Havyn Pty Ltd v Webster

[2005] NSWCA 182

Reported Decision: (2005) ATPR (Digest) 46-266

Court of Appeal

CITATION:	Havyn Pty Ltd v Webster [2005] NSWCA 182
HEARING DATE(S):	22 February 2005
JUDGMENT DATE:	26 May 2005
JUDGMENT OF:	Santow JA at 1; Tobias JA at 180; Brownie AJA at 181
DECISION:	(1) The appeal is allowed in part. ; (2) The cross-appeal is dismissed. ; (3) Set aside Orders 2 and 3 made by Palmer J on 3 August 2004, and in lieu thereof order that the Defendant pay to the Plaintiff damages for breach of the Contract for Sale of Land dated 19 September 2002, to be ascertained by the Master upon enquiry. ; (4) Vary Order 6 made by Palmer J on 3 August 2004 by deleting therefrom the reference to Order 2. ; (5) Set aside Order 7 made by Palmer J on 3 August 2004, and in lieu thereof order that judgment be entered for the Cross-Claimant in the sum of $92,739 together with interest pursuant to the Supreme Court Act. ; (6) Set aside Order 7A made by Palmer J on 3 August 2004. ; (7) Each party is to pay its or her own costs both on the appeal and in the court below.

CATCHWORDS:	CONTRACT - misrepresentation by vendor in sales brochure as to size of property - standard contract for sale of land - contract affirmed by purchaser after discovering misrepresentation - subsequent failure to complete by purchaser not caused by misrepresentation - whether vendor entitled to rely on Notice to Complete and terminate contract - entitlement to damages for breach of contract - TRADE PRACTICES - s42 Fair Trading Act 1987 (NSW) - whether misrepresentation misleading and deceptive conduct - effect of word "approximately" in representation - effect of disclaimer on representation - whether conduct in "trade or commerce" - whether causation established - whether conduct of representee so unreasonable as to sever the chain of causation - damages for misleading and deceptive conduct - PROPERTY - EQUITY - s55(2A) Conveyancing Act 1919 (NSW) - deposit forfeited by vendor after failure by purchaser to complete contract - whether proper to exercise statutory discretion to order the deposit to be returned - factors relevant to exercise of discretion
LEGISLATION CITED:	Conveyancing Act 1919 (NSW) s55(2A) Fair Trading Act 1987 (NSW) s42; s72 Law of Property Act 1925 (UK) s49(2) Trade Practices Act 1974 (Cth) s82; s87
CASES CITED:	Akron Securities Ltd v Iliffe (1997) 41 NSWLR 353 Argy v Blunts & Lane Cove Real Estate Pty Ltd (t/as Blunts of Lane Cove) (1990) 94 ALR 719 Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 Bennett v Stuart (1927) 27 SR(NSW) 317 Butcher v Lachlan Elder Realty Pty Ltd (2004) 79 ALJR 308 Carpenter v McGrath (1996) 40 NSWLR 39 Como Investments Pty Ltd (In liq) v Yenald Nominees Pty Ltd (1997) 19 ATPR 41-550 Cowan v Stanhill Estates Pty Ltd (No 2) [1967] VR 641 Delgado v Walker Developments Pty Ltd (1989) NSW ConvR 55-497 Derry v Peek (1889) App Cas 337 Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189 Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd [No 2] (1987) 16 FCR 410 Export Credits Ltd v Universal Oil Products Co [1983] 1 WLR 399 Fraser v L O'Malley & Sons Pty Ltd [1975] 2 BPR 9133 Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 Gogard Pty Ltd v Satnaq Pty Ltd [1999] NSWSC 1283 Gould v Vaggelas (1985) 157 CLR 215 Hanave Pty Ltd v LFOT Pty Ltd (1999) 43 IPR 545 Harkins v Butcher; Butcher v Lachlan Elders Realty Pty Ltd (2002) 55 NSWLR 558 Harvey v PD (2004) 59 NSWLR 639 Hasanovic v Polistena [1982] NSW ConvR 55-078 Henville v Walker (2001) 206 CLR 459 Horne v Zebra Motor Inn Pty Ltd (Jacobs J, 12 September 1963, unreported) Howe v Smith (1884) 27 Ch D 89 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 James Macara Ltd v Barclay [1944] 2 All ER 31 Kyogle Shire Council v Francis (1988) 13 NSWLR 396 Lubidineuse v Bevanere Pty Ltd (1984) 3 FCR 1 Lucas & Tait Pty Ltd v Victoria Securities Ltd [1975] 2 NSWLR 268 Mallett v Jones [1959] VR 122 March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 Murphy v Overton Investments Pty Ltd (2004) 216 CLR 388 Neilsen v Hempston (1986) 65 ALR 302 Nelson v McDonald (Mahoney JA, 27 November 1972, unreported): NLS Pty Ltd v Hughes (1966) 120 CLR 583 O'Brien v Smolonogov (1983) 53 ALR 107 Ockenden v Henly (1858) 120 ER 590 Omar v El-Wakil [2002] 2 P&CR 36 Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1976] VR 779; [1977] VR 454 (Full Court) Pearlow v Pearlow (1953) 90 CLR 70 Pledge v Roads and Traffic Authority (2004) 205 ALR 56 Potts v Miller (1940) 64 CLR 282 Real Estate Securities Ltd v Kew Golf Links Estate Pty Ltd [1935] VLR 114 Redgrave v Hurd (1881) 20 Ch D 1 Schindler v Pigault (1975) 30 P & CR 328 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 Shuttleworth v Clews [1910] 1 Ch 176 Smyth v Jessep [1956] VLR 230 Sutton v A J Thompson Pty Ltd (1987) 73 ALR 233 Tambree v Travel Compensation Fund [2004] NSWCA 24 Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359 Toteff v Antonas (1952) 87 CLR 647 Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 Universal Corporation v Five Ways Properties Ltd [1978] 3 All ER 1131; [1979] 1 All ER 552 (CA) Wardley v Western Australia (1992) 175 CLR 514 Wilson v Kingsgate Mining Industries [1973] 2 NSWLR 713 Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 Zsadony v Pizer [1955] VLR 496
PARTIES:	HAVYN PTY LTD (Appellant/Cross-Respondent) Renata Marina Paola WEBSTER (Respondent/Cross-Appellant)
FILE NUMBER(S):	CA 40287/04
COUNSEL:	I G HARRISON, SC/ J F MERKEL (Appellant/Cross-Respondent) R W TREGENZA/ D W RAYMOND (Respondent/Cross-Appellant)
SOLICITORS:	Whittens (Appellant/Cross-Respondent) Biddulph & Salenger (Respondent/Cross-Appellant)

LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 5941/02
LOWER COURT JUDICIAL OFFICER:	Palmer J

CA 40287/04
SC 5941/02

SANTOW JA
TOBIAS JA
BROWNIE AJA

26 MAY 2005

HAVYN PTY LTD v Renata Marina Paola WEBSTER

CONTRACT – misrepresentation by vendor in sales brochure as to size of property – standard contract for sale of land – contract affirmed by purchaser after discovering misrepresentation – subsequent failure to complete by purchaser not caused by misrepresentation – whether vendor entitled to rely on Notice to Complete and terminate contract – entitlement to damages for breach of contract

TRADE PRACTICES – s42 Fair Trading Act 1987 (NSW) – whether misrepresentation misleading and deceptive conduct – effect of word “approximately” in representation – effect of disclaimer on representation – whether conduct in “trade or commerce” – whether causation established – whether conduct of representee so unreasonable as to sever the chain of causation – damages for misleading and deceptive conduct

PROPERTY – EQUITY – s55(2A) Conveyancing Act 1919 (NSW) – deposit forfeited by vendor after failure by purchaser to complete contract – whether proper to exercise statutory discretion to order the deposit to be returned – factors relevant to exercise of discretion

FACTS:

The respondent (‘the vendor’) was the owner of a parcel of land and block of six units in Bronte NSW, which she had acquired by inheritance and had been letting the units out through a managing agent. In 2002, the vendor instructed the agent to place property for sale by public auction. For the purpose of marketing the property, the agent prepared a colour brochure which, inter alia, contained a representation as to size in the following terms: “each flat approximately 63 square metres”. The brochure also contained a small-print disclaimer which read “The information contained herein given has been supplied to us and we have no reason to doubt its accuracy, however we cannot guarantee it …”

In fact the representation was incorrect and had been obtained by the agent “pacing out” part of one of the units in the block, and calculating from that estimate.

The successful bidder at auction had relied on the representation as to size as the basis for a calculation as to a potential redevelopment, and had determined a bid price accordingly. A standard contract for the sale of land was entered into by the vendor and the bidder at the price of $3,130,000, and a customary 10% deposit was paid. The bidder was the principal and sole director of the appellant company (‘the purchaser’) and procured a novation of the contract in the company’s favour.

The purchaser was unable to find the balance of the contract price by the date for completion. The vendor issued a Notice to Complete but later agreed on terms to extend time for completion by one month, time being of the essence.

Prior to the extended date for completion, the purchaser discovered that the area of the flats was less than had been represented, although not the precise extent. The purchaser lodged a caveat, and alleged that the Notice to Complete was not effective. Nevertheless an appointment for settlement was made, and both parties attended.

Settlement did not occur as the purchaser still did not have sufficient funds to complete at the contract price. The purchaser sought a further extension of time, but did not agree to the vendor’s condition that it be released from any claims founded on alleged misrepresentation. Negotiations between the parties then broke down and the vendor terminated the contract and forfeited the deposit.

The vendor commenced proceedings by summons in the Equity Division of the Supreme Court seeking a declaratory orders and orders that the purchaser’s caveat be removed. The purchaser filed a cross-claim. Ultimately the purchaser abandoned its claim to specific relief and the vendor sold the property to the underbidder at auction for $3,000,000.

The case proceeded to hearing where the primary judge (Palmer J) had to consider the following issues:

1. Whether the vendor was entitled to terminate the contract and to damages in consequence of the purchaser’s failure to complete, or whether the purchaser was entitled to rescind.

2. Whether the purchaser was entitled to damages for loss arising from the misrepresentation, either in the tort of deceit or for contravention of 42(2) of the Fair Trading Act 1987.

3. Whether, alternatively, the purchaser’s forfeited deposit should be returned pursuant to s55(2A) of the Conveyancing Act 1919.

The primary judge found for the vendor on both the first and second issue, but for the purchaser on the third issue. The purchaser appealed and the vendor cross-appealed.

HELD, allowing the appeal in part, and dismissing the cross-appeal
Per Santow JA (Tobias JA and Brownie AJA agreeing):

A.

The primary judge did not err in holding that there was no equity in the purchaser such as to disentitle the vendor from relying on the Notice to Complete and the Notice of Termination. Therefore the vendor was entitled to damages for breach of contract.

Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359 referred to.

The primary judge erred in holding that the representation did not constitute misleading and deceptive conduct, but was correct in holding that it was made in trade or commerce.

(1) A representation forming part of a course of conduct cannot be considered in isolation from the character of the transaction and the overall conduct of the representor, and this includes considering the effect of the disclaimers.
Butcher v Lachlan Elder Realty Ltd (2004) 79 ALJR 308 followed.

(2) If a representation is of belief, it must be proven that the representor did not actually hold the belief that belief or that there was no adequate foundation upon which that belief could be held:
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82 applied.

The primary judge also erred in holding that even if misleading and deceptive conduct were shown, there was no sufficient causative link between the conduct and the purchaser’s loss and damage by reason of the failure of the purchaser to take reasonable care for its own interests.

(1) The term “by” in s42 invokes the common law practical or common-sense concept of causation (although it is not to be applied rigidly without reference to the terms of the Act).

Henville v Walker 206 CLR 459 followed, Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 followed.

(2) The law recognises that people can be swayed by several considerations to varying extents; therefore loss or damage is causally connected to a contravention of the Act if the conduct materially contributed to the loss or damage and it is not necessary that the conduct be the sole or dominant cause of the loss.

I & L Securities v HTW Valuers (2002) 210 CLR 109 followed, Henville v Walker 206 CLR 459 followed, Como Investments Pty Ltd (In liq) v Yenald Nominees Pty Ltd (1997) 19 ATPR 41-550 referred to.

(3) A plaintiff’s right to relief for loss of which the contravening conduct was a cause does not depend upon him or her having taken reasonable care for his or her own interests; a failure so to take reasonable care is relevant only insofar as it is the operative cause of a severable part of the loss of which the contravention was not a material cause.

I & L Securities v HTW Valuers (2002) 210 CLR 109 followed, Henville v Walker (2001) 206 CLR 459 followed.

(4) It will be a rare case where the quality of the reliance by an innocent party on a misrepresentation can be treated as so dominant in the causal chain as to properly be regarded as the real and effective cause of the loss, negating the causative effect of the misrepresentation.

I & L Securities v HTW Valuers (2002) 210 CLR 109 followed, Henville v Walker 206 CLR 459 followed, Sutton v A J Thompson Pty Ltd (1987) 73 ALR 233 referred to, Neilsen v Hempston (1986) 65 ALR 302 referred to.

(5) The onus of establishing that the quality of the reliance negates the causative effect of the conduct, lies on the party in contravention of the Act

Henville v Walker 206 CLR 459 at 483 per Gaudron J followed.

The purchaser was entitled to damages for misleading and deceptive conduct pursuant to s72(2) of the Fair Trading Act 1987.

(1) Discussion of the principles applying to damages for misleading and deceptive conduct.

The primary judge erred in exercising the discretion pursuant to s55(2A) of the Conveyancing Act, although his decision should be affirmed on other grounds.

(1) Section 55(2A) confers upon a Court a statutory jurisdiction to return a forfeited deposit, which was not previously available at common law or in equity to the same extent;

Workers Trust and Merchant Bank Ltd v Dojap Investments Ltd [1993] AC 573 considered, Export Credits Ltd v Universal Oil Products Co [1983] 1 WLR 399 referred to, Union Eagle Ltd v Golden Achievement Ltd [1997] AC 514 considered, Smyth v Jessep [1956] VLR 230 considered.

(2) It would be wrong to confine the jurisdiction conferred by the plain words of the statute by analogy with principles relating to relief against penalties or forfeiture.

(3) The jurisdiction conferred by s55(2A) is wide and no limiting gloss should be placed upon its words, which allow a Court to order a deposit to be returned “ if it thinks fit ”.

Lucas & Tait (Investments) Pty Ltd v Victoria Securities Ltd [1973] 2 NSWLR 268 considered and approved, Zsadony v Pizer [1955] VLR 496 considered, Horne v Zebra Motor Inn Pty Ltd (unreported, 12 September 1963, Jacobs J) considered, Nelson v McDonald (unreported, 27 November 1972, Mahoney JA) considered.

(4) It is not necessary for an applicant to show special or exceptional circumstances before an order under s55(2A) can be made.

Poort v Development Underwriting (Victoria) Pty Ltd (No 2) [1976] VR 779 considered, Mallett v Jones [1959] VR 122 considered, Harkins v Butcher; Butcher v Lachlan Elder Realty Pty Ltd (2002) 55 NSWLR 558 explained.

(5) Although the jurisdiction is wide, it is not unbounded and the Court must consider the context of a deposit and should not take adopt an approach which weakens the proper function of a deposit as an earnest for performance.

Omar v El-Wakil [2002] 2 P & CR 36 considered, Wilson v Kingsgate Mining Industries [1973] 2 NSWLR 713 referred to, Fraser v L O’Malley & Sons Pty Ltd [1975] 2 BPR 9133 referred to.

(6) For this reason it is important for a Court when considering the discretion under s55(2A) to consider the terms and conditions of the contract, and the circumstances of its breach which gave rise to the forfeiture of the deposit, and to be careful to avoid characterising a deposit as a windfall merely because it is forfeited.

(1) The appeal is allowed in part.

(2) The cross-appeal is dismissed.

(3) Set aside Orders 2 and 3 made by Palmer J on 3 August 2004, and in lieu thereof order that the Defendant pay to the Plaintiff damages for breach of the Contract for Sale of Land dated 19 September 2002, to be ascertained by the Master upon enquiry.

(4) Vary Order 6 made by Palmer J on 3 August 2004 by deleting therefrom the reference to Order 2.

(5) Set aside Order 7 made by Palmer J on 3 August 2004, and in lieu thereof order that judgment be entered for the Cross-Claimant in the sum of $92,739 together with interest pursuant to the Supreme Court Act.

(6) Set aside Order 7A made by Palmer J on 3 August 2004.

(7) Each party is to pay its or her own costs both on the appeal and in the court below.

CA 40287/04
SC 5941/02

SANTOW JA
TOBIAS JA
BROWNIE AJA

26 MAY 2005

HAVYN PTY LTD v Renata Marina Paola WEBSTER

Judgment

1 SANTOW JA:

OVERVIEW
The appellant purchaser, Havyn Pty Ltd, seeks to recover its forfeited deposit and damages. It relies on what it contends was misleading and deceptive conduct by the vendor, the respondent Ms Webster, in overstating the floor area of a block of flats in a flyer. This was a two-sided selling brochure, issued by the vendor’s agent. That alleged conduct preceded the purchaser acquiring the block of six flats at auction under a contract of sale. The vendor terminated that contract because of the purchaser’s failure to complete. That failure was not attributable to the alleged misleading and deceptive conduct but was because of difficulties in securing finance.

2 The claimed misrepresentation was to overstate the size of the six flats by an average of around 5%. When the purchaser failed to complete, the vendor terminated the contract and forfeited the purchaser’s deposit. The purchaser brought proceedings unsuccessfully for damages for misleading and deceptive conduct, and to recover its deposit.

3 The issues were these:

(a) was the vendor entitled to give a Notice to Complete and then terminate for failure to complete;

(b) was the representation (as to approximate size of the flats) an actionable misrepresentation either at common law for the tort of deceit or as misleading and deceptive conduct in trade or commerce, within s42 of the Fair Trading Act 1987 (NSW) (“the FTA”);

(c) if it was such an actionable misrepresentation, did it occasion loss and damage to the appellant and if so, in what quantum;

(d) should the discretion to order forfeiture of the appellant’s deposit to be returned pursuant to s55(2A) of the Conveyancing Act 1919 (NSW) have been exercised by requiring it to be returned in full, and

(e) how should the costs discretion have been exercised.

4 The decision of the trial judge, Palmer J, was, save as to the deposit and as to the representation being in trade or commerce, in favour of the respondent vendor. The appellant purchaser appeals against that decision insofar as it favours the respondent. The respondent vendor puts in issue those parts of the decision favouring the appellant. Thus the respondent cross-appeals against the trial judge’s determination preventing forfeiture of the deposit. There is also a Notice of Contention annexed to the Notice of Cross-appeal dealing with damages and putting in issue the trial judge’s finding that the representation was made in trade or commerce.

SALIENT FACTS

5 The salient facts in this case are essentially not in dispute, although the parties are in vigorous disagreement as to the legal consequences which ought to flow from them. The facts were set out in the judgment of Palmer J, paras [4]-[30], but for convenience I repeat them below, amplifying them where necessary by reference to particular evidence.

6 Ms Renata Webster (‘the vendor’) was the registered proprietor of a property in Pacific St, Bronte (‘the property’), upon which was erected a block of six flats. The building was a three-storey building and there were two flats on each floor, with a central common staircase. The property had not been brought under the Strata Schemes (Freehold Development) Act 1973 (NSW).

7 The vendor had inherited the property from her grandfather in 1988, and had been renting out the flats through a managing agent, Mr Terry Torpy of J F Bentons & Co Pty Ltd. In about August 2002, the vendor decided to sell the property and retained Mr Torpy to act for her as vendor’s agent.

8 Mr Torpy prepared a colour brochure or flyer for the purposes of advertising the property in contemplation of auction on 19 September 2002. The front of the brochure had a large colour picture of the property, with a number of listed features in bullet-point form. I have set these out in approximately the same print size as the brochure:

“ Bronte
16 Pacific Street

· Block of six x two bedroom flats with Panoramic Ocean Views.

· 100 metres to Bronte Beach, shops, cafes, park and city buses.

· Each flat approximately 63 square metres.

· Two lock-up garages.

· Well maintained with scope for further improvement.

· Unsurpassed opportunity for investor or developer.”

9 It is that third representation, that each flat was “approximately 63 square metres”, which lies at the heart of these proceedings. After those bullet points, the brochure sets out particulars of the auction and the inspection dates, as well as details of the agent. At the foot of the page was the following small-print statement which I set out in approximately the same reduced print size as in the brochure:

“E.&.O.E. The information contained herein given has been supplied to us and we have no reason to doubt its accuracy, however we cannot guarantee it. Accordingly all interested parties should make their own enquiries to verify the information.”

10 On the obverse side of the brochure there appeared a sketch-plan showing the layout of an unidentified flat, with certain dimensions marked. These dimensions were only given for the living room (4.5 x 3.5) and the two bedrooms (each, 4.0 x 3.5); no other dimensions were given for other parts of the flat. There was no floor plan of the building itself, or the land upon which it was situated. The dimensions were therefore incomplete so far as the rest of the depicted flat was concerned.

11 Below the sketch plan appeared figures showing the income, outgoings and land value and the agents’ details. Then at the foot of the page was another small-print statement which I again set out in approximately the same print-size as the brochure:

“All measurements are approximates only. While we trust them to be correct we cannot guarantee them.”

12 The measurements contained on the sketch plan had been determined by Mr Torpy simply “pacing out” the bedrooms and living room, and using that method to calculate an approximate size for the units (Affidavit, J Torpy, sworn 13 February 2003, para [4]; Blue, 18). The measurements made by Mr Torpy were the only measurements made available by the vendor to potential purchasers. There was no extant survey plan of the building to be made available for inspection prior to the auction. Nor was it disclosed to the purchaser or its principal that pacing out was the method used.

13 Mr Peter Meyerratken was the principal of the purchaser. He lived in the adjoining property. He had a sum of some $750,000 from the sale of his share in a business, and was looking for a real estate investment. He became interested in purchasing the property for the purpose of refurbishment and resale. He intended to amalgamate the two flats on each floor, such that the property would contain three luxury strata apartments which could be resold at a substantial profit. On 17 September 2002, he inspected the interior of two units in the property when it was “open for inspection” and was given a copy of the brochure by Mr Torpy. Mr Meyerratken gave evidence that he had read the brochure, but he could not recall reading the two warnings at the foot of each page although it was his usual practice to read the whole document. He indicated that he may have cursorily looked at it and concluded that it was a “standard disclaimer” (T, 24.44-57).

14 On 18 September 2002, he returned to the property on his own and took some measurements of the stairwells, in order to calculate the total amount of floor-space on each floor. Mr Meyerratken gave evidence that he relied on the 63m2 in the brochure in order to calculate that amalgamating the stairwell area of each floor with each of the flats on that floor would yield an area of approximately 146m2 per refurbished flat. He did not seek independently to verify the figures given (T, 25.7-47):

“Q. Assuming, as it is in accordance with your practice, you read it, you may say that you just regarded that as a standard disclaimer, did you not consider it or would you not ordinarily in your usual practice consider it appropriate to follow the advice given?
A. In the situation I didn’t see it necessary to follow, to take specific measurements when I have been given a measurement which people are saying, here, no need to doubt the accuracy. I expected it to be, you know, backed up by something that somebody has taken the trouble to get measurements.

HIS HONOUR: Q. Could you repeat that, you are speaking a bit too fast.
A. I’m sorry. I basically relied on measurement that was given to me. I felt the measurement had some substance given that there were numbers on there and someone had gone to some trouble to put these numbers together, therefore they were seeking to represent the space and I believed it.”

Q. The question was if your ordinary practice is to read the document and assuming you read it, why didn’t you just simply take some steps to verify it?
A. I didn’t think it needed verifying.

Q. You noted the word “approximately” 63 square metres?
A. Yes.

Q. And so you understood from that it was not held out to be an exact figure?
A. Not an exact figure.

Q. Did you understand at the time the word “approximately” could encompass some significant variation?
A. Not significant at all, actually. I would expect that to be within a metre. I don’t expect it to be many metres out, but within a metre.”

15 Mr Meyerratken then consulted with local real-estate agents as to area values per square metre, and with his friend Mr Bruce Baudinet, who had some experience in property development. He then calculated that the refurbished flats could be resold for approximately $14,000 per square metre, and that refurbishment, interest and other holding costs would be between $1 million and $1.5 million. This allowed him to decide upon, just prior to the auction, a bid price of about $3 million.

16 Ultimately at auction on 19 September 2002, the property was knocked down to Mr Meyerratken for $3,130,000 (the underbidder bid $3,125,000). Contracts were signed and exchanged between the vendor and Mr Meyerratken, with settlement to occur in six weeks on 31 October 2002. Mr Meyerratken paid over a deposit of $313,000.

17 Mr Meyerratken had acquired the appellant company, Havyn Pty Ltd (‘Havyn’), incorporated on 17 September 2002, and became its sole director, in order to carry out his proposed redevelopment project. This contract was however signed by Mr Meyerratken with no mention of Havyn. Subsequently, on 8 October 2003, he procured the vendor to agree to enter a new contract for sale with Havyn upon the same terms as the earlier contract. By that second contract he also guaranteed Havyn’s obligations. Mr Meyerratken’s deposit under the first contract was to be taken to be Havyn’s deposit and the date for completion remained the same. I should add that no argument was mounted that Havyn could not rely on the misrepresentation, if such it was, to Mr Meyerratken. Henceforth in this judgment, any reference to ‘the purchaser’ of the property is a reference to Havyn.

18 When the date for completion arrived on 31 October 2002, the purchaser had been unable to find the purchase price. Therefore, on 1 November 2002, the vendor’s solicitors issued a Notice to Complete by 18 November 2002. On 14 November 2002, following a request by Havyn, the vendor agreed to extend the time for completion to 2 December 2002, time being of the essence. This was in consideration of the purchaser agreeing to the release of the deposit forthwith, and to covenant to pay interest on the balance of the purchase price at the rate of $857.54 per day from 31 October to 18 November 2002, and at 20% per annum from 19 November to 2 December 2002.

19 On 21 November 2002, Mr Meyerratken discovered that the area of the flats was substantially less than 63m2. On 29 November 2002, in accordance with his instructions, his solicitor wrote to the vendor’s solicitors in the following terms:

"We now act for Havyn Pty Limited and have been provided with a copy of Contract for Sale dated 19 September 2002 between your client and our client.

We enclose a copy of a flyer issued by your client’s agent. It appears to our client that there has been a significant and serious misrepresentation as to the size of each flat.

We refer to the plan on the flyer and advise that it appears that the dimensions are not correct.

Our client hereby requests immediate access to the property in order it may have a surveyor measure up the actual dimensions of the property.

Could you please contact us as a matter of urgency to permit our client’s surveyor to enter the property.

We presume that time will not run under the contract whilst this matter remains unresolved.

We further wish to advise that our client disputes the efficacy of the notice to complete previously issued by you. Accordingly our client disputes that it is bound by the purported variation of the notice to complete referred to in the agreement allegedly binding our client which appears to be undated.

We are lodging a Caveat to protect our client’s interests. Please advise whether you have instructions to accept service of process.

We await hearing from you."

20 That same day, a caveat was lodged by the purchaser Havyn over the land, claiming an interest as purchaser under the contract for sale. By fax of the same date, the vendor’s solicitors responded, refusing to concede that time would not run or the alleged inefficacy of the Notice to Complete.

21 Despite this, an appointment for settlement was made for 2 December 2002, that being the last day under the vendor’s extended Notice to Complete. Settlement clerks attended at the appointed time and place, but the purchaser did not have all the requisite cheques. Those attending were then informed by Mr Meyerratken by telephone that settlement would not proceed. It is conceded that at that time Havyn still did not have sufficient funds to complete.

22 Later on 2 December 2002, Mr Meyerratken received a report from his architect, who had gained access to the property through the vendor’s solicitors, that the size of every one of the flats was substantially less than 63m2. In fact, the area (including the balcony) for Units 1 to 6 was respectively 60.1m2, 56.2m2, 60m2, 59.8m2, 60.1m2, and 59.8m2.

23 Thus if one took the greatest shortfall, that for flat 2 at 56.2m2 as against 63m2, and which alone of the six flats lacked a balcony, the difference in percentage terms was 10.8% (appeal transcript 22 February 2005 at 58.16). The shortfall differential for the other five flats was marginally below and above 5%. The trial judge applied a valuation of $10,000 per square metre. By including the balconies one got an aggregate shortfall in dollar terms of $220,000 (while excluding balconies, the aggregate shortfall became $401,000). That shortfall may be compared to the successful bid price of Mr Meyerratken of $3,130,000. It represents an average shortfall of just over 5% taking all six flats, and including balconies. (In value terms the shortfall in value using the trial judge’s $10,000 per square metre, is around 7%.)

24 Despite having received that information, on 3 December 2002 Mr Meyerratken endeavoured to obtain a further extension of time for completion of the contract, but would not agree to the vendor’s condition that Havyn provide releases from any claims founded on alleged misrepresentation.

25 Ultimately, on 4 December 2002 the vendor issued a Notice of Termination of the contract, and on 10 December 2002 requested removal of the caveat. Havyn refused.

26 The vendor then commenced these proceedings on 16 December 2002, seeking: (1) a declaration that the contract had been validly terminated by her, (2) damages for breach of contract, and (3) an order that the caveat be removed.

27 On 23 December 2003, the purchaser filed a cross-claim by which it sought orders pursuant to s72(2) of the FTA varying the contract to allow completion within a reasonable time, together with an abatement of the purchase price by way of compensation for the misrepresentation. In the alternative, the purchaser claimed either (1) orders rescinding the contract and refunding the deposit of $313,000 with damages for expenditure, or (2) a declaration that the vendor was not entitled to terminate together with an order for specific performance. Failing all that, the purchaser alternatively claimed an order for return of the deposit pursuant to s55(2A) of the Conveyancing Act 1919.

28 In the meantime the vendor had entered into a conditional contract to sell the property to the underbidders at the auction for $3 million. On 14 March 2003, by consent of the parties, a motion for expedition was dismissed. The parties agreed for the caveat to be released to allow the vendor to sell the property to the underbidders in consideration of the monies representing the purchaser’s deposit being invested on behalf of the parties pending determination of the proceedings. These consent orders were made without prejudice to the rights asserted by Havyn in its cross-claim. The property has since been sold to the underbidders, who have been entered on the folio as registered proprietors.

29 It is apparent that after the consent orders, the vendor’s case was still that she had validly terminated the contract on 4 December 2002, and was entitled to damages for breach of contract. The purchaser’s case was that since the vendor had no entitlement to terminate she was in continued repudiation up to the date when the consent orders were made effecting a mutual rescission of the contract. Accordingly, although Havyn must be taken to have abandoned any claim for specific relief, it still claimed damages and return of the deposit primarily on the basis that it had an entitlement to rescind.

30 In order to reflect the issues remaining after the consent orders were made, the purchaser filed on 30 March 2004 an Amended Points of Cross-Claim, in which it sought the following relief: (1) a declaration that the vendor had made false and misleading representations as to the size of the units, and in consequence was disentitled from relying on the Notice to Complete and/or the Notice of Termination; (2) return of the deposit of $313,000, because the contract was validly rescinded or alternatively pursuant to s55(2A) of the Conveyancing Act 1919, and (3) damages suffered by the purchaser in reliance on the misrepresentation by the vendor. These appear to have been claimed in tort and pursuant to s72(2) of the FTA. It would seem that damages were claimed under s72(2) rather than s68 because the deposit had not yet been ultimately lost, invested as it was pendent lite, so that there was no complete cause of action under s68.

31 The proceedings ultimately came before Palmer J on 23 March 2004, and occupied four days before his Honour delivered judgment on 26 March 2004. Further orders regarding costs were made on 1 April 2004.

32 In broad terms, the trial judge disposed of the claim and cross-claim by determining that:

(a) The vendor had validly terminated the contract on 4 December 2002, and was entitled to damages of at least $130,000 (with further damages to be assessed by a Master);

(b) The purchaser was not entitled to damages either in tort or for misleading and deceptive conduct pursuant to s42 of the FTA;

(c) The forfeited deposit ought to be refunded pursuant to the discretion conferred by s55(2A) of the Conveyancing Act 1919 as otherwise the vendor would receive a substantial and unmerited windfall; but

(d) that order should be stayed until the results of a damages enquiry before the Master was known, since Havyn, as a sole purpose company, might not otherwise have the means to pay any damages as assessed, and

(e) Costs of the whole proceedings were to be apportioned, such that each party receive the costs of the issue/s on which it was successful, with the result that the purchaser was to pay 75% of the vendor’s costs.

33 Each of these determinations is in some way challenged in the proceedings on appeal. The purchaser has appealed on (a), (b) and (e), which I shall refer to in summary form respectively as the contractual issue, the misleading and deceptive conduct issue and the costs issue. The vendor has cross-appealed with respect to (c) above, which I shall refer to as the deposit issue. The purchaser did not elaborate on its written submissions on (a) above and acknowledged that if it succeeded on (b) and (c), it did not need (a) (appeal transcript 11.33).

THE TRIAL

34 Since the appeal encompassed all these issues, it is appropriate to set out in more detail the basis upon which the trial judge came to his decision with respect to each of them. I have also incorporated the grounds agitated by both the purchaser and vendor in their respective Notice of Appeal and Notice of Cross-Appeal on those issues.

The contractual issue

35 The trial judge determined the contractual issue adversely to the purchaser on the basis that, even if it had a right to rescind the contract for misrepresentation, that misrepresentation had nothing to do with the purchaser’s subsequent breach of contract constituted by its inability and failure to complete. It was that breach, not the misrepresentation, which gave rise to the vendor’s right to issue a Notice to Complete and ultimately a Notice of Termination. He cited Tanwar Enterprises Pty Ltd v Cauchi (2003) 201 ALR 359 and Redgrave v Hurd (1881) 20 Ch D 1, to support the conclusion that, where a misrepresentation inducing a contract has not, in a significant respect, caused or contributed to the breach by the other party, the party in breach has no equity enabling it to retain the benefit of the contract without performing its own contractual obligations according to their terms. The trial judge rejected, as unsupported by authority, the contrary proposition urged by the purchaser. This was that a party to a contract who has induced the other party to enter into it by a misrepresentation which has nothing to do with the terms of the contract or how it is to be performed, is disentitled in equity from enforcing the contract according to its terms. This was even when the innocent party elected not to rescind for misrepresentation. The trial judge considered it to be clear from the evidence that Havyn wanted to proceed with the purchase and had elected to affirm the contract, desiring only to use the allegation of misrepresentation to obtain more desirable terms: [40]-[43].

36 Having found the vendor to be entitled to terminate the contract for breach by the purchaser the trial judge concluded that the loss occasioned to the vendor is so far proved to be “the difference between the sale price to the defendant ($3,130,000) and the sale price to the subsequent purchaser ($3M).” [86], and that the matter should be referred to the Master for an enquiry into “any loss suffered by the Plaintiff in addition to the loss of $130,000”: [88].

37 By Ground 1 of the Notice of Appeal, the purchaser submits that the trial judge erred in finding that the vendor was entitled to give a Notice to Complete the contract on 1 November 2002, or at any time. The purchaser submits that since the vendor induced the contract by misrepresentation, the vendor in equity should be restrained from the unconscientious use of contractual power thereby obtained. Essentially, it is contended that the vendor was not entitled to terminate the contract. It therefore is said to have remained on foot until there was mutual rescission under the consent orders of 14 March 2003. A further incidental consequence of this argument, if successful, would be that the vendor never became entitled to retain the deposit paid by the purchaser, thereby rendering it unnecessary to consider the s55(2A) discretion.

The damages issue

38 If Ground 1 were successful, it will be unnecessary to consider Grounds 4-6 which challenge the damages assessment of the trial judge in relation to the loss sustained by the vendor due to the purchaser’s breach of contract. These grounds are alternatives and are all variations on the same theme. Essentially it is said that the trial judge erred in either (1) assessing the vendor’s loss at all (when there was insufficient evidence and the matter should have been referred to a Master); (2) assessing the vendor’s loss at $130,000; or (3) assessing the vendor’s loss at the difference between the original purchase price and the purchase price achieved on re-sale.

The misleading and deceptive conduct issue

39 This issue is of central importance on the appeal, and in fact occupied by far the bulk of the hearing time before the trial judge. There were a number of steps in the reasoning of the trial judge to the conclusion that the vendor was not liable for damages for any misleading and deceptive conduct.

40 First, the trial judge considered that it was necessary properly to construe what was the representation relied on as constituting misleading and deceptive conduct. In that regard, he accepted the vendor’s submission that the statement “[E]ach flat approximately 63 square metres” could not be viewed in isolation. The real representation conveyed by the brochure had to be ascertained by reading that statement in the context of the whole document (including the disclaimer statements), taking into account the likely representees and the nature and value of the property. Thus, it was not determinative that the area discrepancy of each particular flat from 63m2 was as I have set out at [23] above. Such a discrepancy of that order could not be said to be within the tolerance of the words “approximately 63 square metres”. The trial judge held that the ordinary reader of a document about such a property, which was worth some $3 million and would be of interest to investors and developers, would be reasonably expected to read the document closely given that it was the only document which gave any information as to the dimensions of the property. The trial judge, however, concluded (at [60]) that the ordinary reader, reading the whole of the brochure, would understand that “what was being represented was not that the floor area was approximately 63m2, but that that the [vendor] by her agent believed that the area was approximately 63m2 but could not guarantee the accuracy of that figure”.

41 Second, the trial judge citing Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) 2 FCR 82, concluded that in order to show that this representation of belief was misleading or deceptive, the purchaser must demonstrate either that the vendor or her agent did not actually hold that belief or that there was no adequate foundation upon which it could be held. The trial judge held that the purchaser had failed to discharge this onus. In the case of the vendor herself, this was because she did not have personal knowledge of the area of the flats and had reasonable grounds to rely, as she did, upon the experience of her agent Mr Torpy and to believe that his approximation was accurate. In the case of Mr Torpy, this was because there was insufficient evidence to displace his repeated assertion that he honestly believed that the pacing-out method would yield a figure which was “pretty close”, the fact that this honest belief was mistaken not being sufficient to render the representation that he held that belief misleading or deceptive. The evidentiary basis for this finding appears to be in the of cross-examination of Mr Torpy (T, 86.33-56), which I set out later in this judgment.

42 The trial judge held that the above conclusion was sufficient to dispose of the purchaser’s claim for damages based on misrepresentation, whether founded in tort or on s42 of the FTA. For completeness, however, the trial judge dealt with a number of other issues which had been the subject of argument, and which would arise if he had not concluded that there was no misleading or deceptive conduct. He thus held that, contrary to the vendor’s submission, the misrepresentation was made “in trade or commerce” for the purposes of s42. This was said to be because letting out six flats through a managing agent in a business like way since 1988 did constitute the carrying on of a business on the property: Lubidineuse v Bevanere Pty Ltd (1984) 3 FCR 1.

43 The trial judge then held that even if he had found there to be misleading and deceptive conduct (such as if he had held the representation to be one of fact rather than belief), he would have denied relief under the Act on the ground of causation. He accepted the vendor’s submission that Mr Meyerratken’s reliance upon any misrepresentation was so unreasonable (in not heeding the disclaiming words) as not to be sufficiently causal of loss, and stated:

“It would be wrong to grant relief under the Fair Trading Act when it is clear that [the purchaser] has failed to take reasonable care for its own interests and has sought to rely on particular words in the flyer which, although misleading in isolation, do not have that character when viewed in the light of the document as a whole.”

44 The trial judge then indicated (at [79]-[81]) the basis upon which damages should be calculated, if he would otherwise have awarded damages. He would have allowed “legal fees and costs and expenses incurred by [Havyn] in furthering the proposed development of the property”. He would not have allowed the $65,000 claimed by Mr Meyerratken for services provided to Havyn. The trial judge noted that Havyn had conceded that it did not press its pleaded claim for loss of profit or loss of the chance of profit (T, 115.52-.58).

45 The trial judge’s resolution of the misleading and deceptive conduct issue has given rise to a number of grounds of appeal. However, no appeal is brought against the trial judge’s rejection of the claim for damages for the tort of deceit. Thus the only cause of action live on appeal is the statutory cause pursuant to the FTA. By Ground 2 of the Notice of Appeal, the purchaser claims the trial judge erred in finding that the representation was not false, misleading or deceptive within the terms of s42 of the FTA. The essence of this submission is that the trial judge was wrong to use the disclaimer to read down an incorrect, express representation so as to regard it as a representation of a belief rather than of fact. This was when there was no basis for the exception by which a representor may rely as belief upon information received from, and sourced to, a third party.

46 By Ground 3, the purchaser claims the trial judge also erred when considering what loss flowed from a misleading and deceptive representation in finding that the purchaser had an obligation at law to take reasonable care for its own interests. It relied on the decision of the High Court in I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109 in support of the proposition that a defendant who has failed to take care for his own interests is not thereby debarred from recovering compensation for loss or damage in statutory causes of action for misleading or deceptive conduct.

47 In its Notice of Contention, the vendor contends that the decision of the trial judge that the purchaser was not entitled to damages for misleading and deceptive conduct can be supported on a number of grounds which it had unsuccessfully pressed in the court below. First, it submits that the discrepancy in this case is within the permissible tolerance of the expression “approximately 63 square metres”. Second, it seeks to reverse the trial judge’s finding that the representations were made in trade and commerce. Third, it submits that there is no evidence that the purchaser suffered any loss as a result of the representation, when the brochure is considered as a whole. This was on the somewhat narrow basis that Mr Meyerratken only gave evidence that he would not have bought the property if the units had not been represented to be 63m2 (and gave no evidence of what he would have done if the units had not been represented to be approximately 63m2). Obviously the issues the subject of the Notice of Contention do not arise for determination unless the appeal on the misleading conduct issue is otherwise successful.

The deposit issue

48 This issue was determined by the trial judge in accordance with the statutory discretion conferred by s55(2A) of the Conveyancing Act, which is in the following terms:

(2A) In every case where the court refuses to grant specific performance of a contract, or in any proceeding for the return of a deposit, the court may, if it thinks fit, order the repayment of any deposit with or without interest thereon.

49 The trial judge held that although this discretion is very broad, it derives its character from the conscience of equity rather than the strictness of the common law. He then concluded that taking into account the circumstances set out below, forfeiture of the deposit would result in a substantial and unmerited windfall to the vendor and a correspondingly large and unnecessary loss to the purchaser. This was so, even though it was through its fault that the contract for sale was terminated. The circumstances relied on by the trial judge included that: (1) the loss so far proved by the vendor was $130,000 whereas the deposit was double that; (2) if her loss is confined to that sum, her windfall will be $183,000, but if it is more she still has a right to claim damages from the purchaser; (3) the vendor had had the benefit of possession of the property and rentals throughout the whole period up to completion with the underbidder; (4) the vendor had the benefit of the deposit from 14 November 2002 until 14 March 2003 (when the consent orders were made); and (5) the deposit represented a substantial proportion of Mr Meyerratken’s assets, forfeiture of which in addition to his expenses would represent to him a severe loss.

50 The trial judge concluded that in these circumstances, the appropriate order was that the deposit be returned, but that the order be stayed until the result of the damages enquiry before the Master was known. This was because a sole-purpose company such as Havyn might not otherwise have the means to pay any additional damages.

51 The vendor challenges this ruling in the Notice of Cross-Appeal, basically on the ground that the trial judge failed to take into account relevant factors and that the factors relied on by him were insufficient to support the exercise of the s55(2A) discretion. In particular, the vendor submits that in considering what is just and equitable for the purposes of s55(2A), regard should have been had to the established and almost universal rule that a 10% deposit of itself cannot be considered to be extravagant or impose an unconscionable burden on the purchaser without some other factor. It was said that if the trial judge’s reasoning were correct, almost every case where the damages assessed were less than the amount of the deposit, the forfeiture of the deposit must be categorised as a windfall gain to the vendor, and its return ordered.

The Costs Issue

52 In terms of costs, the trial judge in his separate costs judgment noted that the normal order would be that (a) the purchaser pay the vendor’s costs of the successful Summons and the costs of the issues in the cross-claim on which she was successful (i.e. the misrepresentation issue), and (b) the vendor pay the purchaser’s costs of the issues with respect to which it was successful on the Cross-Claim (i.e. the deposit issue). The trial judge held, however, that because the misrepresentation issue was fundamental to both the summons and the cross-claim, it was fairer to look at the issues and make a global order as to the costs of the proceedings as a whole. Such an assessment required that the purchaser pay three-quarters of the costs of the vendor, given that it failed on the misrepresentation issue which occupied far more of the time and effort expended in the case than any other issue.

53 The purchaser challenges this decision by Ground 9 of the Notice of Appeal, on the basis that the exercise of the s55(2A) discretion in favour of the purchaser would have required investigation into the circumstances of the transaction (including the misrepresentation) in any event. The resolution of that costs issue may be ultimately unnecessary, dependent as it is upon whether the trial judge was correct in respect of the other issues.

The Transcript Issue

54 There is one further issue arising out of a Notice of Motion with supporting affidavits (filed in Court with leave) on behalf of the purchaser, seeking to correct the transcript of the evidence of Mr Baudinet as to his reaction had he read the disclaimer at the foot of the page. The transcript records Mr Baudinet as saying (T, 82):

“A. … That’s actually a reasonably strong statement. It probably would have given me a heart attack if I had read that.” [emphasis added]

The purchaser claims that the words in bold print should be replaced, so that the sentence reads:

“A. … That’s actually a reasonably strong statement. It probably would have given me heart if I had read that.” [emphasis added]

55 The vendor resisted this application, and filed its own affidavits in support.

56 This application had been made previously to the trial judge. He declined the application in an ex tempore judgment on 22 September 2004 on the basis that he had no power to correct the transcript “at this stage”. This was said to be because an application to correct an error in the transcript was not within the ambit of the slip rule (SCR Pt 20 r10), and because such an amendment could only be remedied on appeal. This judgment was tendered to the Court of Appeal by the vendor, who relied upon the comments made by the trial judge in the course of the ruling:

“However, for what it is worth I should record that in my view the transcript is not in error in recording Mr Baudinet’s evidence in the critical passage. I, myself, clearly recollect that the words recorded in the transcript were the words used by Mr Baudinet. They made a strong impression on my mind at the time. Although I have not made a note of these words in my notebook, I had the benefit of the transcript shortly after the conclusion of the evidence and submissions. With the benefit of my recollection and the benefit of the transcript I was able, with confidence, to refer to that passage of Mr Baudinet’s evidence in the judgment.”

57 In the course of the hearing of the appeal, the Court determined that it would refuse the application in the Notice of Motion. Accordingly, the motion was dismissed with the Court reserving its reasons for so ordering.

DISPOSITION
The Transcript Issue

58 It is convenient that I first deal with the application to amend the transcript. I have earlier referred to the trial judge declining that application in an ex tempore judgment on 22 September 2004 and his reasons for so concluding.

59 The relevance of the transcript amendments sought to be made is self-evidently that the transcript unamended suggests shock on the part of Mr Baudinet, as to what his reaction would have been had he read the disclaimer at the foot of the page (“it probably would have given me a heart attack if I had read that”). Quite a different sense would be given to those words if they read “it probably would have given me heart if I had read that”, meaning that, presumably, the disclaimer would have given some assurance to Mr Baudinet had he read it.

60 It is important to see the question and answer with the immediately surrounding context, and I set that out below:

Q. And had you read that, would it have changed your interpretation of the brochure at all?

A. Well it reiterates that they were approximate, that’s measurements. It says ‘while we trust them to be correct, we cannot guarantee them’. That’s actually a reasonably strong statement. It probably would have given me a heart attack if I had read that.”

with “heart” being the amendment sought to be substituted for “heart attack” by the purchaser.

61 Given the trial judge’s independent recollection that the transcript as recorded was correct, that is a powerful reason for not making any correction. Ranged against that is an affidavit by Mr Baudinet who considers that this was an incorrect transcription of what he said and that the correct transcription should have been “it probably would have given me heart if I had read that”. What he adds is that “it would have given me ‘heart’ or comfort that I could rely on the measurements, given that the agent ‘trusted them to be correct’”. He adds that “accordingly I believe the disclaimer to be a reasonably strong statement supporting the agent’s measurements.”; see affidavit of 18 August 2004.

62 That evidence is backed up by Mr Whitten, the solicitor with carriage of the matter for the purchaser, and supports Mr Baudinet’s recollection.

63 I find it relatively implausible that Mr Baudinet, who was a witness for the purchaser, would have taken heart from a statement about the measurements to the effect that “while we trust them to be correct, we cannot guarantee them”. To be told that they could not be guaranteed would hardly give heart or assurance that it was safe to rely on them.

64 In all the circumstances, I see no reason to depart from the trial judge’s recollection of what was said and would not consider that the transcript should be amended as the appellant seeks.

Conclusion

65 I am not satisfied that any amendment to the transcript is warranted.

The Contractual Issue

66 The issue is whether Ms Webster’s termination of the contract was invalid.

67 It is clear on the evidence that the purchaser’s failure to complete was in no way the result of any misrepresentation by or on behalf of the vendor. There was, for example, no suggestion that the purchaser was unable to obtain funding because of the over-statement of the area of the flats. A reasonable inference from the events that happened is that the purchaser might have had in mind obtaining damages or a reduction of the purchase price by reason of the claimed misrepresentation but had every intention of completing the contract, notwithstanding the alleged misrepresentation. I would be content to adopt the reasons of the trial judge at [31] to [43] on this aspect. In particular, quoting from the joint judgment of Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ in Tanwar Enterprises Pty Ltd v Cauchi (supra) at [58]: “But, at least where accidents and mistake are not involved, it will be necessary to point to the conduct of the vendor as having in some significant respect caused or contributed to the breach of the essential time stipulation”.

166 The only Australian authority I have been able to find considering the case where a party who has been induced by a material misrepresentation to enter into a contract but has, on discovery of the misrepresentation, affirmed it, and then later following its own breach sought to recover the deposit, is Mallett v Jones (supra). In that case, the purchasers had been induced to enter the contract by a fraudulent misrepresentation on the part of the agent for the vendor, that the land was free from flooding. Notwithstanding becoming aware of that fraudulent misrepresentation after taking possession, the purchasers elected to affirm the contract and continued to pay instalments of the purchase price (although they later purported to rescind it). On a suit by the purchasers for rescission or return of the deposit, the trial judge held that a court of equity would have refused to order specific performance against the purchaser on the basis of unfairness or hardship given that as a young couple of limited means they were “virtually compelled” by their economic circumstances to remain on the property.

167 The Full Court of the Supreme Court of Victoria overruled the trial judge, Dean and Smith JJ stating (at 135):

“Respondents with knowledge of the falsity of the representations elected to affirm the contract. Thereby they were bound to perform it. They subsequently made default in performance whereby the vendor rescinded in accordance with the terms of contract. The respective rights of the parties in such an event are governed by the express terms of their agreement and it would require some exceptional circumstances to justify a departure from the agreed terms. There are no special circumstances here sufficient for this purpose. This may appear a hard case as the respondents were induced by fraud to enter into the contract and in the result have lost a good deal of money. But this is because of their election to stand by the contract. We do not think the evidence supports the view that after affirming the contract they were “virtually compelled” to remain in the property. This is, anyhow, one of the risks they assumed by electing to affirm. Accordingly, so much of the judgment as orders the return of the deposit should be set aside.”

168 The other member of the Court, Lowe J, generally agreed with the reasons of Dean and Smith JJ, but made some further comments of his own, including noting that the allegations in the statement of claim supporting the purchaser’s claim for relief under the equivalent of s55(2A) were “merely the making of the contract and its inducement by false and fraudulent representations” (at 122). I do not think that this case goes any further than the general principle which I have earlier considered, namely, that the discretion must be approached bearing in mind the voluntarily entered contractual context. On the facts of this case, their Honours were evidently of the opinion that the hardship suffered by the purchasers was not sufficient to turn the discretionary balance away from enforcing the contract according to its terms.

169 This case stands in somewhat of a different category to Mallett v Jones, which, as the judgment of Lowe J demonstrates, turned on its individual facts and pleadings. Here, the vendor, it is true had a contractual right to terminate the contract for the purchaser’s default in meeting an essential time stipulation which had already been extended. Yet the evidence discloses that the purchaser was generally willing to complete the transaction at all times. Although it did not as at 2 December 2002 have the total funds necessary to pay the balance of the purchase price, the evidence discloses that it was only $300,000 short of having sufficient to complete the purchase at the contract price of $3,130,000, and had reasonable prospects of obtaining the balance within a short period of time (Affidavit of P Meyerratken, sworn 6 June 2003 at para [23]). That fact was known to the vendor’s legal representatives, the settlement clerk for the vendor giving evidence by affidavit that at the abortive settlement on 2 December, Mr Meyerratken instructed his settlement clerk by telephone that he needed another 24 hours to obtain the balance of his finance (Affidavit of S Klem, sworn 13 December 2002).

170 It must also be recalled that the contract price was by reason of the misrepresentation in excess of the true value of the property at the time by $220,000 (using the basis most favourable to the vendor) or some $400,000 (if the balconies were excluded as the purchaser thought they were). It must be remembered that the purchaser only found out the true extent of the misrepresentations on the extended settlement date of 2 December 2002. The purchaser had been endeavouring to obtain an extension of time and abatement of the purchase price prior to settlement (rather than settling for the contract price and suing for damages), a course which would have saved all parties a great deal of time and money. If it had succeeded in those negotiations, it would probably have had enough money to settle by the appointed time. The vendor refused to bargain, first denying (without any basis, as it transpires) any misrepresentation, and then demanding releases from any liability before it would extend time (although knowing that the purchaser needed only a short time to obtain the finance). The purchaser understandably did not want to release the vendor in that way. Furthermore, that context is coloured, as I have previously said, by the purchaser’s apparent belief that the vendor would be disentitled from relying on the essential time stipulation because of the misrepresentation.

171 I have already disposed of the questions of legal principle arising from that state of affairs. The vendor was legally entitled to terminate as it did, and the purchaser was imprudent to rely on its apparent contrary belief. But I am of the view that in the light of the foregoing circumstances I should order the deposit to be returned, in the exercise of my discretion according to the justice of the case. The purchaser’s conduct may have been tactically imprudent, but it was not unreasonable. The vendor’s conduct was entirely legal and could not be said to be unconscionable or inequitable (so far as those concepts have relevance), but it was considerably less reasonable given the context of the misrepresentation having come to light and the evident willingness of Mr Meyerratken to perform. The sequence of events that I have set out at [19] to [24] demonstrates that. As I have described, he was only given the information as to the precise shortfall on 2 December 2002, being the day appointed for settlement, and that shortfall was contrary to what had been represented. That shortfall clearly affected the value of what he was buying. He was, not unreasonably, seeking a further extension of time to settle and it can be inferred, to line up any funding for a security whose area was less than represented. This he may well have done, though I do not go so far as to attribute his failure to have funds on the day to the misrepresentation. Why should he have been required to give a release for any claim founded on the misrepresentation when, as has been demonstrated, he was entitled to damages? I think that it would not be fair in these circumstances for the vendor to retain the deposit, notwithstanding the terms of the contract and the affirmation of it by the purchaser and the purpose of the deposit as an earnest of performance. It follows that the trial judge’s decision on this issue should be affirmed, though for different reasons.

172 Since I would affirm the trial judge’s order that the deposit be refunded pursuant to s55(2A) of the Conveyancing Act, it will be unnecessary to remit the matter to the Master to determine whether it in fact fell within the scope of the purchaser’s loss and damage by reason of the misleading and deceptive conduct of the vendor. Like the trial judge, however, I do not think that the deposit should be returned to Havyn prior to the result of the vendor’s damages enquiry, since Havyn was a “sole purpose company” I would therefore also affirm the stay appointed by the trial judge of the order releasing the deposit pending the result of that enquiry. I need say nothing about the question of interest on the deposit, since that flows from the terms of the agreement between the parties.

Summing Up

173 By way of summation, I would conclude as follows:

(a) Section 55(2A) confers upon the Court a statutory jurisdiction to return forfeited deposits which was not previously available either at common law or in equity. Therefore, it would be wrong to seek to confine the jurisdiction conferred by the words of the statute by analogy with the jurisdiction of common law and equity to relieve against penalties or forfeiture.

(b) Notwithstanding this, it is important for a Court in considering the scope of the discretion conferred by s55(2A) to bear in mind that a deposit is an earnest of performance. That fact forms part of the context in which the discretion falls to be exercised, and means that a Court will not lightly be moved to order the return of a deposit paid as an earnest of performance, and forfeited in accordance with the express terms of the contract when performance does not occur.

(c) That context is significant when considering the justice and equity of the case, and whether the Court “sees fit” to order the deposit to be returned. It does not involve putting a gloss on the words of the statute requiring the applicant to show “special circumstances” (or satisfy any like test) before a deposit will be returned.

(d) In particular, this principle mandates against characterising a forfeited deposit as a windfall to the vendor, merely because it is forfeited.

(e) In considering an application under s55(2A), it will often be material for the Court to consider a number of factors, including (though not exhaustively) the nature of a deposit, the terms of the contract providing for its forfeiture and the circumstances in which the deposit was forfeited.

(f) Considering the circumstances of this case, the factors enumerated above and the relative unreasonableness of the conduct of the vendor compared to the purchaser following the former’s misrepresentation, it is appropriate for the deposit to be returned, although for different reasons than those adopted by the trial judge.

The Costs Issue

174 The resolution of the costs issue as raised by Ground 9 of the Notice of Appeal is unnecessary, given my findings that there was relevant misleading and deceptive conduct on the part of the vendor. That finding removes the basis for the costs orders made by the trial judge in his separate judgment delivered on 1 April 2004. Given this, I must now consider the proper costs orders to be made.

175 Seen in terms of the issues between the parties, it is still the case that the purchaser has succeeded on some issues and the vendor has succeeded on other issues. Specifically, the purchaser has ultimately been successful on the issue of misleading and deceptive conduct, and the vendor has been successful on the contractual issue. I agree with the observation of the trial judge that “the issues as to misrepresentation occupied the vast majority of time and effort expended in the trial”. The truth of that statement extended to the hearing of the appeal. The trial judge considered the issue of misrepresentation to have been fundamental both to the vendor’s claim (by being raised in the purchaser’s defence) and the purchaser’s cross-claim. Looked at in that way both parties have partially failed and partially succeeded on that issue which occupied the greatest proportion of time.

176 Seen in terms of the parties respective claims at first instance, in the ultimate event the plaintiff vendor was successful both at first instance and on appeal with respect to the relief claimed in its Summons. The defendant purchaser was partially successful on its Cross-Claim in the court below, but has been ultimately successful on the appeal. The purchaser has been substantially successful on its Notice of Appeal, while the vendor has been wholly unsuccessful on both its Cross-Appeal and its Notice of Contention.

177 On one approach the foregoing considerations can be accommodated by an order that the costs should follow these events, which would require that they be apportioned by reference to the ultimate claims for relief. However, there would be significant difficulties in carrying out any such apportionment which would, in all probability, lead to more disputation with an accompanying increase in costs. In my opinion, therefore, the more practical, but just as fair, order is that each party should pay its or her own costs both at first instance and on the appeal.

CONCLUSIONS AND ORDERS

178 Before setting out the orders I propose, I shall provide a brief summary of my conclusions:

(1) The sales brochure prepared by the vendor’s agent contained misrepresentations as to the size of the units, which misrepresentations were relied on by the purchaser in entering into the contract;

(2) The disclaimers contained in the brochure added to those misrepresentations, rather than serving to dispel them, and accordingly the brochure taken as a whole constituted misleading and deceptive conduct for the purposes of the FTA on the part of the vendor in consequence of which the purchaser sustained proven loss of $92,739;

(3) Notwithstanding the misrepresentations, the purchaser affirmed the contract but was ultimately unable to complete it on the appointed date of 2 December 2002 by reason principally of an inability to obtain finance, unrelated to the misrepresentation;

(4) The vendor was entitled to terminate the contract on 4 December 2002 following the purchaser’s default in complying with an essential time stipulation. The vendor thereby became entitled to forfeit the deposit (but see (5) below) and to damages (which are yet to be determined);

(5) Although the vendor was by the terms of the contract, entitled upon termination to forfeit the deposit paid by the purchaser, the deposit should be returned pursuant to the discretion conferred by s55(2A) Conveyancing Act 1919.

179 For the foregoing reasons, I would propose the following orders:

(1) The appeal is allowed in part.

(2) The cross-appeal is dismissed.

(3) Set aside Orders 2 and 3 made by Palmer J on 3 August 2004, and in lieu thereof order that the Defendant pay to the Plaintiff damages for breach of the Contract for Sale of Land dated 19 September 2002, to be ascertained by the Master upon enquiry.

(4) Vary Order 6 made by Palmer J on 3 August 2004 by deleting therefrom the reference to Order 2.

(5) Set aside Order 7 made by Palmer J on 3 August 2004, and in lieu thereof order that judgment be entered for the Cross-Claimant in the sum of $92,739 together with interest pursuant to the Supreme Court Act.

(6) Set aside Order 7A made by Palmer J on 3 August 2004.

(7) Each party is to pay its or her own costs both on the appeal and in the court below.

180 TOBIAS JA: I agree with Santow JA.

181 BROWNIE AJA: I agree with Santow JA.

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