Harkins v Butcher

[2002] NSWCA 237

Reported Decision: (2002) 55 NSWLR 558
(2002) ATPR (Digest) 46-225

New South Wales

Court of Appeal

CITATION:	Butcher & Anor v Lachlan Elder Realty; Harkins v Butcher & Anor [2002] NSWCA 237 revised - 28/08/2002
FILE NUMBER(S):	CA 40398/01; 40432/01
HEARING DATE(S):	27, 28 March 2002
JUDGMENT DATE:	28 August 2002
PARTIES :	Jeffrey Gordon Butcher and Judith Kay Radford v Lachlan Elder Realty Pty Limited (ACN 002 332 247) Robert Edward Harkins v Jeffrey Gordon Butcher and Judith Kay Radford
JUDGMENT OF:	Handley JA at 1; Beazley JA at 98; Hodgson JA at 99

LOWER COURT JURISDICTION :	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S) :	ED 2733/98; ED 2580/97
LOWER COURT JUDICIAL OFFICER :	Austin J

COUNSEL:	Butcher & Radford - G A Moore Harkins - J M Ireland QC/W G Hodgekiss Lachlan Elder - L G Foster SC/J V Gooley
SOLICITORS:	Butcher & Radford - Williams Woolf & Zuur Harkins - Roman A Dechnicz & Associates Lachlan Elder - Murray Stewart & Fogarty
CATCHWORDS:	AGENCY - hearsay representation by agent - not representation as to truth of statement - estate agents incorporate copy of incorrect survey diagram in brochure - COSTS - unnecessary charge of fraud which fails - plaintiff to pay costs of issue of fraud - MISREPRESENTATION - hearsay representation by agent - not representation of truth of statement - SPECIFIC PERFORMANCE - defence of innocent misrepresentation - purchasers' failure to rescind no bar - TRADE PRACTICES ACT - s 51A - s 52 - misleading and deceptive conduct - hearsay representation by agents on behalf of principal - representation by principal - not representation by agents - VENDOR & PURCHASER - Conveyancing Act s 55 (2A) - repayment of deposit - loss of right to rescind for innocent misrepresentation no bar to order - discretion
LEGISLATION CITED:	Trade Practices Act 1974 (Cth) Conveyancing Act 1919 (NSW) Real Property Act 1900 (NSW) Evidence Act 1995 (NSW) Misrepresentation Act 1967 (UK) Law of Property Act 1925 (England) Law of Property Act 1928 (Vic)
CASES CITED:	Verrall v Nott (1939) 39 SR (NSW) 89 Attorney General of Southern Nigeria v Holt [1915] AC 599 Falcon v Famous Players Film Co [1926] 2 KB 474 CA 488 Jones v Sutherland SC [1979] 2 NSWLR 206 Taco Co of Australia Inc v Taco Bell (1982) 42 ALR 177 Global Sportsman Pty Limited v Mirror Newspapers (1984) 2 FCR 82 Argy v Blunts & Lane Cove Real Estate Pty Limited (1990) 26 FCR 112 Yorke v Lucas (1985) 158 CLR 661 Barwick v English Joint Stock Bank (1867) LR 2 Ex 259 In re Reese River Silver Mining Company (Smith's case) (1867) LR 2 Ch App 604 Moens v Heyworth (1842) 10 M & W 147 [152 ER 418] Craig v Phillips (1876) 3 Ch D 722 Resolute Maritime Inc v Nippon Jaiji Kyokai [1983] 1 WLR 857 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 Derry v Peek (1889) 14 App Cas 337 The Saints Gallery Pty Limited v Plummer (1988) 80 ALR 525 Lezam Pty Ltd v Seabridge Aust Pty Ltd (1992) 35 FCR 535 John G Glass Real Estate Pty Limited v Karawi Constructions Pty Limited [1993] ATPR 41,356 Dean v Allin [2001] 2 Lloyd's Rep 249 Redgrave v Hurd (1881) 20 ChD 1 CA Mallett v Jones [1959] VR 122 James Macara Ltd v Barclay [1944] 2 All ER 31 Universal Corporation v Five Ways Properties Ltd [1978] 3 All ER 1131 Zsadony v Pizer [1955] VLR 496 Poort v Development Underwriting (Victoria) Pty Limited [1976] VR 779 Yammouni v Condidorio [1959] VR 479 Bernard v Weingarth (15/7/97 unrep) Dimsdale Developments (South East) Ltd v De Haan (1983) 47 P & CR 1 Lucas & Tait (Investments) Pty Limited v Victoria Securities Ltd [1973] 2 NSWLR 268 Pratt v Hawkins (1991) 32 NSWLR 319 Schindler v Pigault (1975) 30 P & CR 328 Faruqi v English Real Estates Ltd [1979] 1 WLR 963 Parker v McKenna (1874) LR 10 Ch Ap 96 Thomson v Eastwood (1877) 2 Ap Cas 215 In re Consort Deep Level Gold Mines Ltd ex parte Stark [1897] 1 Ch 575 CA Adey v Fisher (1914) 14 SR (NSW) 407
DECISION:	Butcher & Anor v Lachlan Elder CA 40398/01 - Appeal dismissed with costs. Orders made; Harkins v Butcher & Anor CA 40432/01 - Appeal allowed in part. Orders made

40398/01 40432/01
ED 2733/98 ED 2580/97
HANDLEY JA
BEAZLEY JA
HODGSON JA


Wednesday 28 August 2002

ROBERT EDWARD HARKINS v JEFFREY GORDON BUTCHER & ANOR

JEFFREY GORDON BUTCHER & ANOR v LACHLAN ELDER REALTY PTY LIMITED

AGENCY – hearsay representation by agent – not representation as to truth of statement – estate agents incorporate copy of incorrect survey diagram in brochure

COSTS – unnecessary charge of fraud which fails – plaintiff to pay costs of issue of fraud

MISREPRESENTATION – hearsay representation by agent – not representation of truth of statement

SPECIFIC PERFORMANCE – defence of innocent misrepresentation – purchasers’ failure to rescind no bar

TRADE PRACTICES ACT – s 51A – s 52 – misleading and deceptive conduct – hearsay representation by agents on behalf of principal - representation by principal – not representation by agents

VENDOR & PURCHASER – Conveyancing Act s 55 (2A) – repayment of deposit – loss of right to rescind for innocent misrepresentation no bar to order - discretion

The vendor’s estate agents produced a promotional brochure that included a survey diagram of the vendor’s property which comprised both freehold and a permissive occupancy with a frontage to Pittwater. The survey diagram showed a swimming pool wholly within the vendor’s freehold and not, as was the fact, partly in his permissive occupancy. The purchasers bought the property at auction relying on the survey diagram. The contract for sale was terminated by the vendor for the failure of the purchasers to pay the balance of the deposit.

The purchasers sought damages for misrepresentation and misleading and deceptive conduct by the vendor and the estate agents based on the incorrect survey diagram. They also sought recovery of the deposit under s 55 (2A) of the Conveyancing Act and claimed damages against the estate agents based on alleged misrepresentations as to the market value of the purchasers’ existing property.

The trial Judge found that the purchasers had been induced to enter into the contract by a material innocent misrepresentation by the vendor but that the estate agents had not engaged in misleading and deceptive conduct, either in relation to the brochure, or in relation to the value of the purchasers’ existing property. He exercised his discretion under s 55 (2A) of the Conveyancing Act to order the return of the $200,000 part deposit paid by the purchasers. The purchasers’ action against the agents was dismissed with costs. The vendor was ordered to pay the purchasers’ costs of the proceedings in which he was the defendant. The vendors and the purchasers appealed.

HELD: (1) The title boundary of the freehold at the mean high water mark on the Pittwater frontage was fixed by a reclamation in 1964 and therefore the survey diagram, the contract for sale that incorporated it, and the brochure, were incorrect. The misrepresentations as to the position of the title boundary had therefore been established. (2) The purchasers’ claim against the agents based on the brochure failed because the relevant conduct of the agents was not misleading and deceptive. The agents claimed no relevant expertise and the diagram itself indicated that it was the work of a professional surveyor. The brochure conveyed a misrepresentation by the principal only, and not by the agents who were merely passing on information obtained from their principal. In reReese River Silver Mining Company, Smith’s case (1867) LR 2 Ch App 604, 615; Yorke v Lucas (1985) 158 CLR 661, 666; and Argy v Blunts & Lane Cove Real Estate Pty Ltd (1990) 26 FCR 112, 131-3 applied. (3) The statements made by the agents about the value of the purchasers’ existing property imported representations that they held those opinions and had reasonable grounds for making them, and since they did have reasonable grounds they were not guilty of misleading and deceptive conduct. (4) The purchasers, having been induced by a material innocent misrepresentation to enter into the contract, would have had a discretionary defence to proceedings for specific performance had the vendor brought such proceedings. Their failure to rescind on this ground and, if it were the fact, their affirmation of the contract, did not preclude an exercise of the discretion under s 55 (2A) in their favour. Principles governing the exercise of the discretion considered. (5) Any claim by the vendor for damages for breach of contract provided no basis for disturbing the trial Judge’s exercise of his discretion to order the return of the deposit. (6) The trial Judge’s order that the vendor pay the whole of the costs of the proceedings against him did not properly reflect the failure of the unnecessary charge of fraud brought by the purchasers. Parker v McKenna (1874) LR 10 Ch App 96, 123 applied. That order for costs was set aside and a substantially less favourable order substituted.

ORDERS


CA 40398/01
Jeffrey Gordon Butcher and Anor v Lachlan Elder Realty Pty Ltd


(1) Appeal dismissed with costs.

(2) Cross-appeal dismissed.

(3) No order as to the costs of the cross-appeal.

CA 40432/01
Robert Edward Harkins v Jeffrey Gordon Butcher & Anor


(1) Appeal allowed in part.

(2) Set aside the order for costs made in the Equity Division.

(3) In lieu thereof order that the defendant pay one quarter of the plaintiffs’ costs of the proceedings in the Division.

(4) Appeal otherwise dismissed.

(5) The appellant to pay three quarters of the respondents’ costs in this Court.

40398/01 40432/01
ED 2733/98 ED 2580/97

HANDLEY JA
BEAZLEY JA
HODGSON JA


Wednesday 28 August 2002

ROBERT EDWARD HARKINS v JEFFREY GORDON BUTCHER & ANOR

JEFFREY GORDON BUTCHER & ANOR v LACHLAN ELDER REALTY PTY LIMITED

Judgment

1 HANDLEY JA: These appeals from a judgment of Austin J arise out of the sale at auction on 18 February 1997 of a freehold property and a permissive occupancy over adjoining reclaimed land at Mona Vale which fronted on Pittwater. Austin J heard two actions together. The first, which was commenced by the purchasers against the vendor on 28 May 1997, sought damages for misrepresentations inducing the sale and by an amendment granted at the start of the trial the return of the deposit. The second, brought by the purchasers against the vendor’s selling agents, sought damages for misleading and deceptive conduct contrary to ss 51A and 52 of the Trade Practices Act. These claims were based on a promotional brochure prepared by the agents and their estimates of the price the purchasers could expect to get for their home.

2 The alleged misrepresentation in the brochure concerned the location of the boundary between the freehold land and the permissive occupancy. It was said to be conveyed by a copy of a survey diagram on the brochure (2/246). This showed a line described as “MHWM” which was understood by all concerned to mark the boundary between the freehold and the permissive occupancy. The survey diagram showed a swimming pool wholly within the freehold. The vendor was said to be liable as principal for the misrepresentation, and for the same misrepresentation in the contract which annexed a copy of the survey diagram and accompanying report. The survey had been carried out by a Mr Hannagan for a Mr Pullicin, and the report is dated 4 August 1980 (2/319, 321).

3 The purchasers were interested in relocating the swimming pool to the side of the block to increase the lawn area between the house and the water, and the location of the pool within the freehold was a matter of importance to them. The Judge held that the contract and the brochure contained representations by the vendor that the title boundary was the line shown as MHWM on the diagram.

4 Having reviewed the survey evidence, and the evidence from the files of the Department of Land and Water Conservation, the Judge held that the title boundary shown on the Hannagan survey was not correct and that the true boundary bisected the swimming pool. He found that the vendor had made the misrepresentations innocently, but not in trade or commerce, and although the agents had engaged in trade or commerce, they were not liable under the Trade Practices Act because their conduct in issuing the brochure had not been misleading or deceptive. He also dismissed the claim against the agents for misleading and deceptive conduct in their estimates of the price the purchasers could expect to get for their home.

5 Although the purchasers established that they had been induced to enter into the contract by a material innocent misrepresentation by the vendor, they did not attempt to rescind on this ground. They commenced proceedings against the vendor alleging fraud, but kept the contract on foot until it was terminated by the vendor on 2 July for their failure to pay the balance of the deposit.

6 The purchasers therefore failed in their damages claims against the vendor and the agents, but the Judge, in the exercise of his discretion under s 55 (2A) of the Conveyancing Act, ordered the return of the deposit with interest. The purchasers were ordered to pay the costs of the agents and the vendor to pay the purchasers’ own costs.

7 The vendor’s appeal challenged the finding of misrepresentation, the order for the return of the deposit, and the order for costs. The purchasers’ appeal challenged the findings that the agents had not engaged in misleading and deceptive conduct in issuing the brochure and in estimating the price they could expect to get for their home.

The Title Question

8 It is appropriate to first consider the title question common to both appeals. The freehold, which was under the Real Property Act, comprised lot 14 in D.P. 9500, registered in 1919. The boundary of lot 14 to Pittwater in the D.P. was a line described as “approximate mean high water mark” (high water mark). The survey evidence established that the distances shown for the side boundaries were measured from what is now Rednall Street to this line. The certificate of title described the land as lot 14 in this plan, and noted the reservations and conditions in the Crown Grant. It was not suggested that these were relevant, although I infer that the Grant defined the Pittwater boundary as the high water mark. The Judge held that the true seaward boundary of lot 14 in 1997 was the high water mark in its 1919 position as shown on the D.P.

9 The owner who caused the D.P. to be registered had no title below the then high water mark, and is not likely to have intended to exclude from the plan any part of his land above the high water mark. The natural inference is that the title boundary in 1919 was the actual high water mark at that time. See Moore “Land by the water” (1968) 41 ALJ 532 (Moore). Such a boundary is ambulatory, and if the high water mark retreats as the result of natural accretion, the additional land accrues to the landward title. As Moore states (534): “Land described as being bounded by the sea is not excluded from the benefit of accretion because measurements are also given”.

10 The existence of a certificate of title to land with a water frontage, even if there is also a certificate of title to the foreshore and sea bed, does not exclude the doctrine of accretion either, provided the true boundary is ambulatory. See Verrall v Nott (1939) 39 SR (NSW) 89, 99. There was no evidence that the Department had a certificate of title to the foreshores and bed of Pittwater.

11 If accretion occurred on the water frontage of lot 14 after 1919, title to the additional land would have accrued in favour of the owner of lot 14. It was therefore possible that the true title boundary in 1997 was different from the high water mark in 1919. However reclamation work was undertaken on the water frontage of lot 14 at some stage, and title to reclaimed land is in the owner of the sea bed, and not the frontager. See Attorney General of Southern Nigeria v Holt [1915] AC 599, 615; Moore p 536.

12 Some of the history of the successive reclamations on the waterfront of lot 14 is in evidence in documents obtained from the files of the Department of Land and Water Conservation (formerly the Lands Department). What was said by the Department (2/460) to be the earliest plan of the reclamation on its file (467), although undated, contains the names of C & M G Pullicin and the reference LB 74-118. The next plan (2/452) is marked “PO 64-287 C & M G Pullicin”. Both relate to a permissive occupancy originally granted by the Department during 1964 to the then owners of lot 14. It covered a reclaimed area 10 metres deep on most of the waterfront of lot 14 together with an associated slipway, jetty and pontoon. The reclamation was in the shape of a battleaxe across the water frontage, the axe handle being a narrow section at the head of the slipway. No further accretion could occur to the freehold of lot 14 after this reclamation.

13 A survey report and diagram dated 17 June 1975 (2/351) prepared in connection with the purchase of lot 14 by Mr and Mrs Pullicin was not in the Department’s files. It shows a reclaimed area in the same shape on the Pittwater side of a line described as the “original” high water mark. The report states: “The location of the original mean high water mark defined by Deposited Plan No. 9500 has been marked, beyond this an additional area has been reclaimed as shown in the sketch”. This report and diagram came into the vendor’s possession by chance in April 1997 (1/79).

14 In June 1979 Mr and Mrs Pullicin applied for an amendment of their permissive occupancy. The plan submitted with this application was that referred to in para 12 with handwritten amendments (2/448). These show the deletion of the slipway, reclamation in the battleaxe handle, the substitution of a ramp for the jetty, and the construction of an inground swimming pool. The plan is noted: “Identified as Mr Pullicin’s application for amendment dated 22-6-79”. Other copies appear at 369 and 466. The application is not in evidence but there is a letter dated 4 July 1979 from the Department of Lands to the Warringah Shire Council (2/268, 270, 449) which describes the application. It states:

“Mr and Mrs Pullicin have more recently supplied a diagram and details of the structures they wish to install.
Please note that the recessed boat ramp and slipway of the current Permissive Occupancy have been removed and the reclamation continued to the established limit line for the entire water frontage of the subject holding.
Mr and Mrs Pullicin now propose to build a swimming pool adjoining their house. This pool is planned to intrude onto the permissive occupancy as indicated on the attached diagram. All proposals are shown in blue on the diagram”.

15 This establishes both the title boundary at the time and the location of the swimming pool in relation to that boundary. This and the plan in its original form were admissible against the vendor as business records and as admissions by his predecessors in title. As to the latter, see Falcon v Famous Players Film Co [1926] 2 KB 474 CA, 488, 498; Jones v Sutherland SC [1979] 2 NSWLR 206, 211. The Evidence Act 1995 makes no explicit provision for the reception of such admissions, but it seems to me that they are admissible against a successor in title in accordance with the rules of law and equity preserved by s 9. The vendor’s predecessors in title agreed in 1964 and again in 1979 that the high water mark in 1964 was in the position shown on the 1919 deposited plan, and that there had been no accretion to lot 14.

16 A Land Inspector was instructed to inspect the area, and his handwritten report dated 19 July 1979 appears on the same document (2/450) with an attached diagram which incorporated the amendments including the pool shown as bisected by the title boundary (2/451). The same plan appears at 265, 371, 444 and 465. It does not show any berthing piles. There was also a letter from the Council of 19 July 1979 (2/267). A reply to the Council dated 24 July (266, 442) stated that the permissive occupancy has been amended to include the inground pool and that it covers a total area of 162.5m² including a reclaimed area of 145m² (2/450). The plan as amended, together with a supporting schedule relating to this and other permissive occupancies, was received by the Council from the Department on 4 September (2/264, 265, 444).

17 Mr Hannagan’s survey of 4 August 1980 (2/319, 321) was made shortly after these events, but his diagram, which shows the pool wholly within the freehold, was clearly incorrect and Mr Pullicin must have known it was incorrect.

18 The title boundary at this time was therefore clear and it could not be altered without a formal alienation by the Crown. There was no such alienation.

19 A new plan was prepared by the Department following an inspection on 8 September 1983 (2/263) which shows 7 berthing piles in the water beyond the reclamation and a new position for the pontoon and ramp. It showed the title boundary bisecting the pool.

20 The renewed permissive occupancy offered to the Pullicins to commence from 24 September 1983 related to an unchanged area of 162.5m² and was expressed to cover the inground pool (2/258). It also covered 7 berthing piles for the first time. The plan at 174, 263 and 372, which bears the names of C & M G Pullicin, is consistent with this offer, and shows the pool bisected by the title boundary. The permissive occupancy agreement was received by the Council on 24 May 1984 (259). It appears that further reclamation occurred after this. Material from the Department file in June and November 1984 (453, 454) shows that the permissive occupancy was still regarded as including the inground pool.

21 The next development recorded in the evidence was an inspection by a Mr T J Paterson, a Land Inspector, which became the subject of his report of 23 April 1985 (2/374-5). This dealt with the reclamations in front of lots 11, 12, 13 and 14 and referred to “a re-defined High Water Mark based on aerial photography and survey information from Water Board maps”. The changes were said to be shown on the accompanying diagram “A” which is at 373. His report stated:

“In terms of P.O. 1964/287 (Pullicin) fronting lot 14, the new interpretation of original high water mark indicates a variation from the occupancy diagram. Diagram ‘A’ shows that aside from the water based structures, there is a larger area of reclamation on which a brick/block wall exists. Although this is generally not an acceptable structure it does not impede public access in any way. In fact the 10 metre wide strip of open reclamation remains along the waterfront and authorisation of the wall is therefore considered unobjectionable”.

22 He recommended that the permissive occupancy be amended to account for the previously incorrect High Water Mark notation “to cover a larger area of reclamation and the aforementioned wall. Ground area of reclamation is now estimated at 229 m²”. The diagram he refers to (373) shows unchanged side boundaries of 14.8 and 15.5 metres for the reclamation area. It does not reveal the nature of any change to the original high water mark and does not refer to the swimming pool.

23 On 30 May 1985 a Mr Dahlen, writing on behalf of the Regional Manager of the Lands Office, wrote to Mr and Mrs Pullicin stating that a recent inspection of their permissive occupancy had revealed “that the reclamation is considerably larger than authorised. The inspection also revealed the existence of 9 berthing piles as opposed to the authorised 7. The swimming pool was found to be entirely on your freehold land. This office is prepared to authorise all the variations” (2/175). The letter enclosed an offer of a new permissive occupancy covering 9 berthing piles and an area of 248m² which included the areas occupied by the water based structures (176). It omitted any reference to the swimming pool. Mr Dahlen’s letter was presumably prompted by Mr Paterson’s report, but this had said nothing about the location of the swimming pool. Neither the letter nor the offer referred to any change in the “original” high water mark.

24 The formal amendment to the permissive occupancy (176) referred to an area of 248m² and 9 berthing piles but omitted any reference to the inground pool. The plan enclosed (179, 262) with the offer bears the names of Mr and Mrs Pullicin and shows the 9 berthing piles for the first time. The side boundaries of the reclamation are unchanged, but the word “mean” has been crossed out and the word “original” has been written in below the high water mark line. This plan also shows for the first time a solid wall across the reclaimed area parallel to, and by a happy coincidence 10.1 metres back from, the waterfront. This was the depth of the original reclamation (para 12).

25 The vendor and his then wife purchased the property in December 1985 from Mr and Mrs Pullicin and completed in March 1986 (2/180-198). The Department sent the vendor and his wife an offer of a new permissive occupancy from 12 March 1986 (2/255) expressed to replace that formerly held by Mr and Mrs Pullicin. It covered the enlarged area of 248m² and included 9 berthing piles. The plans at 2/249, 254 and 376 appear to relate to this offer because they contain the name of the vendor. They show 9 berthing piles and a reclamation area with unchanged side dimensions measured from the “original” high water mark. The crossed out word “mean” has been deleted and the plans continue to show a solid wall 10.1 metres back from the waterfront. No relevant change occurred in the later permissive occupancies prior to the auction in February 1997.

26 When the purchasers became concerned about the location of the title boundary they obtained their own survey from Mr Warren Bee (445). This shows the title boundary bisecting the pool but does not show the depth of the reclamation along its side boundaries. The vendor then obtained a report from Mr Green, another surveyor (2/410), but this was based on incomplete historical information. Mr Green concluded that the position was confused and was unable to determine the title boundary (see also Black 243).

27 A Mr Souter surveyed the property in November 1997, probably at the request of Mrs Hayes who purchased the property from the vendor when it was resold. His report (473) located the title boundary 17.4 metres from the water front on one side and 17.8 metres on the other, bisecting the pool. The area of reclaimed land was said to be 248m². The Department adopted this survey which became the basis of a new permissive occupancy granted to Mrs Hayes (485-6).

28 This analysis satisfies me that the title boundary was frozen at the 1919 high water mark line by the grant of the first permissive occupancy in 1964 and the reclamation carried out at that time. The Judge was correct in finding that the Hannagan survey diagram, and the brochure and contract of sale which incorporated it, were incorrect. The misrepresentations relied upon by the purchasers were established.

The Misrepresentation Questions

29 Mr Ireland QC acknowledged that the vendor was legally responsible for any misrepresentation in the contract or the brochure. It was common ground that the purchasers did not elect to rescind the contract before the vendor terminated it for their breach. The remaining issues on the vendor’s appeal are his challenges to the order for the return of the deposit and the order for costs. It will be convenient to defer consideration of these issues and to deal with the misrepresentation case against the agents.

30 There is no doubt that the brochure, by incorporating a copy of the Hannagan survey diagram, conveyed a representation by the vendor about the location of the swimming pool in relation to the title boundary. The agents had been given a copy of the Hannagan survey by the vendor. They denied that its use in the brochure constituted misleading or deceptive conduct on their part or that they had made any representation that the survey diagram was accurate. The Judge held that the class of potential purchasers of waterfront homes in a price bracket above $1M, independently advised by their own solicitors, would be unlikely to be misled by the brochure read as a whole having regard, in particular, to its disclaimer provisions.

31 He found that the agents were entitled to rely upon the survey diagram provided by the vendor without attempting to verify its accuracy. He also found that even if the brochure had been misleading or deceptive the agents had done no more than pass on the survey diagram making it clear that they were not the source of the information. The Judge said that if he had found that the brochure was misleading or deceptive he would probably have found that the agents had not engaged in misleading or deceptive conduct because of their limited role as agents.

32 Having found, against the vendor, that the brochure conveyed a representation as to the location of the pool within the freehold (pars 115, 128-130), and that the vendor’s conduct in that respect was misleading or deceptive (par 144), it was not open to the Judge to find in favour of the agents that the brochure was not misleading or deceptive (pars 170-1). It is well established that conduct cannot be misleading or deceptive unless it conveys a misrepresentation. Taco Co of Australia Inc v Taco Bell (1982) 42 ALR 177, 202, Global Sportsman Pty Limited v Mirror Newspapers (1984) 2 FCR 82, 88 and Argy v Blunts & Lane Cove Real Estate Pty Limited (1990) 26 FCR 112, 131 (Argy). The converse must also be true in cases such as the present.

33 The Judge found that the purchasers reasonably relied on the diagram in the brochure (par 145) and that they did not see the contract prior to the auction. However their solicitor, Mr Zuur, received a copy of the contract the day before (par 31) and explained it to them (par 179). Thus they relied through their solicitor on the survey report and diagram annexed to the contract.

34 The findings that the agents acted reasonably in using the survey diagram in their brochure (pars 171, 175) merely passed on information they had obtained from the vendor, had no intention to deceive, and were not personally at fault, do not establish that their conduct, viewed objectively, was not misleading and deceptive. In Yorke v Lucas (1985) 158 CLR 661 Mason CJ, Wilson, Deane and Dawson JJ said at 666:

“It is, of course, established that contravention of [section 52] does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive”.

35 Thus the reasons given by the Judge for holding that the agents had not engaged in misleading and deceptive conduct cannot be supported. He added (par 181):

“The information about the location of the mean high water mark was supplied by [the vendor] and the [agents] did no more than pass that information on, making it clear by the wording of the disclaimer that it was not the source of the information. In those circumstances it is probable, in my view, that the company would not have engaged in misleading conduct even if the content of the brochure had been misleading (contrary to my finding)”.

36 In view of my conclusions it is necessary for this Court to decide this question.

37 Under the general law a representation communicated by a disclosed agent with the authority of his principal was for all purposes a representation by the principal. Barwick v English JointStock Bank (1867) LR 2 Ex 259, 266-7. That being so it was seldom necessary to determine whether the agent himself made the same representation, or whether in appropriate circumstances he should be understood as making a more limited one in his own right. However it was recognised that someone who did no more than state as information received such information as he has makes no representation as to the truth of that information. The point was made by Lord Cairns in In re Reese River Silver Mining Company, (Smith’s case) (1867) LR 2 Ch App 604, 615:

“If they had been content to say ‘we ourselves know nothing about the state of the mine, but we have been told it is a very valuable mine largely worked at present’ and if they had, in point of fact, been so told, no person could have complained of the prospectus as calculated to mislead; but in place of repeating as hearsay what they had been told, they affirm it as a positive fact”.

38 See also Moens v Heyworth (1842) 10 M & W 147 [152 ER 418] and Craig v Phillips (1876) 3 Ch D 722, 734.

39 Until relatively recently an agent making a representation on behalf of his principal within his authority incurred no liability to a third party for any misrepresentation unless he was guilty of fraud. The agent’s knowledge that the representation was false would establish that he intended to convey that representation. The Court would not find, in favour of a fraudulent agent, that his representation should be given a restricted meaning. Even if the Court did so find the agent would still be guilty of fraud because of his implied representation of honest belief in the truth of the statement made on behalf of his principal. Compare Spencer Bower, Turner & Handley “Actionable Misrepresentation” pp 12-14.

40 The Misrepresentation Act 1967 did not alter this state of affairs in England because the Act does not impose any liability on an agent. See Resolute Maritime Inc v Nippon Kaiji Kyokai [1983] 1 WLR 857. However an agent’s immunity for innocent misrepresentation has changed in recent years with the development of liability for negligent misrepresentation as a result of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 and the introduction of s 52 of the Trade Practices Act 1975.

41 It is well established for the purposes of s 52 and its equivalents that a disclosed agent conveying a representation on behalf of his principal may properly be understood as conveying a more limited representation in his own right. Thus in Yorke v Lucas (1985) 158 CLR 661, 666 the joint judgment, having said that a person may engage in misleading or deceptive conduct although he acted reasonably and had no intention to deceive, continued:

“That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive”.

42 Any implied disclaimer of a belief in the truth of information passed on to another would have to be quite clear because of the general principle established in Derry v Peek (1889) 14 App Cas 337, 374 per Lord Herschell: “to prevent a false statement being fraudulent there must, I think, always be an honest belief in its truth”.

43 This dictum in Yorke v Lucas has been followed by the Federal Court. In The Saints Gallery Pty Limited v Plummer (1988) 80 ALR 525 the Full Court said at 530:

“The reference in Yorke v Lucas … to an express or implied disclaimer of belief in an instruction conveyed by an agent does not involve that an agent who does believe his client, and makes that fact apparent, may not at the same time impliedly disclaim personal responsibility for what he conveys”.

44 See also Lezam Pty Ltd v Seabridge Aust Pty Ltd (1992) 35 FCR 535, 552-3, and John G Glass Real Estate Pty Limited v Karawi Constructions Pty Limited [1993] ATPR 41,356, 41,358. The case which is most relevant is Argy (1990) 26 FCR 112, which also arose out of the sale of valuable real estate. The solicitors for the vendor were sued for misleading and deceptive conduct arising from the annexation of an incomplete s 149 certificate to the contract of sale where the missing page referred to significant restrictions upon the development of the land. Hill J said at 131-3:

“… I have difficulty with the submission that the inclusion of a s 149 certificate in a contract constitutes … a representation by the person who prepares the contract that the zoning is in accordance with the terms of the certificate. … in my opinion it merely constitutes a representation by that person that the certificate annexed is the certificate of the relevant statutory authority … I am however of the view that the annexation of a certificate to a contract by the person preparing it can be seen to be a representation by that person not only that the certificate is the certificate issued by the Council but that it is the whole of that certificate so that where, as here, the certificate is incomplete … there is a misrepresentation made by the person preparing the contract carrying with it the capacity to deceive.
The applicant’s case against [the estate agents] so far as it depends upon the contract to constitute misleading and deceptive conduct, is even more difficult. It is hard to see why a contract prepared by a solicitor constitutes a representation by an estate agent going to matters contained in the contract because the name of the agent is shown in the contract or because the agent distributes … it to prospective purchasers. In making the contract available to prospective purchasers the agent can be taken, at least in the ordinary case, to have represented that the contract so distributed by him is as prepared by the solicitor whose name appears in the contract but not that each matter disclosed in the contract is correct … [the solicitors] were … engaged in misleading and deceptive conduct but only in the sense that the contract … can be seen to be a … representation made by them as the persons responsible for the preparation of the contract that the s 149 certificate annexed thereto was, so far as relevant to the land the subject of it, a copy of the complete certificate as issued by the Council”.

45 In Dean v Allin [2001] 2 Lloyd’s Rep 249 Lightman J, delivering the principal judgment in the Court of Appeal, made the same point, saying at 257-8:

“The greatest caution is required in treating statements made by a solicitor in the course of conveyancing transactions and the like on or in accordance with the instructions of his client as representations made by the solicitor rather than as ‘conveyed’ by him as (in effect) a medium of communication or messenger for his client, for this may readily be assumed to be understood to be part of his role in the transactions. The solicitor’s position in such a situation is to be contrasted with his position … where [he] makes an express unequivocal statement to a third party which is not attributable simply to performing his role as the client’s adviser: for in the latter case the adviser may readily be held to have assumed responsibility to the third party, since the explanation of his acting merely as a messenger would be inapplicable”.

46 There is no reason why these principles should not apply to other agents as well. The agent’s brochure carried disclaimers in fine print at the foot of the front and back pages, but I would not accord these decisive significance on the present question. They are however relevant as showing that the agents did not accept responsibility for the accuracy of the information in the brochure.

47 The only representation in the brochure as to the location of the pool in relation to the title boundary was that conveyed by the diagram reproduced on the back. The text contained nothing of relevance for present purposes. The diagram purports to be a copy of an original prepared by a professional surveyor. The agents represented that the reproduction was an accurate copy of what they believed was a genuine and correct survey diagram. In my judgment they made no representation as to its accuracy. The question can be tested by supposing that they handed copies of the survey report and diagram to prospective purchasers telling them, without more, that it was a copy of a survey they had obtained from the vendor. The recipients would know that the agents did not hold themselves out as professional surveyors, and had not carried out the survey themselves.

48 The agents by proffering copies would be impliedly representing that they had an honest, or perhaps honest and reasonable, belief that the copies were genuine and recorded the surveyor’s opinion on the matters disclosed. See Spencer Bower, Turner & Handley “Actionable Misrepresentation” pp 13-14. They would also impliedly represent their belief that the report and diagram were accurate (op cit pp 11-13), but I see no good reason why they would intend to represent that it was in fact accurate, or why the recipients would think that the agents were making any such representation. In my judgment the situation is indistinguishable from that considered in Argy.

49 Mr Moore, who appeared for the purchasers, relied strongly on John G Glass Real Estate Pty Limited v Karawi Constructions Pty Limited (1993) ATPR 41-249, a decision of the Full Federal Court. The appellant had prepared and distributed a typed document which stated that the net lettable area in a commercial building under construction was 180m². The agents obtained this information from the vendor’s consultants and believed it to be true. They provided the purchaser with a bound dossier which included a letter from the vendor’s management consultants, a copy of their typed document, a summary of a quantity surveyor’s report, a copy of the building plans, a copy of the building approval and a feasibility study. The inside cover stated that the agents specialised in “real estate investment consultants to Institutional investors and to developers of major properties” (sic). There was a disclaimer at the back.

50 The typed document did not reveal the source of the information although the purchaser knew that it had been obtained from the vendor, and “he did not think that the [agents] had verified the statements about the net lettable area” (supra at p 41,358).

51 The Full Court referred to Yorke v Lucas, and the resulting line of authority in the Federal Court, and said (41,359):

“In our opinion an estate agent which holds itself out as, amongst other things, ‘consultants to institutional investors and to developers of major properties’ would not be regarded by potential purchasers … as merely passing on information about the property ‘for what it is worth and without any belief in its truth or falsity’.
… We think a purchaser like Karawi would ordinarily expect … that the agent had no reason to doubt the completeness or accuracy of the information provided.
… the appellant adopted the information in question and incorporated it as a central and prominent feature of their selling effort on behalf of the vendor. … As part of its ordinary business the agent was providing information in a persuasive form with a view to achieving a sale of its principal’s property and of course earning commission. It was this conduct which the learned trial Judge, correctly in our opinion, held to be misleading and deceptive”.

52 In that case the agents claimed relevant expertise, adopted the figures as their own, and put them forward without any reference to their source. In the present case the agents claimed no relevant expertise, and the diagram itself indicated that it was the work of a professional surveyor. In these circumstances that decision is distinguishable and does not determine the outcome in the present case. In my judgment the purchasers’ claim against the agents based on the brochure fails because the relevant conduct by the agents was not misleading or deceptive.

53 The other claim against the agents was based on representations by Mr Spring and Mr Elder to Mr Butcher, one of the purchasers, that he and his partner could expect to sell their existing property at Calvert Parade, Newport for $1.3M. The Judge held that these allegations were not supported by the evidence. On 12 February, after Mr Spring had inspected the Newport property, he completed a residential listing which stated that in his opinion its market value was $1.2M. He gave evidence, which the Judge accepted, that in forming that view he had regard to sales of other properties. Mr Spring told Mr Butcher that he felt “really comfortable” with the sale price of $1.2M-$1.3M. Mr Butcher said he would be comfortable with $1.25M, but asked Mr Spring to obtain an opinion from Mr Elder.

54 On 14 February Mr Butcher and Ms Radford met Mr Elder at the Newport property. Mr Elder predicted a sale price of “absolute dead set minimum $1.2M” and up to $1.3M or even more. The Judge accepted that evidence. Relying on this advice the purchasers bid $1,360,000 for the Rednall Street property and signed a contract at that price.

55 The agency agreement entered into between the purchasers and the agents a few days after the auction contained a statement that the agent’s opinion as to the current reasonable selling price was $1.3M. The Judge said that it was clear that this figure, and the figures given orally, were estimates rather than valuations and Mr Butcher conceded that the figure of $1.3M was an indication rather than a guarantee.

56 The agents marketed the property from mid-March onwards and received a number of offers which were passed on to the purchasers but rejected. They eventually sold the property for $1.1M on 24 June 1997. This represented 85% of the price stated in the agency agreement and 88% of the minimum of $1.2M mentioned by Mr Spring and the “absolute dead set minimum” mentioned by Mr Elder. However in April, prior to the first auction date, the agents passed on to the purchasers an offer from a Mr Adams of $1,175,000, which represented 98% of the minimum figure of $1.2M. The purchasers rejected that offer.

57 The representations by Mr Spring and Mr Elder were statements of opinion by experienced real estate agents familiar with the market for such homes. Their statements imported representations that they held those opinions and had reasonable grounds to support them. See Spencer Bower, Turner & Handley, pp 15-16. In any event s 51A(1) of the Trade Practices Act provides that where a corporation makes a representation with respect to any future matter and does not have reasonable grounds for doing so, it shall be taken to be misleading. Sub s (2) provides that a corporation shall be deemed not to have had reasonable grounds for making such a representation unless it adduces evidence to the contrary.

58 The honesty of Mr Spring and Mr Elder was not challenged and the Judge found they had a reasonable basis for their estimates. Within a month of the start of marketing the agents secured an offer representing 98% of their lowest estimate. In these circumstances, as the Judge found, there was really no evidence that the agents had engaged in misleading and deceptive conduct. This conclusion is reinforced by Mr Butcher’s concession that the figure of $1.3M he had been given was an indication and not a guarantee. This claim by the purchasers also fails and their appeal against the judgment in favour of the agents must be dismissed with costs.

The Deposit

59 The purchasers obtained an order for the return of the deposit of $200,000 which they had paid, together with interest. This order was made under s 55(2A) of the Conveyancing Act, which provides:

“In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon”.

60 When dealing with this issue the Judge said:

“… it would be extremely harsh on the purchasers, given my findings as to the importance to them of the proposal to relocate the swimming pool … to hold that they have forfeited the deposit”.

61 He had found that the vendor was entitled to terminate the contract on 2 July 1997, but he also found that the purchasers had behaved reasonably in view of their inability to immediately pay the balance of the deposit of $70,000 following the sale of the Newport property because of the 7 day cooling off period.

62 He referred to the events of 2 and 3 July which culminated in the rescission and said that in his view it would be “an amazing outcome” if they resulted in the forfeiture of the deposit. Since he had already held that the vendor had validly forfeited the deposit, his Honour must have meant that it would be an amazing outcome if the Court were to hold that those events disentitled the purchasers to an order for its return.

63 Mr Ireland challenged this order on a number of grounds, but did not submit that the events of 2 and 3 July disentitled the purchasers to an order. I can therefore pass to the grounds that were relied upon which are still available having regard to my earlier conclusions. These were that the Judge erred in allowing the purchasers to raise an unparticularised claim under the section at the start of the trial, that the purchasers had elected to affirm the contract, or at least had not elected to rescind, and that the vendor had a right to damages for breach.

64 The plaintiff’s application for leave to raise this claim was not made until the first day of the trial. It was allowed at the start of the second day when the Judge made orders by consent in the form of short minutes (black 15). These are not in the appeal book, and we do not know their contents. The statement of claim was never formally amended and the purchasers were never required to give particulars. The claim was therefore propounded under the prayer for further and other relief based on the matters pleaded. The trial continued for a further seven days and the claim was upheld on grounds which were within the pleadings. The vendor has not established that he was prejudiced by the decision to allow this claim to be litigated and this ground of appeal fails.

65 The Judge found that the vendor had made material, but innocent, misrepresentations as to the location of the title boundary. These entitled the purchasers to rescind the contract (Redgrave v Hurd (1881) 20 ChD 1 CA), or possibly to enforce completion with compensation under the error or misdescription clause in the contract.

66 It was common ground that the purchasers did not elect to rescind. As the Judge held, the vendor validly rescinded when the purchasers failed to pay the balance of the deposit on time.

67 Rescission for innocent misrepresentation would have been a defence to any action by the vendor for specific performance (Redgrave v Hurd), but innocent misrepresentation may still be a discretionary defence to specific performance although the purchaser has affirmed the contract, or was unable, for some reason, to rescind it. The relevant principles are stated in Spry “Equitable Remedies”, 6th ed, 2001 at pp 161-4:

“… it by no means follows, merely because a right to rescind has been lost through laches, … or through waiver, or for any other cause, that the matters that formerly would have been taken into account as founding a right to rescind may not be taken into account subsequently where a court of equity is asked to exercise its discretion by ordering specific performance … If the defendant has entered into the material contract … in reliance on misleading statements … of the plaintiff, specific performance is refused either if circumstances of unfairness render it unreasonable to grant relief … or if in view of the error or misunderstanding of the defendant and the hardship that may be suffered by him it is unreasonable to grant relief … or if in view of both these considerations it is unreasonable to grant relief … in each of these situations the court, in deciding whether to grant specific performance, looks to all matters that may render it more or less just to grant relief, and to that extent it is not bound by restrictions or limitations based on what would be appropriate in relation to rescission. … So even when a right to rescind has been waived by the defendant it may still be necessary, in determining whether subsequently specific performance should be granted, to consider the extent to which hardship will be caused to him if he is required to carry out the terms of the contract in specie”.

68 In Mallett v Jones [1959] VR 122, 135 Dean and Smith JJ suggested that the purchasers, who had elected to affirm a contract voidable for fraud, could not rely on the misrepresentation to resist specific performance, but in my judgment the wider view of Dr Spry is correct.

69 The Judge accepted (par 31) the purchasers’ evidence that they would not have bid at the auction or contracted to purchase the property if they had known that the title boundary traversed the swimming pool. This and other findings established that the misrepresentation was material. All the problems with this transaction flowed from this initial misrepresentation. In my judgment the Court would have refused to order specific performance of the contract in favour of the vendor.

70 The first limb of s 55(2A) refers to a case where the Court has heard proceedings for specific performance brought by the vendor and refused that relief. The second limb is in general terms. Equivalent sections are found in Law of Property Act 1925 (England) s 49(2) and the Law of Property Act 1928 (Vic) s 49(2).

71 In James Macara Ltd v Barclay [1944] 2 All ER 31, 32 Vaisey J suggested that the sole object of the section may have been to remove the difficulty faced by a purchaser who could resist specific performance but not recover his deposit. On that view the second limb was there to provide for cases where the vendor did not bring proceedings for specific performance. He also pointed out that the section does not authorise an order for the return of part of the deposit. The Court of Appeal dismissed an appeal without expressing any view on these questions ([1945] KB 148, 156).

72 In Universal Corporation v Five Ways Properties Ltd [1978] 3 All ER 1131, 1137 Walton J said that it was an all or nothing section and the second limb was included:

“… to enable a purchaser, when the vendor was not suing for specific performance, to come to the Court and say in substance: If the vendor had sued for specific performance the Court could have ordered a return of the deposit to me, but the vendor … is not going to sue for specific performance and therefore I have … to bring my own action to get the deposit back”.

73 His decision was reversed, [1979] 1 All ER 552 and Buckley LJ said (555):

“… the jurisdiction is one to be exercised where the justice of the case requires … in a wide sense indicating that repayment must be ordered in any circumstances which make this the fairest course between the two parties”.

74 The position in Victoria is now broadly the same. In Zsadony v Pizer [1955] VLR 496, 503-4 Dean J emphasised the width of the discretion and was not disposed to place any limitation on it not found in its language.

75 In Mallettv Jones [1959] VR 122, 134 Dean and Smith JJ appeared to take a narrower view and said that the Court should not order the return of the deposit where the contract was enforceable against the purchaser at law and in equity. They refused (135) an order because the purchasers had affirmed the contract, but took the deposit into account in awarding damages for deceit.

76 The wider view was maintained by Gillard J in Poort v Development Underwriting (Victoria) Pty Limited [1976] VR 779, 784 (Poort). He held there was power to order the return of the deposit “whenever the contract … was not completed … but was determined prior to conveyance” (785), but this can occur when the contract was enforceable against the purchaser in equity but the vendor preferred to rescind. He also pointed out that the section could not apply where a vendor obtained an order for specific performance, but in such a case the purchaser does not lose the benefit of the deposit.

77 Despite otherwise adopting the wider view, Gillard J held (786) that where the deposit had been validly forfeited “exceptional circumstances” would be required to justify an order for its repayment. His decision not to order repayment was affirmed without any discussion of these issues. See [1977] VR 454. Any requirement for special circumstances to be shown where the deposit has been forfeited is out of step with the views of the Court of Appeal in Universal Corporation v Five Ways Properties Ltd [par 72], the views of Dean J in Zsadony v Pizer [par 73] and the settled approach in this State [par 79].

78 In Yammouni v Condidorio [1959] VR 479, 493 Monahan J ordered the return of the deposit, but the purchaser was ordered to pay an occupation rent with only the balance to be refunded.

79 In Poort Gillard J said (785-6) that a defaulting purchaser could offer to pay any damages the vendor had suffered. In Bernard v Weingarth McLelland CJ in Eq (15 July 1997 unrep) followed this dictum and ordered repayment of the deposit subject to a deduction for damages. A similar course was taken by Gerald Godfrey QC, sitting as an additional Judge of the Chancery Division, in Dimsdale Developments (South East) Ltd v De Haan (1983) 47 P & CR 1, 12.

80 In Lucas & Tait (Investments) Pty Limited v Victoria Securities Ltd [1973] 2 NSWLR 268 (Lucas & Tait) Street CJ in Eq confirmed the view adopted in this State that the section conferred a wide discretion. He said that this was to be exercised where it was just and equitable to deny the vendor the enjoyment of a forfeited deposit, but he declined to state “where the boundaries of the discretion are to be drawn” (273). He said (272-3):

“… an order for the return of the deposit does not necessarily affect the vendor’s right to sue a defaulting purchaser at law and recover against him such damages as the vendor can prove. The jurisdiction … does not give to a Court an overall discretionary supervision of monetary adjustments between parties to a contract under which a deposit was paid but which has been terminated … the ordinary principles of contract law and of damages stand untouched by this section except in so far as it operates to qualify the ordinary right of a vendor to forfeit and retain his deposit”.

81 In Pratt v Hawkins (1991) 32 NSWLR 319, 324 Young CJ in Eq held that an order under the section does not put an end to the vendor’s right to sue the purchaser for damages, but referred to dicta of Megarry J and Walton J to the contrary. In Schindler v Pigault (1975) 30 P & CR 328, 336 the former said:

“… a decision under the sub section that the deposit should be returned to the purchaser seems to me in all normal circumstances to involve a decision that the contract is at an end, though not necessarily by rescission”.

82 With respect I do not understand how the contract could be at an end in such circumstances except by rescission ab initio.

83 In Faruqi v English Real Estates Ltd [1979] 1 WLR 963, 969 Walton J treated this dictum as applicable under the previous law when specific performance in favour of the vendor was refused. I would have thought that in such a case the contract remained on foot so that the vendor could retain the deposit and sue for damages.

84 It is not necessary to express any final view on these questions.

85 For the reasons I have given, the purchasers’ failure to rescind and any election by them to affirm are not a bar to the exercise of the Court’s discretion in their favour. Mr Ireland’s submission to the contrary must be rejected.

86 On 26 August 1997 the vendor resold the property for $1,370,000, $10,000 more than the price for which it had been sold to the purchasers. Completion took place on 10 November 1997. Thus the vendor did not suffer a capital loss, but he had incurred expenses and paid interest under his mortgage between the contractual completion date under the first contract and the actual completion date under the second.

87 The Judge was not asked to assess the vendor’s damages and order that they be deducted from the deposit and this Court was not asked to do this either. Both parties adopted an all or nothing approach. It was conceded that the vendor could not retain more than $136,000, 10% of the purchase price, but he would still enjoy a substantial windfall if this was forfeited. In these circumstances the vendor’s claim for damages provides no basis for disturbing the Judge’s exercise of his discretion. His appeal against the order for the return of the deposit must therefore be dismissed.

88 The deposit of $200,000 was paid to the vendor’s mortgagee forthwith and reduced the interest payable under the mortgage. There is therefore no reason to disturb the Judge’s order that the vendor pay interest on the deposit until its repayment.

Costs

89 The purchasers have succeeded in retaining the order for repayment of their deposit with interest under a claim added at the start of the trial. Their claims against the vendor for damages for fraudulent misrepresentation and for misleading and deceptive conduct failed. They also failed on the contract issues.

90 The allegation of fraud against the vendor was a serious charge particularly since he was a solicitor. He had to defend the charge while it remained on the file and its existence made settlement negotiations difficult, if not impossible. As Lord Cairns said in Parker v McKenna (1874) LR 10 Ch App 96, 123:

“… if the suit had been framed [without the charge of fraud] it would have been open to the defendants … to have submitted to such a suit, and not to have resisted it. But to a suit constituted like the present, it is impossible for the Defendants to submit. They must resist it; they must meet the allegations of fraud which it contains, and they have no choice but to follow the line on which the Plaintiff may lead them as regards the amount and extent of their proof”.

91 The allegation of fraud in the present case was completely unnecessary if all the purchasers sought was repayment of their deposit, because innocent misrepresentation would have been sufficient. Particulars of the purchasers’ damage pleaded in the amended statement of claim included the deposit, the unpaid balance of the deposit, and their legal and survey costs. These amounts, other than the deposit, were modest.

92 Plaintiffs who make unnecessary allegations of fraud which fail will normally be ordered to pay the defendant’s costs of those issues. See Parker v McKenna (1874) LR 10 Ch Ap 96, 122-3, 125, 127; Thomson v Eastwood (1877) 2 Ap Cas 215, 242-3, 254, 259; In re Consort Deep Level Gold Mines Ltd ex parte Stark [1897] 1 Ch 575 CA, 594; Adey v Fisher (1914) 14 SR (NSW) 407, 415.

93 The Judge, who was not referred to this rule of practice, ordered the vendor to pay the whole costs of the proceedings. That order cannot be supported and this Court must re-exercise the discretion.

94 The claim for the return of the deposit was only raised on the first day of the trial, more than two years after the proceedings commenced. The Court will often make a special order for costs where a plaintiff only succeeds on a claim raised very late or at the trial. It will frequently be appropriate either to deprive the plaintiff of the costs of issues on which he failed, or to give the defendant his costs of those issues. In the circumstances I consider that the vendor should have the costs of the issues on which he succeeded. Another important factor is that the proceedings were prolonged by the concurrent hearing of the purchasers’ action against the agents, in which the vendor was joined as a cross-respondent. This added several days to the trial.

95 The appropriate course in a case of this complexity, to avoid difficult and expensive assessments, is to make a fractional order in favour of the purchasers. On a broad approach it seems to me that the issues on which the vendor succeeded would be appropriately reflected in an order that the purchasers pay one quarter of his costs. If costs were then set off he would be ordered to pay one half of the purchasers’ costs. This does not take into account the additional costs incurred by the vendor as a result of the concurrent hearing. In the circumstances the proper order is that the vendor pay one quarter of the purchasers’ costs.

96 The appellant has substantially succeeded on the costs issues but failed on the misrepresentation and deposit issues which occupied most of the hearing time. He should pay three quarters of the respondents’ costs of the appeal.

Orders

97 The following orders should be made:

CA 40398/01
Jeffrey Gordon Butcher and Anor v Lachlan Elder Realty Pty Ltd


(1) Appeal dismissed with costs.

(2) Cross-appeal dismissed.

(3) No order as to the costs of the cross-appeal.

CA 40432/01
Robert Edward Harkins v Jeffrey Gordon Butcher & Anor


(1) Appeal allowed in part.

(2) Set aside the order for costs made in the Equity Division.

(3) In lieu thereof order that the defendant pay one quarter of the plaintiffs’ costs of the proceedings in the Division.

(4) Appeal otherwise dismissed.

(5) The appellant to pay three quarters of the respondents’ costs in this Court.

98 BEAZLEY JA: I agree with Handley JA.

99 HODGSON JA: I agree with Handley JA.

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