interest in land make a false or misleading misrepresentation concerning the nature of the interest in the land, the price payable for the land, the location of the land, the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land.
Section 79 of the Act states that a person who suffers loss or damage by conduct of another person that was done in contravention of either of the above provisions may recover the amount of the loss or damage by action against the other person or against any person involved in the contravention.
For there to be the necessary causal relationship between a contravention of the Act and loss or damage, so as to satisfy the requirements of s 79 it is not essential that the contravention be the sole cause of the loss or damage. The representation need only be one of the causes of the loss or damage sustained by a plaintiff. The provision should be understood as taking up the common law practical or common sense concept of causation as discussed by the High Court in the case of March v E & M H StramarePty Ltd (1990‑1991) 171 CLR 506;Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 and Henville v Walker [2001] HCA 52.
Application of the law and facts to the issues
Claim in negligence against the first defendants
1. Did the first defendants make the representations as alleged?
There is no doubt that the first representation was made. The first representation was made by the second defendant in that it arranged for the advertisements to be placed in the newspaper. The first defendants, having authorised the second defendant to place those advertisements and such placement being within the second defendant's authority, are also held to have made the first representation; Richardson v Norris Smith Real Estate Ltd & Ors (1977) 1 NZLR 152 and Thompson v Henderson & Partners Pty Ltd v Bromberger (1989) 51 SASR 431.
For reasons given earlier I have found that the evidence is insufficient to prove that either the second or fourth representations were made as alleged in the statement of claim.
In relation to the making of the alleged second representation there is a lack of evidence that would enable me to be satisfied that that was expressly said by the first named first defendant. Further I am not satisfied that it could be said that the representation was made by virtue of the first named first defendant's failure to speak up whilst Mr Jackson was discussing the proposed development of the land. A relevant factor is that anything Mr Jackson said about the proposed development must have been in general terms due to the date and the circumstances. Silence can only amount to a negligent misrepresentation if the speaker has assumed responsibility to supply the information. Whilst the evidence discloses that on that visit Mr Brandenburg and Mr Stewart knew that Mr Jackson wanted to know where the southern boundary of the land was, there is insufficient evidence to enable me to conclude that Mr Stewart had assumed responsibility for advising Mr Jackson as to the capacity for potential use of the whole of the land as opposed to merely identifying the location of the southern boundary of the land.
With respect to the alleged fourth representation again there is insufficient evidence to enable me to conclude that Mr Brandenburg expressly said anything to this effect. Again, his silence in the face of Mr Jackson's discussion of the plaintiff's proposed development of the whole of the land could not be said to give rise to a negligent misrepresentation because Mr Brandenburg had not assumed responsibility to supply that information on that occasion.
The alleged third representation was made by the first named first defendant in terms that the southern boundary of the land was no more than 10‑15 metres in front of a dry piece of land on which he and Mr Jackson were standing. I also find that it was not apparent that that spot or any other part of the boundary was under water. In fact it appeared to be dry land.
Mrs Stewart, the second named second defendant, did not directly make the third representation. Nor was she present when it was made. However she admitted in evidence that whatever Mr Stewart, the first named first defendant, did in relation to the sale of the property was done on behalf of both of them. She did not suggest that anything said by Mr Stewart about the southern boundary of the land was outside his authority. Thus I find that at the time Mr Stewart directly made the third representation he was acting on his own behalf and within the scope of his agency, as an agent for Mrs Stewart. Consequently both first defendants can be said to have made the third representation.
2. Were the first and third representations false?
In respect to the first and third representations the plaintiff says that they were false because the submerged land is unusable for commercial development, the rear boundary of the land is part of the submerged land and the Department of Environmental Protection required any commercial development to be constructed not less than 50 metres from the land under water.
I do not believe that the representations contained in the advertisement are false by virtue of the submerged land. The advertisement stated that the land comprised "8½ acres council approved commercial development". The land did and does have an area of 8½ acres and there was a council approved commercial development in respect of the land. As the first defendants contend the bird park which was the subject of the approval may have utilised the whole of the 8½ acres. The fact that the commercial development that the plaintiff proposed could not or would be unlikely to be able to utilise the whole 8½ acres is not to the point. There is no representation in the advertisements of the type of commercial development that had been approved for the land.
Even if the approval did not allow all of the land to be used for the bird park, there is nothing in the advertisement which represents that it did. It would be unreasonable for any reader of the advertisements to assume that the council approval allowed the active use of all of the land. It is a matter of common sense and the plaintiff acknowledges that it knew that the relevant authorities only allow a certain proportion of the land to be used for the development and other parts to be set aside as setbacks or buffers between roads and the development, neighbouring properties and the development and the lake and the development.
With respect to the third representation I find that it was false. Even though I accept that Mr Stewart may not have been indicating exactly the point on which the men were standing but rather some point 10‑15 metres in front of them, the boundary of the land was approximately 40‑50 metres in front of the men and under water.
I reject the first defendants' argument that even if a point was identified as being part of the rear boundary on dry land, that was not a representation to the effect that all of the boundary was situated on dry land. The representation was false because it was reasonable to infer from it and the circumstances in which it was made that the boundary was generally above the level of the lake.
However, I agree with the defendants that for the reasons I have given above the identification of this boundary on usually dry land could not give rise to an inference that all of the land was usable for a commercial development.
The other particular of falsity which is alleged in the statement of claim relates to the requirement for the buffer. I do not believe that the representations in the advertisement are false because they fail to refer to the buffer. At the time that the advertisements were published the requirement for the buffer had not been imposed and it certainly had not been imposed on the council approved commercial development that was referred to in the advertisement.
Similarly at the time Mr Stewart represented that the location of the southern boundary was on dry land, the buffer had not been recommended as a requirements for any future commercial development of the land.
3. Did the plaintiff rely upon the representations?
I am satisfied for the reasons given earlier when I was considering the evidence that the plaintiff did rely upon the first and third representations. Whilst the plaintiff may have also relied on other information it received about the land and the feasibility of its project, I am satisfied that it also relied upon the third representation made to it through Mr Jackson.
4. Were the first defendants negligent in making such false representations?
As a consequence of my findings the only representation that was made that was false was the third representation. However, in case I am wrong as to the falsity of the first representation that I have found that was made, ie the first representation, I will also consider whether the first defendants were negligent in making that representation.
With respect to the first representation I am of the view that the law of negligence does not impose a duty upon the first defendants in respect to advertisements that are published in a general newspaper in relation to the sale of land. The representation was not made to the plaintiff in particular. It was made to the community at large. Thus there was no special relationship between the parties and the misstatement (if any) was directed not at, or to, the plaintiff but to any member of the community reading the newspaper. The circumstances do not exist where the defendants ought to have realised that a reader would intend to act upon the information in the advertisement to their detriment and similarly in such circumstances it is not reasonable for the reader to accept and rely upon the advertisement in connection with a matter of serious consequence. Whilst honesty in advertisements is to be encouraged, these advertisements made some very general comments about the land and no reasonable person, as I have said, would believe that they were anything other than a very general guide to the characteristics of the land.
However in respect to the third representation I am of the view that the first named first defendant must have realised or should have known, in the circumstances, that Mr Jackson intended to act upon the information or advice in respect of the boundary of the land. I reject the defendants' argument that Mr Stewart was not aware of the purpose of Mr Jackson's enquiry. At the very least at the outset of the visit Mr Stewart knew that he was accompanying a proposed purchaser on a site inspection. By the time that the men got to the south western boundary and Mr Jackson asked Mr Stewart to indicate where the boundary was, a reasonable person would be aware that Mr Jackson intended to act upon the information provided in connection with a matter of serious consequence, being the proposed purchase of the property.
Further I am of the view that in the circumstances it was reasonable for Mr Jackson to seek, accept and rely at that time upon Mr Stewart's reply. Mr Stewart was the vendor of the property and in the absence of any disclaimer of knowledge on his behalf, it would be reasonable to rely upon his answer to the question as to the location of the boundary.
It could well be, as the first defendant submits, that the location of the boundary was not important to Mr Stewart when he purchased the land. However, at the April 1994 site inspection I find that he was told in general terms of the nature of the development that the plaintiff intended to put on the land and he was then asked where the boundary was. In those circumstances regardless of the importance of the question to him, he should have been aware that it was a matter of some consequence to the plaintiff.
I am therefore satisfied that the first defendants owed the plaintiff a duty of care in respect of the information that the first named first defendant supplied to the plaintiff. I am further satisfied that in making the third misrepresentation the first defendants breached that duty of care. Mr Stewart's complete failure to qualify the information that he provided was unreasonable given that, he now admits, that he did not know the location of the boundary.
As I have stated the law does not require the maker of representations to make enquiries before making a representation. However the first defendants were negligent in that they made a false representation with respect to the location of the southern boundary when they had insufficient knowledge of the facts upon which to proffer an opinion. In the circumstances it was reasonable for the plaintiff to believe that Mr Stewart had made the enquiries as particularised in the statement of claim before providing the information.
Thus the first defendants are liable in negligence for any loss the plaintiff has suffered as a consequence of its reliance upon the third misrepresentation made by the first defendants.
5. What is the measure of damages?
The plaintiff's damages in negligence are to be assessed as the difference between the amount paid for the land and its value at the date of purchase.
It is agreed that the first defendants sold the land to the plaintiffs for $480,000. There is a conflict between the parties as to the value of the land at the date of sale, being 23 May 1994.
The land has a total area of 3.426 hectares or approximately 8 ½ acres. At the date of valuation it had an asbestos home built in 1940 on it. It has subsequently been demolished.
Mr Lamers' valuation
The plaintiff called Mr Ben Lamers, a licensed value. His evidence was that the land was valued at $360,000 at the date of sale. Mr Lamers used the comparative sale method to determine the value of the land.
This valuation was criticised by the first defendants for a number of reasons.
First they said that Mr Lamers had failed to value the land on an “as is” basis in that he did not value the land taking into account the approval that the first defendants had obtained in August 1993. When this was pointed out to him during his evidence Mr Lamers proffered the opinion that the approval would have a marginal impact on the value. Thus the first defendants said that Mr Lamers' valuation could not be accepted because he had not been aware of a crucial characteristic of the land when he valued it and had subsequently only considered it in court in a hasty and ill informed manner. They submitted that the plaintiff had failed to adduce expert evidence as to its loss and had failed to prove its loss; Voss Real Estate Pty Ltd v Schreiner (1998) 70 SASR 545.
I do not accept this submission. When Mr Lamers was advised of the approval he gave his opinion as to the effect this would have on his valuation. He has thus valued the land. However the late and short consideration he gave to the effect of the approval on the value is a factor I should consider in determining what weight to give his valuation. The case of Voss is very different. In that case the plaintiff did not call any expert evidence.
A second criticism of Mr Lamers' valuation was that it ascribes no value to the submerged land. The first defendants submit that this is a further reason why the valuation cannot be accepted as a valuation of the land.
Again I do not accept this submission. To hold such view would be equivalent to saying that whenever a valuer comes to the conclusion, in contradistinction to another valuer's opinion, that part of a parcel of land has no value the first opinion should not be accepted. In my view it is still a valuation that I should take into account and balance with the other valuation evidence.
The first defendants also submit that as the first defendants would not have sold the land for less than $480,000 there was no lost opportunity to purchase it at a lower price. I do not accept that argument. I am unwilling to rely on what the first defendants now express their attitude was at the time of sale. They clearly have a significant interest in saying that $480,000 was their lowest acceptable sale price. The fact is that if the extent of the submerged land was known to both the vendors and the purchasers and, as the evidence disclosed, the vendors and the purchasers were keen but not over anxious to sell and buy respectively I am entitled to assume that a bargain would have been struck at fair market value.
The last complaint raised about Mr Lamers' valuation is that it is based on assumptions about the total area of the submerged land which are based in turn on only two proven measurements. They being the point on the eastern and western boundaries at which the submerged land began. I have already found that it is reasonable to assume that the variation in the northern boundary of the submerged land does not exceed to any significant extent the 15 metres difference between the boundaries on the eastern and western sides. The plaintiff has calculated the area of the submerged land by assuming that the boundary of the lake travelled in a straight line between the eastern and western boundary. Whilst it is a matter of commonsense that it will not do so, for the reason I gave earlier in these reasons, it seems a reasonable approach to take when attempting to calculate the area affected by the lake. In any event the simple fact is that the development potential and thus value of the whole of that area is going to be substantially affected because it is either part of the lake or its banks.
There was also criticism of the plaintiff's calculation of the submerged land as being approximately 5000 m2 . Mr Jackson said that a computer program calculated the area after he had entered the relevant variables. I am prepared to rely upon the figure. In doing so I have taken into account that simple maths says that the area of the submerged land, assuming that the northern boundary is the same length as the southern boundary and the length of the western boundary is the same length as the eastern submerged boundary, is 3958 m2 plus an additional area to take account of the remaining triangular shaped piece of land comprised of the greater amount of submerged land on the western boundary and the additional length in an east west direction due to the shape of the property. This simple analysis indicates that the computer calculation is likely to be correct.
Mr Miles' valuations
The first defendant did not instruct a valuer but called Mr Brian Miles and tendered the feasibility reports and valuations that he had prepared for the plaintiff in respect to the land in 1994 and 1996.
In his 1994 report there is a heading of "VALUATION". Under that heading he has written, "In valuing the subject project …". The project is the development that the plaintiff intended to put on the property. Later under the same heading Mr Miles has purported to value 1.19 hectares of the land approximately at $325,000. In his 1996 report, done on a similar basis, he has valued the land component at $1,225,000.00. The first defendants rely upon these values as proof that the plaintiff has not suffered any loss.
I do not accept their argument. The Miles' reports are not market valuations of the land as it was in May 1994. By their express terms they are feasibility reports and valuations of the proposed project. The value put on part of the land in the reports is, as Mr Miles said in evidence, the value of the land once the project or development was completed. He said it was obtained by working back from the value of the completed project. However he did not explain further how he arrived at the value.
Neither did he describe the significance of placing a value on only 1.19 hectares. The first defendant’s counsel attempted to suggest that if there was a further 1.19 hectares available for development then the value of $325,000 could simply be doubled to arrive at the value of the land. This seems quite erroneous. Obviously the reason why Mr Miles valued 1.19 hectares was because it was the income producing part of the land; that is, the part that the motel units was going to be built on. Doubling the area of the land is not necessarily going to double the income of the land. Using Mr Miles' method the remainder of the land may be worth more, less or nothing at all depending upon its income producing ability. Another detailed analysis would have to be carried out if it was intended to value the remainder of the land.
For the above reasons I am not prepared to rely at all on Mr Miles' valuations as proof of the market value of the land as at 23 May 1994.
The first defendants also said that a comparison of the Miles' valuations showed the money's worth which the plaintiff had within 2 years of the purchase. They submitted that if this was taken into account the plaintiff had not suffered any loss. I do not accept this argument. If which, I do not accept has been proven, the value of the land increased dramatically between 1994 and 1996, any "money's worth which the plaintiff had" subsequent to purchase was a consequence of the value of the non‑submerged land. The plaintiff would have always had this "money's worth" if it had paid fair market value for the land. What it has lost, until compensated by law, is the money that it erroneously paid for the submerged land. There is no evidence that subsequent to purchase the plaintiff obtained any "money's worth" from the submerged land. Thus as I have said, its loss remains.
As I have said, even if I am wrong in this respect I do not accept the premise on which the submission is based, which is that the Miles' valuations can be used as proof of the plaintiff having obtained its "money's worth" from the land. The Miles' valuations are valuations of a project that has not been completed and probably could never be completed due to the existence of the submerged land. They are hypothetical in the extreme.
Lastly, the first defendants submit that the Miles' valuations show the value of a planning approval. I am not prepared to draw that inference. Mr Miles did not say that that was what was reflected in his valuations. It seems to me that what is probably reflected is the price a vendor could ask for the land given the projected income producing capacity of a particular project over the projected capital costs. The development approval may play a part in the resulting value. In some cases it may be significant, for example if it was approval for a guaranteed profitable development. In others it will be less significant. I will later return to the issue of the value of the approval in this case.
Mr Richmond's valuation
The second defendant called Mr Richmond, an experienced licensed valuer, to give evidence. Mr Richmond is vastly more experienced than Mr Lamers. Mr Richmond valued the land as at 23 May 1994 at $467,000. He primarily used the comparative sales method.
Mr Richmond valued the improvements at $5,000. Mr Lamers had not put any value on them as they were subsequently demolished indicating to him that the plaintiff had not valued them. Mr Miles said that he would ascribe no value to them. Of course it is not necessarily true that just because the improvements have been demolished they were of no value. The materials may have been sold as scrap. Also a hypothetical purchaser may have valued them as either providing interim rental income whilst development approvals were being obtained or as a site office and facilities during the construction phase. However, as the first defendant did not test these matters by putting them to Mr Jackson or Mr Godfrey to determine what they intended as at the date of valuation I find that the improvements added no value.
The plaintiff submitted that several of the opinions expressed by Mr Richmond were not supported by factual material; Pownall v Conlan Management P/L (1995) 12 WAR 370. I do not need to consider all the opinions said to be unsupported as some of them relate to issues upon which Mr Richmond and Mr Lamers substantially agree. For example Mr Richmond values the non-submerged land at $120,000 per hectare whereas Mr Lamers attributes a value of $123,000 per hectare to it.
The significant difference between the 2 valuers is in the respective values of the submerged land. Mr Richmond values it at $60,000 per hectare, whereas Mr Lamers says it is worth nothing at all.
The evidentiary issue that is most crucial to this part of Mr Richmond's valuation is the plaintiff's complaint that the first defendants did not produce any factual material to support his opinion that the Ministry for Planning were purchasing inferior land round other lakes for $50,000 per hectare and there was the possibility that the Ministry would also purchase the submerged land. Having regard to its superior location Mr Richmond valued it at $60,000 per hectare.
I agree with the plaintiff that there is insufficient evidence before me to enable me to place great weight on this evidence. Even if I accept that the Ministry has purchased land elsewhere there was no evidence before me that it intended to do likewise around Lake Joondalup or even if it did have such plans when those plans may result in a purchase. In this case, the submerged land would be difficult to develop as it is part of Lake Joondalup and may also require a buffer around it. Therefore there may be little incentive for the Ministry to purchase it as it would be difficult for a developer to make it the subject of a genuine development application.
However there was evidence led from Mr Walsh, from the Department of Environmental Protection about possible uses of the submerged land. He gave evidence that passive recreational infrastructure and low key type access such as walkways could be developed in buffer zones and, it would seem, in the wetlands themselves. Mr Richmond took that into account when determining the value of the submerged land but Mr Lamers did not. Mr Lamers, by not attributing any value to the submerged land, did not take into account that a purchaser may value the existence of a wetlands system on their land even without the possibility of developing it. This may be a value placed on the wetland itself or on the value that it may add to a development planned for the adjacent land, such as a bird park. I accept that as there is an absence of comparative sales for such land, the comparative sales method cannot be relied upon to place a value on the submerged land.
For these reasons I believe that the value to be placed on the submerged land is more than the zero it was valued at by Mr Lamers but not as high as the $60,000 per hectare placed on it by Mr Richmond. For these reasons I place a value of one third of Mr Richmond's value, that is $20,000 per hectare, on the submerged land.
I see no reason to distinguish between Mr Richmond's and Mr Lamers' opinions of the value of the non-submerged land. However Mr Richmond subsequently added 5 per cent to the total value for the prominent corner site. Valuation textbooks generally recognise the added value of a corner site. However the amount of that value is notoriously difficult to determine. In this case I will adopt Mr Lamers' value for the value of the non-submerged land as indicating my general agreement that on top of Mr Richmond's value of $120,000 per hectare there should be some premium for the corner site. However I do not agree that it should be a percentage of the whole of the value of the land, as it does not seem to me that the submerged land has any premium on its value as a consequence of its corner location.
Mr Richmond then added a further $62,000 as being the value of the approval obtained by the first defendants. In doing so he recognised that he had no market evidence upon which to determine the extent to which the approval increased the value of the land. There are two aspects to Mr Richmond's opinion. The first is that the approval increases the value of the land. I accept this view. Even Mr Lamers agreed that it would have some impact. In this regard I accept the 40 years experience that Mr Richmond has in valuing property in and around Perth as being superior to that of Mr Lamers. I have also taken into account that the general tenor of Mr Jackson's evidence was that when deciding to purchase the land the fact that it had approval for a commercial development was a significant advantage. I accept that this would be reflected in the amount that a purchaser would be prepared to pay for the property. I do not believe that this view needs to be supported by factual evidence. It is an opinion that would be arrived at after years of experience rather than as a result of individual valuations.
The second aspect is the calculation of the actual increase in value due to the approval. Mr Richmond says that there is no market evidence to establish what this would be. I accept that opinion. However in making his assessment Mr Richmond does not appear to have acknowledged that the value of this particular approval may be rather less than would otherwise be the case. That is because of the existence of the submerged land and also because the approval itself is for a restrictive type of development and it was conditional. In these circumstances I am only prepared to add $20,000 to the value of the land to reflect the value of the approval.
Summary of Calculations of value of land as at 23 May 1994
Non-submerged land, 2.9260 hectares @ $123,000/ha $359,898
Submerged land, .5 hectare @ $20,000/ha $ 10,000
Value of approval $ 20,000
Total $389,898
6. Did the plaintiff contribute to its loss by its own negligence?
A finding of contributory negligence turns on a factual investigation of whether the plaintiff contributed to its own loss by failing to take reasonable care for its property. What is reasonable care depends on the circumstances of the case. In many cases, it may be proper for a plaintiff to rely on the defendant to perform its duty. However there is no absolute rule. The duties and responsibilities of the defendant are a variable factor in determining whether contributory negligence exists and, if so, to what degree; Astley v Austrust Ltd (1999) 73 ALJR 403 at par [30].
The standard of care required of a plaintiff is determined objectively by reference to what a reasonable person would have done in all the circumstances of the case. The beliefs or lack of knowledge of the plaintiff cannot prevent a finding of contributory negligence if a reasonable person in the same circumstances would have taken the steps to protect his interests; Ibid at par [35].
The first defendants allege that the plaintiff has contributed to its loss by its own negligence or that of its director, Mr Jackson. The particulars of this plea have been given above.
In effect the defendant argues that the plaintiff contributed substantially to its own loss and damage by failing to make any of the enquiries that a prudent developer in the position of the plaintiff would have made and by disregarding the wording on the contour survey and failing to make any enquiries in relation to it.
I agree with the first defendants' submission.
Mr Jackson was an experienced developer who had been living and working in the Wanneroo area for a long period. A reasonable experienced developer, would have taken greater care to protect itself from the potential financial loss that it could suffer as a consequence of the southern boundary of the land adjoining Lake Joondalup and the parks and recreation reserve. An experienced developer would be aware that the potential consequences could not only include inundation of part of the land but also development controls and restrictions being put on the land because the land adjoined the lake and reserve.
A reasonable prospective purchaser in the plaintiff's position would have not only made enquiries of the vendor as to the location of the boundaries of the land but would have also made enquiries with such bodies as the Department of Environmental Protection, Conservation and Land Management, the Ministry for Planning and the local authority. If it had done so it is likely that it would have discovered, prior to entering into the contract, that the southern boundary of the land was submerged. It probably would have also discovered that there would have been additional planning restrictions placed on the land in any event by virtue of its common boundary with the lake and parks reserve.
There is also the allegation regarding the survey of the land. First the plaintiff contributed to its loss by not obtaining a boundary survey prior to entering into the contract or alternatively not making the contract conditional upon the completion of such a survey. This is because any reasonable person knowing, as the plaintiff did, that the land abutted the lake would appreciate the importance of ensuring the boundary was not affected by the lake. The common boundary with the lake and parks reserve was a matter that was peculiar to this land and it was a peculiarity that was known to the plaintiff.
Secondly, after the contract had been entered into and the plaintiff commissioned and received the contour survey the plaintiff contributed to its subsequent loss by failing to have regard to the terms of the survey. I am not satisfied that Mr Jackson acted reasonably in believing that the absence of contour lines on the southern portion of the contour survey merely indicated that the survey was incomplete. This, in my view, is not the logical inference to draw from the contour survey. At the very least it could be said that the contour survey was ambiguous and the negligent failure of the plaintiff to make any enquiries of Automated Surveys as to the absence of the contour lines on the southern portion of the land contributed to its subsequent loss. At the time that it received the contour survey, the plaintiff had presumably paid a deposit of $5,000 on the land but settlement was still some two months away. If the plaintiff had either drawn the logical conclusion from the contour survey or alternatively made enquiries to satisfy itself as to that conclusion then it is probable that it would not have completed the purchase and neither would the first defendants have been in a position to force it to do so. This then is another aspect of its contributory negligence.
It was submitted by the defendant that Mr Jackson's negligence with respect to the contour survey was reasonable because he had been told that the first defendants did not want any surveyors on the land. This it is said justified Mr Jackson believing that the contour survey was not finished. It also justified Mr Jackson not proceeding to obtain a survey prior to settlement. I have already dealt with the issue of Mr Jackson's failure to make any enquiries with respect to the meaning of the contour survey. Neither am I satisfied that these explanations justify the failure to obtain a survey prior to settlement. The error on behalf of the plaintiff was in not ensuring that as part of the contract it was entitled to obtain a survey of the property prior to settlement. The plaintiff's failure to query why a survey could not be completed prior to settlement with either Mr Brandenburg or the first defendants again shows a further lack of care taken to protect the plaintiff's own interests.
The plaintiff was exposed to loss due to its own failure to assess the development potential of the land and due to the first defendant's breach of duty. These defaults were concurrent and successive causes of the loss sustained. In terms of share of responsibility, I am of the view that although the plaintiff's failure was significant, it was the first defendants' failure to qualify the representation they made about the location of the southern boundary which apparently lulled the plaintiff into a false sense of complacency about its need to take reasonable steps to assess the development potential of the whole of the land prior to completion of the purchase. Consequently I am of the opinion that the plaintiff's damages should be reduced by 35 per cent in order to reflect the contribution that its own negligence made to the loss that it has suffered.
In coming to this conclusion I have taken into account the cases referred to me in submissions. The first defendants referred to the case of Argy v Blunts & Lane Cove Real Estate Pty Ltd (1996) 26 FCR 112. I do not accept that this is a case where it could be said that the negligence of the plaintiff was a complete intervening cause of the plaintiff's loss. Rather the plaintiff's damages should be reduced to take account of its negligence. I should add that it appears that contributory negligence was not pleaded in Argy's case and the defendant failed to prove that the plaintiff's conduct was an intervening cause of damage.
Claims in negligence and breach of statutory duty against the second defendant
As a consequence of the above findings it is not necessary for me to detail many of the reasons for my conclusions with respect to the liability of the second defendant.
1. Did the second defendant make the representations as alleged?
I have already also found that the second defendant made the first representation.
For the reasons given above, I find that the second and fourth representations were not made.
As to the third representation I have found that the first named first defendant made that representation. I have also found that Mr Brandenburg indicated at the time his agreement with the first named first defendant. To this extent Mr Brandenburg, who was acting within the authority of his employment with the second defendant, also made the third representation.
2. Were the first and third representations false?
I have found that I am not satisfied that the first representation was false.
However I have found that the third representation was false.
3. Did the plaintiff rely upon the representations?
I have found that the plaintiff did rely upon the third representation.
4. Was the second defendant in breach of a statutory duty not to make such a false representation?
At the time the third representation was made, the second defendant was the first defendants' agent and was conducting the business of representing the vendor in the sale of the land. It therefore was acting in trade or commerce and for the reasons that I have given I am satisfied that it engaged in conduct that was misleading in making the third representation. Thus it has breached its statutory duty under s 10(1) of the Fair Trading Act1987.
For the same reasons it has also breached its duty under s 12(2)(b) of the Fair Trading Act 1987 in that it has made a misleading representation concerning the characteristics of the land in connection with the possible disposal of an interest in the land.
As I have either found that the other representations were not made or were not false, misleading or deceptive I do not have to further consider them.
5. Was the second defendant negligent in making such a false representation?
Mr Jackson gave evidence that he rang Mr Brandenburg and said that he wanted to know where the back of the block was. He said that Mr Brandenburg said "We'd better talk to Mr Stewart and have a meeting on site". He said that when on site Mr Stewart led the way and indicated where the back of the block was. He was asked whether Mr Brandenburg did or said anything and Mr Jackson said "He was sort of in agreeance with Mr Stewart". Later he said that neither Mr Stewart nor Mr Brandenburg said anything about not being able to use the full extent of the land.
Later in cross‑examination by counsel for the first defendants Mr Jackson said in relation to this inspection that he took the word of the agent that was selling the property and the owner that that the point indicated to him was the boundary and that it was dry land.
Under cross‑examination by counsel for the second defendant it was put to Mr Jackson that Mr Brandenburg had indicated to him that he didn't know where the boundary pegs were and that Mr Stewart would have to point that out. Mr Jackson replied "He would have to get advice from Mr Stewart about it." It was then that the meeting was arranged.
On the basis of this evidence I am not satisfied that the conditions for the existence of a duty of care between the plaintiff and the second defendant have arisen.
It does not appear to me that Mr Brandenburg must have realised or ought to have realised that Mr Jackson would place any reliance upon his agreement with Mr Stewart's information as to the location of the boundary. This is because Mr Brandenburg had made it known to Mr Jackson that such information would have to be sought from Mr Stewart. That is, Mr Brandenburg was not able to provide the information.
Secondly, I do not believe that given these facts it was reasonable for Mr Jackson to rely upon any comment by Mr Brandenburg. This is also because Mr Brandenburg had indicated that such information as to the location of the boundaries would have to be obtained from Mr Stewart. Again the only conclusion a reasonable person would draw from this is that Mr Brandenburg did not know where the boundaries were. Mr Brandenburg had not assumed responsibility for providing the information and Mr Jackson ought to have realised that.
For these reasons the second defendant was not negligent in making the third misrepresentation.
6. What is the measure of damages for the second defendant's breach of statutory duty?
The plaintiff has failed to satisfy me that it has suffered any loss "by" the second defendant's breach of the Act. This is because I am not satisfied that the plaintiff relied upon Mr Brandenburg's agreement with Mr Stewart's identification of the location of the southern boundary of the land. For the reasons I have given in relation to the issue of negligence I am satisfied that it would not have been reasonable for Mr Jackson to have relied upon Mr Brandenburg's agreement. I have also looked at Mr Jackson's evidence to ascertain whether he did in fact rely upon Mr Brandenburg's agreement. Although Mr Jackson refers to having asked both the agent and the vendor, he acknowledges that the answer he got from Mr Brandenburg was that they would have to in turn ask Mr Stewart. Mr Jackson relied upon the information supplied by Mr Stewart not that relied upon by Mr Brandenburg. Any loss suffered by the plaintiff was occasioned by the negligence of the first defendants and by the plaintiff's own negligence and not by any breach of statutory duty on behalf of the second defendant. Thus under s 79 of the Act, the plaintiff is not entitled to recover damages from the second defendant as a consequence of the making of the third representation. The plaintiff's action against the second defendant fails in full.
Indemnity and/or contribution
There are no issues with respect to indemnity and/or contribution as the first defendants' notice to the second defendant only applies if I find the first defendants liable by reason of representations made by the second defendant. For the reasons I have stated above, I have not so found.
Summary of damages payable by first defendants
Summary of damages
Amount plaintiff paid for land $480,000
Less true value of land $389,898
Difference $ 90,102
$ 90,102
Less contributory negligence – 35% $ 31,535
Damages payable by first defendants $ 58,567
The plaintiff also claims interest on its assessed loss. In the circumstances the plaintiff is entitled to interest on the sum of $58,567 at the rate of 6 per cent per annum from 16 August 1994, the date of the settlement, to the date of judgment. I will hear counsel as to final orders.
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