H W Thompson Building Pty Ltd v Allen Property Services Pty Ltd

[1983] FCA 168

Re: H.W. THOMPSON INVESTMENTS PTY. LIMITED
And: ALLEN PROPERTY SERVICES PTY. LIMITED (1983) 77 FLR 254
Nos. NSW G36 and G37 of 1983
Trade Practices Act 1974

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
St. John J.(1)

CATCHWORDS

Trade Practices Act 1974 - alleged misleading conduct - applicant a speculator in home unit purchases - respondent's intention to complete complex of buildings - applicant advised by solicitor - not misleading in the circumstances.

TRADE PRACTICES ACT 1974 Sections 52, 87.

Trade Practices - Misleading or deceptive conduct - Contract of sale - Real property - Vendor intending to erect complex of buildings - Erection of buildings subject to sufficient pre-sales of units - Portion only of complex of buildings erected - Purchaser applies for declaration contract void - Purchaser experienced speculator in strata title units - Purchaser had benefit of solicitor's advice - Whether vendor's conduct misleading or deceptive - Trade Practices Act 1974 (Cth), ss 52, 87.

Evidence - Similar facts - Admissibility - Principles as to admissibility of similar facts evidence.

HEADNOTE

The respondent issued a brochure describing a development named "Tweed Gardens" in terms that commence: " 'PINEHURST', 'ST ANDREWS' AND 'GLENEAGLES' - The three magnificent towers of 'Tweed Gardens' will take up less than three per cent of a parkland site. . . . " After some negotiations with the respondent and perusal of the brochure by the applicants, each of the applicants entered into a contract with the respondent for the purchase of a strata unit in the "Pinehurst" tower building. At the relevant time the respondent had the intention to proceed with the building of "St Andrews" if and when sufficient pre-sales in that tower were made.

The applicants had the services of a solicitor, had experience in speculating in home units and had previously bought units off-the-plan. A clause of the contract gave the respondent the right to rescind the contract if sufficient pre-sales of units in the building "Pinehurst" were not achieved by a certain date.

The applicants alleged misleading conduct by the respondent in breach of s 52 of the Trade Practices Act 1974 and sought, inter alia, declarations that the contracts of sale were void. The applicants alleged that at the time the contract was entered into the respondent had represented that it intended to proceed with the building of three towers when, in fact, it had decided to build only one.

Held: that the applications should be dismissed because: (i) In the circumstances of the instant case, the respondent's conduct was not misleading.

Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, applied.

(ii) Alternatively the applicants did not rely on the alleged misleading conduct of the respondent in deciding to enter into their respective contracts.

Westham Dredging Co Pty Ltd v Woodside Petroleum Development Pty Ltd (1983) 66 FLR 14, followed.

The admissibility of similar fact evidence considered.

Makin v Attorney-General (NSW) (1894) AC 57; Martin v Osborne (1936) 55 CLR 367, followed.

Markby v The Queen (1978) 140 CLR 108; Cooper v The Queen (1961) 105 CLR 177, referred to.

Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23; Gates v City Mutual Life Assurance Society Ltd (1982) 2 TPR 125, not followed.

HEARING

Sydney, 1983, March 11; June 22-24, 27, 29, 30; July 1, 29. #DATE 29:7:1983

APPLICATIONS

Two applications heard together by consent both seeking relief pursuant to s 87 of the Trade Practices Act 1974 (Cth) based upon the respondent's alleged breaches of s 52 of that Act.

D F Rofe QC and D A Cowdroy and J F Kildea, for the applicants.

J M N Rolfe QC and S D Rares, for the respondent.

Cur adv vult

Solicitors for the applicant: Brady Donald & Co.

Solicitors for the respondent: Gadens.

EFF

ORDER

1. The application is dismissed.

2. The applicant is ordered to pay the respondent's costs.

Orders accordingly

JUDGE1

These applications were, by consent, heard together, the evidence being identical in respect to each application, except that the contracts finally entered into related to different strata units in the same building. The applicants in each case seek relief pursuant to S.87 of the Trade Practices Act 1974 ("the Act") based upon the respondent's alleged breaches of S.52 of the Act. The relief sought is a declaration that a contract of sale between the applicants and the respondent in each case is void and for an order that monies paid by way of a deposit be re-paid and for damages, including the costs associated with the contract.

The alleged misleading conduct, within the meaning of S.52, consists of oral and written statements made by the respondent and its agents about a building project known as "Tweed Gardens" at Tweed Heads in the state of New South Wales.

It is convenient to go first to a brochure issued by the respondent, containing an artist's impression of the completed project, consisting of three high rise buildings of twenty-five floors, situated in a landscaped area of approximately sixteen acres, containing a lake, swimming pools adjacent to each of the three towers, tennis courts and various coloured pictures depicting the surrounding area, the sporting and recreational activities available, such as surfing, fishing and the local scenery.

The text of the brochure descriptive of the project itself is in these terms:-
"'PINEHURST', 'ST. ANDREWS' AND 'GLENEAGLES'

The three magnificent towers of 'Tweed Gardens' will take up less than three percent of a parkland side adjoining the lush fairways of the Coolangatta/Tweed Heads Championship Golf Course."

"'Tweed Gardens' is a unique development.

Its three luxurious towers - 'Pinehurst', 'St. Andrews' and 'Gleneagles' - will be set in more than 6.4 hectares (nearly 16 acres) of fully landscaped gardens.

Each tower of exceptional architectural design, will contain a composition of three and four bedroom residences, ranging in size from about 18 squares to 25 squares.

'Tweed Gardens' will set completely new living standards for those seeking the northern sun in terms of comfort, privacy, relaxation and peace.

BUILDING FEATURES

. Twenty-five residential levels
. Two express lifts per tower
. Tinted glazing throughout
. Under-cover parking for two (2) cars per unit
". Lock-up storage
. Large visitors' car park
. Five full-size tennis courts (two floodlit)
. A half-Olympic swimming pool, sauna and spa for each tower
. Fully-equipped children's playground (not too close)
. Large Bent grass putting green
. 1 Kilometre private jogging track
. Uninterrupted views from every window"

The alleged misleading conduct includes the text quoted from the brochure, certain statements made by a Mr. Magill prior to the receipt of the brochure, certain letters, and advertisements in newspapers and journals which reproduced the artists' impression referred to and the text of this brochure.

The applicant, in each case, alleged that, at the time the contract was entered into, that is 23rd December, 1981, the respondent had represented that its intention was to proceed with the building of the three towers when, in fact, it had decided to build only one tower and not to proceed with the other two towers until sufficient sales off-the-plan had been made. Also, it alleged that the respondent represented that there would be available to the occupants of the first tower built (including the applicant), all of the facilities described in the brochure, such as three swimming pools and five tennis courts when, in fact, it was not the respondent's intention to provide all those facilities.

For the respondent, its case was that the conduct, in the circumstances, was not misleading and, in fact, the applicant had not been misled. Further, the respondent asserted that there was no causal connection between the conduct and the respondent entering into the relevant contract.

Mr. Charles Thompson Jnr., who was a shareholder in one of the applicant companies and a joint director with his father of both the applicant companies, was the only person apparently who had dealings with the respondent or its agents. Mr. Thompson Jnr. gave evidence that he had previously speculated in the purchase of units on the Gold Coast of Queensland and he had previous dealings with a Mr. Magill, an employee of the respondent's agents. He says that, on October 30th, 1981, Mr. Magill telephoned him and informed him that his firm was the marketing agent for a three-tower complex at Tweed Heads and he believed that "as a purchase and re-sale, there is reasonable profit in it". A price of approximately one hundred and seventy-five thousand dollars ($175,000) was mentioned and, at Mr. Thompson Jnr.'s request, he agreed to forward details. Mr. Magill also said that it was a unique development in that it was situated on a 16 acre site right beside the Tweed/Coolangatta golf course and that it was a resort-type complex involving five tennis courts, swimming pools, a large landscaped area, with a jogging track and children's playground, and it was complete in that it was a resort.

Mr. Thompson Jnr. subsequently received a typewritten description of the development which contained much of the text which was later incorporated in the brochure, but it is pertinent to note that it was described as a "project".

A further conversation between Mr. Magill and Mr. Thompson Jnr. took place on 9th November, 1981, when Mr. Thompson Jnr. agreed (on behalf of each applicant) to purchase two units at a price which was later increased, and a ten percent deposit was forwarded. At a subsequent telephone conversation, Mr. Thompson Jnr. was informed of a price increase and he says that he gave details of the name and address of his solicitor to Mr. Magill and asked that the contracts be forwarded to that solicitor, who was not the solicitor retained by him to pursue these applications. Although there was dispute as to whether the contracts had been received by Mr. Thompson Jnr. in the mail directly from Mr. Magill's firm, it is clear that they came into the hands of his solicitor some time after 26th November, 1981, with an accompanying document dated 19th November, 1981. That document is in the following terms:-
"TO THE PURCHASER:

Our agent has handed to you with this letter a contract in duplicate for the purchase of the unit which you have selected at 'Tweed Gardens' together with a copy of a notice under the Land Sales Act. We suggest you deliver one copy of the contract to your solicitor and arrange to discuss it with him as soon as possible. If the executed contract is not delivered to our solicitor for exchange within fourteen (14) days we may issue a contract for the unit to another interested party.

We wish in this letter to describe in general terms the documents attached to the contract, our intentions for the final form of the total 'Tweed Gardens' development and the program which we will be following to achieve that form.

The conditions of sale in the contract are designed to enable us to achieve the program. This letter is not intended in any way to override the provisions of the contract and must at all times be read with those provisions in mind.

There is a plan of the building in which your unit will be contained attached to the contract. We intend to construct the three tower blocks in the development in three separate stages. You will see that the contract provides for refund of your deposit with interest if the contract is not completed for any reason (other than your default).

Papers dealing with development of the recreation area have been made available for your inspection. The landscaping and construction of facilities will be substantially completed at the same time as the first tower. Control of this area will be given to the bodies corporate of the buildings as the strata plans are registered. In this way the buyers of the units are taking over management of the area and will be able to decide how best to use and manage it when the development is complete.

As owners of the units you will be entitled to use the recreation facilities on the recreation area in common with each other, your guests and tenants and will be the only persons entitled to do so. It will be subject to a covenant which restricts development to structures consistent with these purposes. This will prevent the land being developed in any other way without unanimous consent of all owners.

Any further details which you or your solicitor require regarding operation of the recreation area may be obtained from our solicitors, Gadens, 175 Pitt Street, Sydney, Telephone [phone] (contact: Mr T Austin)
Yours faithfully,

ALLEN PROPERTY SERVICES PTY. LIMITED"
I shall refer hereafter to this document as "the accompanying letter".

The contracts of sale were in identical terms, except as to the description of the strata units, and were in the form of the 1972 Law Society of New South Wales and Real Estate Institute of New South Wales form, with additional clauses and deletions adapting it to an "off-the-plan" sale. A number of clauses in the contracts deserve reproduction:-
"28. The Purchaser acknowledges that other than as expressly stated in this agreement no representations, inducements or warranties have been made by the Vendor or its agents or representatives relating to the present state or condition or relating to any proposed work or improvements to the property or any part thereof. For the purposes of this clause property shall include the common property and all lots in the Strata Plan."

"39. The Purchaser acknowledges that he is aware that:-

(a) the property and the Building are part of a development which includes buildings and other improvements erected and/or to be erected on adjoining and/or nearby lands which have been designed in such a way that enjoyment of the property, the Building and those other buildings to some extent depend upon the orderly completion of construction of all of the buildings;"

"45. The Vendor will exercise its best endeavours to arrange sales in respect of other of the lots in the Strata Plan. If by the date specified in the Eleventh Schedule the number of binding contracts entered into by the Vendor for the sale of those other lots is not in the opinion of the Vendor (and in this regard the decision of the Vendor shall be final and binding upon the Purchaser) sufficient to justify early completion of construction of the Building then the Vendor may by notice in writing to the Purchaser rescind this agreement whereupon the provisions of Clause 20 shall apply. Any right to rescind given to the Vendor by this clause must be exercised by notice in writing to the Purchaser within seven (7) days after the date specified in the Eleventh Schedule."

"50. The Vendor shall (but not necessarily before completion):-

(a) diligently complete construction of amenities on and landscaping of the land (the "Land") comprised in Lot 4 of annexure "F" hereto substantially in accordance with the plans and model displayed at the office of Ray White (Real Estate) Pty. Limited at 53 Wharf Street, Tweed Heads;

(b) procure the transfer to Dutchmead Pty. Limited ("Dutchmead") of the Land at no cost to the Purchaser or the Body Corporate;

(c) procure the transfer to the Body Corporate or its nominee at no cost to the Body Corporate or the Purchaser of one-third of all shares issued in the capital of Dutchmead;

(d) procure the passing by the Body Corporate of a unanimous resolution amending the by-laws of the Body Corporate contained in the First Schedule of the Act by adding a by-law in the form or substantially to the effect of the draft by-law annexed hereto and marked "G"; and

(e) procure the execution by the Body Corporate of a Deed (the "Amenities Agreement") between the Body Corporate and Dutchmead in the form or substantially to the effect of the copy Deed annexed hereto marked "H".

No objection requisition or claim for compensation will be made by the Purchaser to any of these matters and the Purchaser will if requested by the Vendor forthwith execute a form of proxy authorising the Vendor or its duly authorised representative to vote in the name of the Purchaser at any duly convened meeting of the Body Corporate in respect of any resolution regarding the passing of that by-law, the execution by the Body Corporate of the Amenities Agreement and the acceptance of a transfer of those shares in Dutchmead. The provisions of this clause shall not merge in the transfer on completion."
The Lot 4 referred to in this clause is the area proposed to be for the common use of all occupants of the three buildings.

The general scheme of the contracts was that the purchaser of a unit in a particular tower building would become a shareholder in a body corporate which owned and controlled the block of land and buildings on a particular block delineated on a plan annexed to the contracts. That plan also showed three other blocks which were to be utilised for the second and third towers and the common recreational area, which was to be vested in a body corporate controlled by the bodies corporate which owned the first three-mentioned blocks.

At the time that the contracts were entered into, the respondent had decided to proceed only with the erection of the tower "Pinehurst", a unit of which the applicant in each case had agreed to purchase.

Interest in the proposed second block, "St. Andrews", was such that there was no intention to continue building operations in respect of that block until at least further off-the-plan pre-sales had been made. The only oral evidence called by the respondent was from Mr. Farmer, a project development manager employed by the respondent, whose evidence was to the effect that, at the time the contracts were submitted, any further building work on "St. Andrews" would be delayed until such time as sufficient pre-sales had been made.

In Mr. Thompson Jnr.'s evidence, he asserted that it was his understanding that all the recreational facilities specified in the brochure would be available to the occupants of "Pinehurst". A comparison of the artist's impression on the brochure showing the position of the swimming pools in particular, and the plan annexed to the contract would easily dispel such an understanding. This contention was later apparently abandoned by counsel for the applicants. In any event, I do not accept Mr. Thompson Jnr.'s evidence that that was his expectation for reasons I later give.

Senior counsel for the applicants relied heavily on the alleged misleading conduct of the respondent in failing to specifically state to the applicants, before the contracts were signed, that interest in the second proposed tower, "St. Andrews", was such that there was no intention to proceed with it until such time as sufficient pre-sales off-the-plan had been achieved. In cross-examination, Mr. Farmer stated that the respondent deliberately refrained from making such a statement because it may have caused confusion. I am prepared to accept that the respondent did as little as possible to dissuade prospective purchasers from signing contracts, but my function is to examine the conduct of the respondent in the light of all the circumstances and to consider the respondent's conduct as a whole. I find however, that at the relevant time the respondent had the intention to proceed with the building of "St. Andrews" if and when sufficient pre-sales in that building were made.

From an early stage, it was clearly in the contemplation of the parties that the applicants would have the services of a solicitor, and it must be assumed that that solicitor was of reasonable competence. It is common ground that the contract and the letter accompanying the contract reached the solicitor and that the conditions in the contract, or at least some of them, were the subject of his advice to the applicants' two directors, Mr. Thompson Jnr. and Mr. Thompson Snr. who spent approximately one and a half hours with him discussing the matter. It is the solicitor's function, in a conveyancing transaction, to protect the interests of the parties to the contract who instruct him. Reasonably competent advice must include what the respondent's obligations to the applicants were in each of the contracts. There was not included in those obligations an obligation to proceed with the other two tower buildings. There is no obligation in the contract for all the recreational facilities mentioned in the brochure to be completed. In the accompanying letter, there is a suggestion that the contract be discussed with the proposed purchasers' solicitor. The letter refers to "our intentions for the final form of the total 'Tweed Gardens' development and the program which we will be following to achieve that form.". The next sentence is "The conditions of sale in the contract are designed to enable us to achieve the program.". One of the conditions in the contract, namely clause 45, gives the respondent the right to rescind the contract if sufficient pre-sales of units in the building "Pinehurst" are not achieved by a certain date. In my view, this is a sufficient indication that the development of the second and third buildings is dependant upon pre-sales. The letter then goes on "This letter is not intended in any way to override the provisions of the contract and must at all times be read with those provisions in mind.".

It must be taken into account that Mr. Thompson Jnr. had experience in speculating in home units and had previously bought units off-the-plan, although whether for himself or the companies of which he was a joint director, was not revealed. The contemplation of the parties to this action that a solicitor would be advising the applicants, the subject matter of the contract and the price of one hundred and eighty-one thousand dollars ($181,000) for each unit leads me to the conclusion that the respondent's conduct, in the circumstances, was not misleading. In doing so, I have had regard to what fell from the Chief Justice and Mason, J. in Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd. (1982) 42 A.L.R. 1. At p.6 of that report, Gibbs, C.J. said:-
"Section 52 does not expressly state what persons or class of persons should be considered as the possible victims for the purpose of deciding whether conduct is misleading or deceptive or likely to mis-lead or deceive. It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct. Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must, in my opinion, be regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances. The persons likely to be affected in the present case, the potential purchasers of a suite of furniture costing about $1500, would, if acting reasonably, look for a label, brand or mark if they were concerned to buy a suite of particular manufacture.
The conduct of a defendant must be viewed as a whole. It would be wrong to select some words or act which, alone, would be likely to mislead if those words or acts, when viewed in their context, were not capable of misleading. It is obvious that where the conduct complained of consists of words, it would not be right to select some words only and to ignore others which provided the context which gave meaning to the particular words."

At p.16 of the same report, Mason, J. emphasised the importance "both financially and aesthetically" of the purchase, the subject of the transaction under review.

In the event that I am in error in reaching this conclusion about the respondent's conduct, should an appellate court so decide, I go on to consider whether or not it was in reliance on this conduct that the applicants acted in entering into the contracts. I am not satisfied on the evidence, that it was that conduct which caused Mr. Thompson Jnr. to be in favour of the two applicant companies entering into their respective contracts. His evidence as to the receipt of and reliance on various documents was in conflict with his answers to interrogatories. His co-director, who was also his father and present in court, was not called to give evidence. The applicants' solicitor, in the conveyancing transaction, also was not called and, although Mr. Thompson Jnr. was crossexamined about the discussions he had with his then solicitor, senior counsel for the applicants refrained from re-examination as to the detail of that discussion. Taking all those matters into account, I am satisfied that Mr. Thompson Jnr. did not rely on the alleged mis-leading conduct in deciding that the applicant companies should enter into their respective contracts. The background also, which Mr. Thompson Jnr. confirmed, was that the real estate market was buoyant at the time of entering into the contracts, but depressed at the time for completion is relevant. I am satisfied that these applications were a desperate attempt to avoid completion of the contracts because the market had fallen.

In dismissing the applications, I rely, in the alternative, upon the view I expressed in Westham Dredging Company Pty. Ltd. v. Woodside Petroleum Development Pty. Ltd. & Ors. (1983) A.T.P.R. 40-338 where I held that the definition of consumer in section 4A of the Act was relevant in the interpretation of section 52 for the reasons therein stated. I was not prepared to depart from my reasoning therein despite additional arguments advanced by senior counsel for the respondent.

During the hearing, I made one ruling as to the admissibility of evidence about which I indicated I would later give my reasons. The respondent sought to adduce evidence that other purchasers had been induced to enter into similar contracts because of similar conduct as was relied upon by the applicants. In support of admissibility, the respondent's senior counsel relied upon a decision of Northrop, J. in Mister Figgins Pty. Ltd. v. Centrepoint Freeholds Pty. Ltd. (1981) 36 A.L.R. 23, where that learned judge admitted similar fact evidence of representations made to tenants other than the applicant which representations were allegedly false. At p.28, Martin v. Osborne (1936) 55 C.L.R. 367 at 375-6, the judgment of Dixon, J., as he then was, was quoted in part. There Dixon, J. said:-
"If an issue is to be proved by circumstantial evidence, facts subsidiary to or connected with the main fact must be established from which the conslusion follows as a rational inference."
With respect, I decline to follow Northrop, J. as, in my view, the opening words of that quotation were not heeded. It appears to me that Martin v. Osborne (supra) does not alter the law which was succinctly stated in Makin v. Attorney General (N.S.W.),(1894) A.C. 57. The examples from previous decisions quoted by Dixon, J. clearly show the ambit of the admissibility of similar facts. The principles have been re-affirmed recently in Markby v. The Queen (1978) 140 C.L.R. 108 and Cooper v. The Queen (1961) 105 C.L.R. 177.

I have also been referred to the decision of Ellicott, J. in Gates v. City Mutual Life Assurance Society Ltd. (1982) 43 A.L.R. 313, where that learned judge purported to apply Martin v. Osborne (supra) in similar circumstances to those in Mister Figgins case (supra). Again, with respect, I declined to follow that decision for the same reasons. Different considerations apply when the application is for an injuction pursuant to section 80 of the Act.

In the result, both applications are dismissed, and the applicants are, in each case, ordered to pay the respondent's costs.