Henville v Walker [2001] HCA 52 6 September 2001 P55/2000
ORDER
1.Appeal allowed.
2.Set aside the Orders of the Full Court of the Supreme Court of Western Australia made on 24 August 1999 and in place thereof order that the appeal to that Court be dismissed.
3.The respondents to pay the costs of the appeal to this Court and of the appeal to the Full Court of the Supreme Court of Western Australia.
On appeal from the Supreme Court of Western Australia
Representation:
P Mendelow with P J Hannan for the appellants (instructed by Bowen Buchbinder Vilensky)
C L Zelestis QC with C B Edmonds for the respondents (instructed by Phillips Fox)
Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.
CATCHWORDS
Henville v Walker
Trade Practices – Misleading or deceptive conduct – Real estate transaction – Home unit development – Misleading representation by land agent to developer as to price which could be obtained for residential home units – Incorrect estimate of likely costs of development made by developer – Quantification of damages where misleading or deceptive conduct is but one of a combination of circumstances bringing about the loss ultimately suffered.
Damages – Statutory – Trade Practices Act – Measure of damages – Relevance of common law analogies when quantifying damages – Identification of loss or damage required – Causation of loss or damage – Quantification of damage caused "by conduct of" person in breach of s 52.
GLEESON CJ. This appeal raises a question concerning the extent of liability under s 82 of the Trade Practices Act1974 (Cth) ("the Act") for a contravention of s 52. The misleading or deceptive conduct involved the giving of advice and information by a real estate agent, which induced a purchaser to buy land for the purpose of a development project and to undertake the project.
The appellants were contemplating the purchase of land in a residential area for the purpose of development by the construction of a small block of home units. In considering whether to buy the land for that purpose, they made a feasibility study which calculated the likely return from the project. The feasibility study was based upon estimates of construction and other costs, and anticipated selling prices of the units. The appellants relied upon their own expertise for the cost estimates. (The first appellant is an architect). They relied upon advice of the vendor's agent (the first respondent) as to selling prices and marketability for the purpose of estimating gross revenue. The costs were substantially under-estimated. The selling prices were substantially over-estimated. The state of the market for home units was misrepresented. The land was acquired and the project was undertaken. In…
Grounds of appeal
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
Henville v Walker [2001] HCA 52
Case
[2001] HCA 52
Decision Date
CaseChat Overview and Summary
This case concerned an appeal to the High Court of Australia by Mr Henville against Mr Walker and his associated company. Mr Henville, a property developer, alleged that Mr Walker, a real estate agent, made misleading and deceptive representations regarding the demand for and likely sale prices of residential units in Albany. These representations were made in the context of Mr Henville's consideration of developing a property at 36 View Street. Mr Henville claimed that he relied on these representations when making his decision to proceed with the development, which ultimately resulted in a financial loss.
The central legal issues before the High Court were whether Mr Henville had suffered loss or damage as a result of Mr Walker's conduct, and if so, how that loss should be quantified under section 82 of the *Trade Practices Act 1974* (Cth). Specifically, the court had to determine whether the misleading conduct was a cause of Mr Henville's loss, even if other factors also contributed to that loss, and the principles governing the assessment of damages in such circumstances.
The High Court found that the Full Court of the Supreme Court of Western Australia had erred in its conclusion that Mr Henville had not suffered loss. The court reasoned that Mr Walker's statements about market demand and unit prices were directly linked to Mr Henville's decision to proceed with the development and were integral to the profitability calculations underpinning that decision. While acknowledging that other factors might have influenced Mr Henville's actions and contributed to his loss, the court held that the existence of such additional factors did not preclude a remedy under section 82 of the Act. The court emphasised that these other factors were relevant to the assessment of the quantum of damages, but not to the existence of a cause of action.
The High Court allowed Mr Henville's appeal, setting aside the orders of the Full Court and dismissing his appeal to that court. Consequently, Mr Walker and his company were ordered to pay Mr Henville's costs of the appeal to the High Court and the costs of the appeal to the Full Court of the Supreme Court of Western Australia.
Orders
Orders of the court
1. Appeal allowed.
2. Set aside the Orders of the Full Court of the Supreme Court of Western Australia made on 24 August 1999 and in place thereof order that the appeal to that Court be dismissed.
3. The respondents to pay the costs of the appeal to this Court and of the appeal to the Full Court of the Supreme Court of Western Australia.
Background
Background to the litigation
In my opinion, the Full Court erred in holding that Mr Henville had not suffered loss by reason of the false and misleading statements of the respondents. The statements concerned the general demand for units of the kind being contemplated, the likely prices that such units would fetch and the time within which they could be sold for those prices. They were as inextricably linked with Mr Henville's decision to proceed with the project, as they were at the heart of the profitability computation in the feasibility study. It was that computation that led Mr Henville to proceed with the project and incur the loss. That factors, other than a respondent's contravention of the Act, have operated to induce a person to act in a way that results in loss or damage does not prevent that person from recovering the amount of loss or damage under s 82 of the Act. The existence of other operative factors may be relevant in assessing the amount of the loss or damage, but it does not deny an applicant a remedy under s 82.The material facts In both judgments below, the appellants have been identified by reference to Mr Henville only, and the respondents by reference to the first respondent, Mr Walker, only. I will adopt the same convention. In 1994, Mr Henville, an architect, set up a property development consultancy business. After hearing of favourable prospects for development in Albany, he visited that town in December 1994 where he met Mr Walker, an agent who had almost 19 years' experience of the Albany real estate market. Mr Walker was and is a director of the second respondent. Mr Henville told Mr Walker that he was interested in properties that were suitable for unit development. Mr Walker showed him a number of properties. Mr Henville was interested in purchasing one of them. In January 1995, Mr Walker wrote a letter to assist Mr Henville to obtain finance and to encourage him to proceed with the project. In the letter, Mr Walker stated that there was almost "a crisis situation in Albany with demand for quality units and town houses outstripping supply". Although Mr Henville did not ultimately proceed with the development – because he was unable to obtain the finance – he remained interested in the Albany market and maintained contact with Mr Walker. The View Street property In June 1995, Mr Walker showed Mr Henville and a colleague, Mr Waldock, the property at 36 View Street that is at the centre of this case. The View Street site was zoned R30, which meant that a development of up to four residential units was permitted. Anderson J, who heard the matter at first instance, accepted the evidence of Mr Henville and Mr Waldock as to what was said during the course of their inspection of the site. Mr Walker told them that there was a "huge void" at the top end of the Albany market. He said that he was often getting inquiries from people asking for "luxury top of the range units for investment and retirement" but nothing of that kind was available. He told them that there was always a shortage of quality home units in prestige locations in Albany. Farmers with "million dollar wool cheques" were "unable to spend them". Pointing out the excellent views, Mr Walker expressed the opinion that it would be preferable to build three larger high quality units on the site, rather than the maximum four. He said that, if three such units were built, they would fetch between $250,000 and $280,000 each.