Hinton v Commissioner for Fair Trading, Office of Fair Trading

[2007] NSWADTAP 17

Appeal Panel - Internal

CITATION:	Hinton & Ors v Commissioner for Fair Trading, Office of Fair Trading (GD) [2007] NSWADTAP 17
PARTIES:	FIRST APPELLANT Peter Leslie Hinton SECOND APPELLANT Ereca Louise Hinton THIRD RESPONDENT Mahevi Pty Ltd RESPONDENT Commissioner for Fair Trading, Office of Fair Trading
FILE NUMBER:	069059, 069060 and 069061
HEARING DATES:	6 December 2006
SUBMISSIONS CLOSED:	6 December 2006
DATE OF DECISION:	3 April 2007
BEFORE:	O'Connor K - DCJ (President); Fitzgerald K - Judicial Member; O'Neill A - Non Judicial Member
CATCHWORDS:	Real estate agents - discipline - misrepresentation - concealment of material fact - property site of notorious murder - Property, Stock and Business Agents Act 2002, section 52 - interpretation - Fair Trading Act 1987, section 42 - interpretation - refusal to extend to merits - appeal dismissed
MATTER FOR DECISION:	Principal matter
FILE NUMBER UNDER APPEAL:	053055, 053056, 053057
DATE OF DECISION UNDER APPEAL:	09/01/2006
LEGISLATION CITED:	Administrative Decisions Tribunal Act 1997 Fair Trading Act 1987 Hire Purchase Act 1960 Interpretation Act 1987 Property Stock and Business Agents Act 2002 Property Stock and Business Agents Regulation 2003 Trade Practices Act 1974 (Cth)
CASES CITED:	Hinton & Ors v Commissioner for Fair Trading [2006] NSWADT 257 Hinton & Ors v Commissioner for Fair Trading (No 2) [2006] NSWADT 299 Lloyd v Veterinary Surgeons Investigating Committee (2005) 64 NSWLR 245 Clark v Esanda Limited [1984] 3 NSWLR 1 Western Australia v Ward (2002) 76 ALJR 1098; 191 ALR 1 Metalcorp Recyclers Pty Limited v Metal Manufactures Limited [2003] NSWCA 213 Smith v Chadwick (1884) 9 App Cas 187 Sola Optical Aust Pty Ltd v Mills (1987) 163 CLR 628 Roads and Traffic Authority of New South Wales v Baldock [2007] NSWCCA 35 CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 Marks v GIO Australia Holdings Limited [1998] HCA 69 Arbest Pty Ltd v State Bank of New South Wales (1996) ATPR 41-481 Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60, (2004) 79 ALJR 308 Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 Johnson Tiles Pty Limited v Esso Australia Limited [1999] FCA 569 Noor Al Houda Islamic College Pty Limited & Anor v Bankstown Airport Limited [2005] NSWSC 20 Lam v Ausintel Investments Australia Pty Limited (New South Wales Court of Appeal, unreported 11 October 1989) Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546 Demagoge Pty Ltd v Ramensky (1992) 39 FCR 31 Warner v Elders Rural Finance 113 ALR 517 Gould v Vaggelas (1985) 157 CLR 215 Neilsen v Hempston Holdings Pty Ltd 65 ALR 302 Aronberg v Federal Trade Commission (1943) 132 F 2d 165 Sunol v Collier [2006] NSWADTAP 51 CDJ v VAJ (1998) 197 CLR 172 R v. District Court of the Metropolitan District Holden at Sydney; Ex parte White (1966) 116 CLR 644 Azzopardi v. Tasman UEB Industries Ltd (1985) 4 NSWLR 139 Prakash v Health Care Complaints Commission [2006] NSWCA 153 Obradovic v Commissioner for Fair Trading, Office of Fair Trading [2006] NSWADTAP 45
REPRESENTATION:	APPELLANTS R S Sheldon of counsel instructed by TressCox Lawyers RESPONDENT P I Lakatos SC instructed by J Coss, solicitor
ORDERS:	Appeal dismissed

1 This appeal has its origins in disciplinary action taken on 16 December 2004 by the Commissioner of Fair Trading as administrator of the Property, Stock and Business Agents Act 2002 (NSW) (the PSB Act). The action was taken under s 195 of the PSB Act against three persons holding real estate agent licences. The three persons are the principal of the firm known as L J Hooker, North Ryde, Mr Peter Hinton, his daughter, Ms Ereca Hinton and the corporate licensee, Mahevi Pty Ltd (the appellants).

2 The conduct giving rise to the disciplinary action was their failure to disclose to prospective purchasers that a residential property for which their firm was the selling agent in 2004 had been the site of a notorious multiple murder. The Commissioner made adverse findings against each of the appellants and made disciplinary orders.

3 The appellants applied to the Tribunal for review. The Tribunal held a hearing over six days. It agreed with the findings made by the Commissioner, and with one variation in the case of Mahevi Pty Ltd, the orders made by the Commissioner: see Hinton & Ors v Commissioner for Fair Trading [2006] NSWADT 257 (findings, 1 September 2006; Hinton & Ors v Commissioner for Fair Trading (No 2) [2006] NSWADT 299 (orders, 19 October 2006).

Disciplinary Findings

4 The Commissioner’s internal review decision of 20 January 2005 affirmed the findings made in the primary decision of 16 December 2004. The Tribunal, in its decision delivered 1 September 2006, made the same findings, that is:

(1) With respect to Mahevi Pty Ltd, that it:

i. misrepresented the sale of 6 Collins St North Ryde by the concealment of a material fact namely the non-disclosure of murders which occurred on the property – s.52(1) of the PSB Act;

ii. engaging in misleading or deceptive conduct namely the non-disclosure of murders which occurred on the property – s.42 of the Fair Trading Act 1987 (NSW) (the Fair Trading Act); and

iii. failed to act honestly, fairly and professionally – r.3(1) Rules of Conduct (s.37 of the PSB Act and cl 11 of the Property, Stock and Business Agents Regulation 2003).

(2) With respect to Mr Hinton, that he as a Director and Licensee in charge of Mahevi Pty Ltd:

i. misrepresented the sale of 6 Collins St North Ryde by concealment of a material fact namely the non-disclosure of murders which occurred on the property – s.52(1) of the PSB Act;

ii. misleading or deceptive conduct namely the non-disclosure of murders which occurred on the property – s.42 of the Fair Trading Act 1987;

iii. failed to act honestly, fairly and professionally – r.3(1) Rules of Conduct;

iv. misled or deceived a party to a transaction – r.3(2) Rules of Conduct; and

v. failed to supervise the business of the corporation – s.32 of the PSB Act.

(3) With respect to Ms Hinton, that she:

i. misrepresented the sale of 6 Collins St North Ryde by concealment of a material fact namely the non-disclosure of murders which occurred on the property – s.52(1) of the Act;

ii. misleading or deceptive conduct namely the non-disclosure of murders which occurred on the property – s.42 of the Fair Trading Act 1987;

iii. failed to act honestly, fairly and professionally – r.3(1) Rules of Conduct; and

iv. misled or deceived a party to a transaction – r.3(2) Rules of Conduct.

Disciplinary Orders

5 Mahevi Pty Ltd was required by the Commissioner to pay a monetary penalty of $13,200 and prepare a compliance manual. Mr Hinton and Ms Hinton were penalised $5,500 and $2,200 respectively. The Tribunal affirmed the orders in respect of Mr Hinton and Ms Hinton. In the case of Mahevi Pty Ltd it affirmed the penalty but removed the requirement that it prepare a compliance manual.

The Appeal

6 An appeal may be made in relation to a ‘question of law’, and, with the leave of the Appeal Panel, may extend to the merits: Administrative Decisions Tribunal Act 1997 (ADT Act), ss 112, 113. It is not necessary that an error of law be demonstrated before consideration can be given to extending the appeal to the merits: Lloyd v Veterinary Surgeons Investigating Committee (2005) 64 NSWLR 245.

7 The appellants have lodged notices of appeal in identical terms supported by identical submissions asserting that the reasons of the Tribunal in agreeing with the Commissioner’s adverse findings was affected by errors of law and seeking leave to extend the appeal to the merits.

8 The essence of the appellants’ case before the Commissioner, before the Tribunal below and before the Appeal Panel has remained the same. It is that the failure by a selling agent to disclose that a residential property has been the site of a notorious multiple murder does not contravene standards applicable to the business of a real estate agent either under the law specific to real estate agents (the PSB Act and the Code of the Conduct) or under general commercial law (the Fair Trading Act).

The Conduct in Issue

9 The following acts (either agreed or made by way of findings of the Tribunal) are not in dispute:

(a) On or about 10 July 2001 the owners of the property 6 Collins Street North Ryde, Mr and Mrs Gonzales as well as their daughter Clodine, were murdered in their dwelling. The murders received extensive publicity stimulated in part by the statements and conduct of the surviving son Sef (who had attracted suspicion as the possible murderer). Some time later he was arrested and charged but he continued to protest his innocence and pleaded not guilty. On 20 May 2004 he was subsequently found guilty of all murders and ultimately sentenced to life imprisonment.

(b) In or about July 2004 the executrix of the will of Mr and Mrs Gonzales gave instructions to Mr Hinton to offer the property for sale. She informed Mr Hinton of the background circumstances giving rise to the sale and she and Mr Hinton discussed a selling strategy including whether the crimes would affect the saleability of the house. Mr Hinton sought advice from a solicitor as to whether it was necessary to disclose to prospective purchasers the fact that the property had been owned by the Gonzales’ family and was the site of the murders and was advised that it was not required. The executrix agreed to a selling strategy which involved advertising the property in a low key way. It was decided that purchasers would be told the property was a deceased estate with the beneficiaries in the Philippines deciding that they did not want the property.

(c) Ms Hinton was responsible for dealing with enquiries, inspections and prospective purchasers. Some potential purchasers recognised the property as the site of the Gonzales murders and decided not to pursue their enquiry any further.

(d) Following negotiations and discussions with Ms Hinton, a contract for sale was entered into with Mr Kwok and Ms Lin on 31 August 2004. They paid a deposit of 10%. They then learnt that the property had been the site of the Gonzales murders. They complained to the agency and to the Commissioner of Fair Trading. There is no dispute that in their minds at least the non-disclosure of this history was a material fact. They sought release from the contract, and return of the deposit; or, as a compromise, release from the contract and return of half the deposit. Eventually the executrix decided to release them from the contract and return the whole of the deposit.

(e) Subsequently several months later a purchaser was found for the property. The price was a lower one ($720,000) than had been agreed by the Kwoks ($800,000). We should note that no emphasis was given in the case put by the Commissioner as to this difference. The Commissioner acknowledged that the difference may well be explained by general market factors (the Sydney real estate market may have been in decline over the months that followed the failed sale to Mr Kwok and Ms Lin) rather than any ‘discount’ that might be said to apply by reason of there being fewer interested purchasers for a property that was the site of notorious crimes.

Section 52 of the PSB Act

10 Section 52 of the PSB Act provides:

‘ 52 Misrepresentation by licensee or registered person

(1) A person who, while exercising or performing any function as a licensee or registered person, by any statement, representation or promise that is false, misleading or deceptive (whether to the knowledge of the person or not) or by any concealment of a material fact (whether intended or not), induces any other person to enter into any contract or arrangement is guilty of an offence against this Act.

Maximum penalty: 200 penalty units.

(2) Without limiting the generality of subsection (1), a statement, representation or promise is taken to be false, misleading or deceptive if it is of such a nature that it would reasonably tend to lead to a belief in the existence of a state of affairs that does not in fact exist, whether or not the statement, representation or promise indicates that the state of affairs does exist.

(3) It is a sufficient defence to a prosecution for an offence under this section if the defendant provides that the defendant did not know, and had no reasonable cause to suspect, that the statement, representation or promise was false, misleading or deceptive.’

11 The appellants’ main appeal point was that the Tribunal, like the Commissioner, had erred in finding all of the relevant elements of s 52(1) satisfied, i.e. ‘concealment’ of a ‘material fact’ that ‘induces’ any other person (here Mr Kwok and Ms Lin) to enter into a contract. Submissions were addressed to each of these elements. If any one of them can not be established, then, obviously, an offence is not made out.

12 ‘Concealment’. The appellants rely on Clark v Esanda Limited [1984] 3 NSWLR 1 where the matter was considered in the context of the Hire Purchase Act 1960. They rely on the conclusion of Priestley JA that the element of intent to withhold seems ‘necessarily conveyed by the word ‘concealment’’ (see at 5B). This grounds their primary argument that because there was no intent to withhold information the information was not concealed.

13 Judicial decisions on statutory terms ‘can never give more than guidance as to the meaning of the same terms in different statutes unless the statutes are not materially different in context, history and purpose’: Western Australia v Ward (2002) 76 ALJR 1098 at 1196; 191 ALR 1 at 137. Aside from this principle, the appellants’ argument is explicitly rejected by the language of s 52 itself. That section states ‘any concealment … (whether intended or not) ….’ (emphasis added).

14 The wording of the statute therefore overrides any argument based on Clark v Esanda and indicates a clear legislative purpose that intent is not a necessary element of concealment. Even if the contrary position were accurate it does not support the appellants’ position as they knew of the fact that the house was the location of a triple murder and took the positive step of deciding not to disclose that fact.

15 A positive attempt to hide the truth is not required by s 52 of the PSB Act. This is made clear by the words ‘whether intended or not’. To this end the appellants’ reliance on the state of the premises as being in a shambles or the fact that the agents did nothing to tidy the house or remove the family’s personal effects is not to the point. We note that in submissions the appellants seek to rely on this point as being relevant to the assessment of the agents’ conduct rather than whether the purchaser should have been alerted to a particular set of circumstances.

16 We disagree with the position of the appellants that the fact some purchasers had their suspicions aroused is highly relevant to deciding what the agent is obliged to do in all the circumstances.

17 For instance, there are many circumstances consistent with a house being left in a shambles, including owners overseas selling a tenanted investment property, a deceased estate, a booming market requiring less effort and it cannot be the statute’s intention that it be left to the purchaser to determine that in fact the reason for the state of the house was that it was the location of a triple murder.

18 In our view the presence of finger print dust was insufficient. An ordinary purchaser with no previous experience with these matters could not be expected to distinguish between that and ordinary dust or dirt that was consistent with the house being a mess (the purchaser that the agent points to as having had his suspicions aroused by the state of the house was in fact a solicitor and there is other evidence that he separately knew about the history of the property). This may be compared for instance to a situation where sections of the property are cordoned off by police tape or there is another obvious police presence such as would invite an inquiry as to the reason for the crime scene.

19 In this regard, consumer behaviour will be relevant to a certain extent, that is, a consumer cannot be wilfully blind to a situation. In the same way the reactions of other purchasers who inspected the house may form part of the evidence but will not be determinative as the assessment of what is a material fact is by and large an objective one.

20 The Tribunal accepted the evidence of Kwok and Lin that they were not aware of the fact that the house was the Gonzales house. We see no reason to disturb that finding and specifically do not accept that they ought to have known by content of the reasons raised by the appellants, namely that they lived in the area; drove past the street on a daily basis; knew the murders had occurred, ate regularly at a nearby restaurant; were Asian and had seen media reports which showed the house. The findings of the Tribunal in relation to these matters do not go as far as the appellants state.

21 In our view s 52 of the PSB Act imposes a positive duty to disclose ‘material facts’. The words ‘concealment…whether intended or not’ point to a positive duty to reveal ‘material facts’. Even if the agents did not mean to hide the fact of the murders the evidence suggests that they at least omitted to announce the fact of the property being the location of the Gonzales murders.

22 To this end, even if the agents had described the house as a ‘deceased estate’, it would not have been sufficient to discharge the obligations of the section. Its most usual connotation, we think, is to describe the circumstance where an aged, and often sole, resident has passed on. The circumstances of this case leading to the property coming onto the market are so removed from what we see as the most usual connotation that more was required by way of disclosure of the background to the sale.

23 We do not accept the appellants’ argument that an offence constituted by an omission requires proof of an independent duty to disclose material facts. Again there is nothing in the section which demands such a reading nor from the plain, English use of the word ‘conceal’. As noted in the appellants’ own submissions, the definition of conceal includes ‘to forbear to disclose or divulge’. Again the fact that the agents did not expend their own money presenting the house or ridding it of personal paraphernalia is not to the point. Conceal does not require removing all evidence of a particular fact and leaving some ‘clues’ for purchasers does not answer the current fact situation. There may be instances where the conduct of the agent and the presentation of the house is sufficient so that it cannot be said the agent concealed the material fact in question or that the purchaser was not induced by it but as stated earlier this is not the case here.

24 Nor do we accept the fact that Mr Hinton obtained legal advice as to the effect of s 52 is relevant to the issue of concealment. Lack of knowledge, or incorrect understanding of, the law is no defence to a statutory obligation.

25 ‘Induced’. This term is not qualified in any way, for example, there is no express qualification that the person so induced have reasonable grounds, viewed objectively, for being induced. The assessment is a strictly factual one. Mr Kwok and Ms Lin did enter into a contract for the sale of 6 Collins St North Ryde. The Tribunal accepted evidence that entry into this contract was because they were not aware that the house had been the scene of the Gonzales murders.

26 As was stated in the context of s 52 of the Trade Practices Act 1974 (Cth) (the Commonwealth Trade Practices Act) in Metalcorp Recyclers Pty Limited v Metal Manufactures Limited [2003] NSWCA 213 at [51]:

‘…inducement, involves a question of causation. It arises under general law in cases of fraud and it has been long settled that reliance or inducement may be proved by circumstantial evidence. In Smith v Chadwick (1884) 9 App Cas 187, 196-7 Lord Blackburn said:
‘I do not think it is necessary …. that the plaintiff should always be called as a witness to swear that he acted on the inducement …. I think if it is proved that the defendants …. made a statement to the plaintiff of such a nature as would be likely to induce a person to enter into a contract, and its proved that the plaintiff did enter into the contract, it is a fair inference of fact that he was induced to do so by the statement … it’s weight as evidence must greatly depend upon the degree to which the action of the plaintiff was likely; and on the absence of all other grounds on which the plaintiff might act.’’

27 Although familiar with the area the Tribunal found that the respondents were not aware that the house was the Gonzales house until after significant press following the sentencing of Sef Gonzales. It was shortly after this time, 22 September 2004, that they contacted Peter Hinton. We see no reason to disturb that finding. Another relevant fact is that although they negotiated as to price with Ms Hinton, the respondents made no attempt to bargain on the basis that the house was the location of the murders.

28 Further we do not accept the appellants’ argument that the respondents’ failure to ask about the history of other properties they were interested in purchasing supports the contention that they were not induced to purchase the house at 6 Collins Street. Again, the appellants’ argument attempts to place a positive duty on the purchaser rather than accepting that the statute, as one designed for consumer protection, imposes obligations on the agent.

29 The appellants made much of the fact that Mr Kwok gave evidence that he had never been told the history of the property by an agent and answered, ‘I thought the solicitor would do it.’ Specifically the appellants rely on his statement that:

‘What I think is the agent will try to cover all the problems of the house so actually I don’t really believe the agent.’

30 This was provided in response to the question:

‘You didn’t think, did you, that an agent would volunteer to you that a murder had been committed on a property at the time you inspected it, did you?’

31 We do not think that this evidence alone is sufficient to dislodge the inference that Mr Kwok and Ms Lin were induced to enter into the contract for sale. It is more a general statement of mistrust for agents which does not go far enough to contradict the other evidence that they were not aware the house was that of the Gonzales. Relevant to this decision is the fact that the information was not able to be found through standard independent searches, as would normally be carried out by a solicitor, and the contract of sale provided no indication that it was the Gonzales’ home.

32 ‘Material Fact’. Unsurprisingly, the matter of greatest contention between the parties was whether non-disclosure of the fact that the property had been the site of the Gonzales’ murders was, in the context of the practice of a real estate agent, a ‘material fact’.

33 There will, as the Commissioner acknowledged in her submissions, always be an area of debate as to where the plethora of ‘material facts’ ends in relation to a real estate transaction.

34 We have not found any previous case law considering the meaning of ‘material fact’ in the context of s 52 of the PSB Act (or its predecessor s 84B of the 1941 Act).

35 As acknowledged by the respondents, there is limited utility in considering the phrase in other statutory contexts because of the specific language within which it is couched. In one such different context the High Court in Sola Optical Aust Pty Ltd v Mills (1987) 163 CLR 628 cited the Shorter Oxford English Dictionary meaning of ‘material’ as including ‘of such significance as to be likely to influence the determination of a cause’.

36 That decision, considering a limitations statute, also stated that a fact had to be ‘relevant to the issues to be proved’. While necessary to state explicitly in that context, in our view relevance follows as a matter of logic to be an ingredient of ‘material’ in the current context. It arises from the plain English use of the word as ‘likely to influence the determination of the cause’ as well as from the requirement that the material fact ‘induce’ the purchaser.

37 A fact may become ‘material’ within the meaning of s 52 in two ways – it can become ‘material’ because in the particular circumstances it is known by the agent to be material to the particular consumer, even though agents and consumers may not typically regard the matter as ‘material’. The other way in which it may become ‘material’ is by the application of an objective standard which has regard to what a reasonably informed consumer with a fair minded understanding of the real estate market, including the role of a real estate agent, would regard as ‘material’.

38 This is a case of the latter type. There is no evidence that Mr Hinton had actually been informed as to what Mr Kwok and Ms Lin were thinking. On the other hand there is evidence that a number of prospective purchasers who had recognised the house at the Gonzales’ murder site were turned off by that fact as well as evidence that the agents themselves considered it a matter that was relevant to address when planning the sales campaign.

39 The appellants contend that the section permits the former reading only. However, it will be seen that we agree, in essence, with the submissions of the Commissioner and the approach of the Tribunal below on this point.

40 There is nothing in the words of the section nor analogous case law that directs a reading of ‘material’ to be limited to those matters identified by the purchaser to the real estate agent. To so limit the section would be to make it circular in effect and to constrain its purpose as a consumer protection statute in a very real sense as it would place the onus on the purchaser to raise all specific matters with the agent. This cannot be the statute’s intention as it is clear from the breadth of the section that it is to cover precisely those areas where the purchaser is at a disadvantage because of lack of knowledge about a property. This provision is one of a number of provisions designed to afford consumers protection against misconduct by agents. The emphasis must be on the mind of the hypothetical reasonable consumer.

41 As Spigelman CJ noted recently in Roads and Traffic Authority of New South Wales v Baldock [2007] NSWCCA 35:

‘It is well established in Australian law that statutory interpretation requires a Court to have regard to the context of the legislation in the first instance and not merely after some kind of ambiguity is established. (See e.g. CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 at 408; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at [69].)’

42 Spigelman CJ also referred in this regard to s 33 of the Interpretation Act 1987:

‘ 33 Regard to be had to purposes or objects of Acts and statutory rules

In the interpretation of a provision of an Act or statutory rule, a construction that would promote the purpose or object underlying the Act or statutory rule (whether or not that purpose or object is expressly stated in the Act or statutory rule or, in the case of a statutory rule, in the Act under which the rule was made) shall be preferred to a construction that would not promote that purpose or object.’

43 Numerous provisions of the PSB Act are designed to protect consumers from conduct that is unfair. The Act’s focus on consumer protection must inform the approach taken to the interpretation of its provisions. While the PSB Act does not contain an objects clause, the Minister’s second reading speech on the 2002 Act (in the context of the other amendments to the 1941 Act) does not leave any doubt as to the objectives of the provisions presently under notice:

‘‘consumer protection to a level that acknowledges the significance of property transactions in people’s lives’ and ‘I cannot stress enough that the intention of the bill is to protect consumers and their investments in their homes.’ (See Hansard extracts 9/05/2002 and 10/06/2002).

44 We also note the comment of Kirby J in Marks v GIO Australia Holdings Limited [1998] HCA 69 (11 November 1998) albeit in the context of Commonwealth Trade Practices Act:

‘In construing legislation enacted to secure significant national economic objectives, such as the provision of important remedial protection for consumers, the Court should resist attempts to divert it into a construction which would frustrate and defeat those objectives. …

‘The [Trade Practices Act] is a significant measure of legislative reform. Its purposes, at least where it provides for consumer protection and remedies, must therefore be given effect by the courts in a wholehearted way. It would be quite wrong to defeat the achievement of the policy of the [Trade Practices Act], and specifically of the remedies provided by the Parliament for its enforcement, by construing the remedies narrowly by reference to supposed analogies developed in different times and for different purposes by the general law. Experienced judges have declined to don a ‘strait-jacket’ proffered by reference to historical analogies. They have been right to do so.’

45 Not only does the PSB Act make explicitly clear that the agent need not have knowledge of the false, misleading or deceptive statement nor intent to conceal the material fact but the section is generally broad in scope as is evidenced by use of the words ‘any’ before ‘functions of a registered person’; ‘statement, representation or promise’ and ‘concealment of material fact’. The only qualifier in the section is that the ‘fact’ in question be a ‘material’ one.

46 As our formulation of the appropriate approach suggests, we do not think one can exclude from the list of matters which might be regarded as ‘material facts’ matters which are known, from experience in the practice of real estate agency work, to be likely to be sensitive to at least some of the prospective purchasers.

47 For the purpose of the approach we see as the appropriate test, a ‘reasonably-informed’ consumer taking into account what might fairly be understood by those experienced in real estate work to be facts or matters that purchasers might reasonably be interested in when deciding to buy.

48 Prospective purchasers are, we accept, influenced by a variety of factors when considering the purchase of a residential property: affordability, number of rooms, location, proximity to amenities, neighbourhood, the recent use of the property (for example, as rental accommodation rather than owner-occupied). In this instance, we think that vendors and agents would recognise that some aspects of the recent history of use or activity in a dwelling would be of interest to purchasers, and are significant enough to be classified as ‘material facts’.

49 In our opinion, real estate agents would recognise that for some purchasers at least the fact that the property had been the site of very gruesome and widely-publicised events would turn them away. In fact, Mr Hinton, an experienced real estate agent, recognised from the outset that some care needed to be adopted in the presentation of this property so as not to draw attention to the fact that it was the site of the Gonzales’ murders and a specific strategy was adopted to address that issue, namely prospective purchasers would be told that it was a deceased estate, save if they asked directly if it was the Gonzales’ home in which case they would be told it was.

50 The Tribunal found that the purchasers were not in fact so told, and we see no reason to disturb that finding. In any event we query whether being told that the Gonzales’ home was a deceased estate would have been sufficient to discharge the agents’ obligations under s 52 given the usual usage and understanding of the term ‘deceased estate’ as opposed to the rare and somewhat different occurrence of a triple murder.

51 The appellants seek to limit the test to the situation where the purchaser raised the question with the agent. However, there is nothing in the wording of the section to suggest that it is incumbent on the purchaser to raise matters with the agent before the statutory obligation imposed on the agent will attach. It may be the case that such questions are an indication of materiality but their absence here is of little import as the agents had independently formed the view that the fact of the triple murders was relevant to the campaign and the valuation evidence provides similar independent support. In our view, requiring a purchaser to raise all relevant issues in order to have them answered would be to subvert the intention of the section.

52 The appellants also rely heavily on a floodgates argument which in essence states that it is not possible for an agent to know the foibles and superstitions of all potential purchasers as there are almost endless possibilities as to what might be material. We agree that it is not possible to determine in advance the scope of ‘material’ for the purposes of s 52 as it will be peculiar to any particular case and fact situation. This does not however render the provision inoperative or requiring a narrow interpretation and there are other provisions that operate in a similar manner, for example s 52 of the Trade Practices Act.

53 While an agent will not always know the intangible factors that bear on a decision to purchase that is not what is required by the section. Absent a specific question from the purchaser or the independent determination by the agent (as was the case here), the question is an objective one to be viewed in all the circumstances. This will necessarily involve a question of reasonableness providing protection for agents from a purchaser seeking to rely on the provision for whimsical or unreasonable claims of materiality.

54 It is not necessary now to determine the parameters of what is a ‘material fact’ for the purpose of s 52. Suffice to note that indicia that will be relevant to such a determination include the agent’s treatment of the fact; whether the fact is able to be independently ascertained; whether the fact is likely to impact on price; the reaction of other purchasers to the fact; whether the fact results in the property being in a rare or unusual category or position.

55 The agent must be especially careful that the purchaser is informed of matters which could not be revealed through undertaking usual enquiries. Agents should be wary of failing to disclose anything which is particularly unusual about the physical or historical aspects of the property (including usage, ownership). It is significant that murders, especially of the kind in this case, are rare. Anything rare or unusual such as would distinguish the property from other similar properties is likely to be material.

56 There is evidence, accepted by the Tribunal, that the appellants appreciated the fact of the murders was one to be explained or dealt with as part of its advertising campaign and further that independent valuers considered it was a fact that would impact on the value of the property. Here the knowledge of the agent that it was a matter relevant to a campaign, the valuation evidence and the evidence of impact on other purchasers are sufficient to determine that the fact was a material one.

57 The section does not go so far as to require the purchaser to raise all relevant issues in order to have them answered – that would be to subvert the intention of the section.

Section 42 of the Fair Trading Act, 1987

58 Section 42 of the Fair Trading Act 1987 (NSW) is relevantly identical to s 52 of the Commonwealth Trade Practices Act, and provides:

‘ Misleading or deceptive conduct

(TPA s 52)

(1) A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

(2) Nothing in this Part shall be taken as limiting by implication the generality of subsection (1).’

59 Judicial determinations in relation to s 52 apply equally to s 42 (see for example Arbest Pty Ltd v State Bank of New South Wales (1996) ATPR 41-481).

60 In Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60, (2004) 79 ALJR 308 McHugh J explained the proper approach to statutory interpretation of a section of this kind at [97]:

‘Section 52 - which is in Pt V of the Act - is capable of flexible application and should be construed accordingly. Such an approach gives effect to the consumer protection objectives that underpin Pt V of the Act generally and s 52 in particular. As Lockhart and Gummow JJ pointed out in Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd [(1993) 42 FCR 470 at 503]:
‘... the evident purpose and policy underlying Part V, which includes s 52, recommends a broad construction of its constituent provisions, the legislation being of a remedial character so that it should be construed so as to give the fullest relief which the fair meaning of its language will allow ..’’

61 Silence as Conduct. The conduct complained of here is that the appellants did not tell the respondents that 6 Collins Street was the site of a triple murder, that is the conduct complained of is non-disclosure or silence.

62 The conduct must be that of the respondent. Section 4(4) of the New South Wales act defines ‘a reference to conduct’ as including doing or refusing to do any act. Section 4(4)(b) specifies that a reference to ‘refusing to do an act’ includes a reference to refraining (otherwise than inadvertently) from doing the act.

63 That is, cl 4(4)(b) requires that silence be intentional. However, it has been held that this is limited to where silence alone constitutes the actionable conduct, compared for example to a combination of disclosure or positive conduct about some matters coupled with silence about other matters. See Johnson Tiles Pty Limited v Esso Australia Limited [1999] FCA 569 at [2]-[4] as cited in Noor Al Houda Islamic College Pty Limited & Anor v Bankstown Airport Limited [2005] NSWSC 20 at [190]. Hoeben J accepted where non-disclosure is in issue and forms part of rather than constituting the misleading or deceptive conduct, the respondent’s knowledge or intention will be a relevant but not decisive consideration.

64 There may be a question as to the agent’s liability under s 42 in circumstances where the agent is not aware of the relevant facts which mislead or deceive. This is not the case here, as it is clear from the evidence that the appellants knew that the house was the site of the Gonzales murders and in fact anticipated that fact as being relevant to the campaign.

65 Here the evidence is clear that the appellants knew of the correct situation regarding the property such that their silence was intentional. In fact according to their own evidence the appellants constructed an alternative scenario to describe the state of the property – namely that it was a deceased estate the beneficiaries of which lived in the Philippines and no longer required the property. In any event the non-disclosure formed only part of the conduct given that other representations about the property were made.

66 Duty to Disclose or Reasonable Expectation. The core issue between the parties is whether the relevant test for assessing non-disclosure is that there must be a separate duty to disclose or that there must be a reasonable expectation of disclosure. There was no suggestion that the other requirements of s 42 were not met.

67 The appellants take issue with the Tribunal’s reasoning in relation to this issue drawing a distinction between a positive duty to speak as forming the basis of the relevant test and a reasonable expectation of disclosure as was found by the Tribunal to be the relevant test. The cases were set out at length by the Tribunal and the conclusion reached in our view was the accurate one. We do not agree with contentions of the appellants that the Tribunal failed to articulate reasons with respect to this issue.

68 The appellants relied on Lam v Ausintel Investments Australia Pty Limited (New South Wales Court of Appeal, unreported 11 October 1989) and in particular comments of then Chief Justice Gleeson that parties dealing at arms length in a commercial negotiation are not obliged to bring to each other’s attention facts which might change their negotiating stance. However, that case was decided in quite different circumstances from the current one and the Chief Justice does acknowledge that some features of the relationship between parties may require full disclosure. Here the specific statutory obligations found in s 52 of the Act as well as the Codes of Conduct define the relationship as requiring the agent to make disclosure.

69 It was originally considered that there must have been a duty to reveal relevant facts in order for silence to constitute misleading conduct (Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546). However, the position has been broadened and silence may constitute misleading or deceptive conduct where in all the circumstances (constituted by all the acts, omissions, statements or silence) the relevant conduct was likely to mislead or deceive.

70 See Demagoge Pty Ltd v Ramensky (1992) 39 FCR 31 where this was described as a reasonable expectation that silence would be broken:

‘…. the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case for if particular matters exist they will be disclosed.’

71 This construct has been accepted as the better view in later cases such as Noor Al Houda Islamic College Pty Limited & Anor v Bankstown Airport Limited [2005] NSWSC 20 at [181]. As noted by the Tribunal, the New South Wales Court of Appeal approved the principles summarized by Black J in Demagoge Pty Ltd v Ramensky (1992) 39 FCR 31 in Metalcorp Recyclers Pty Limited v Metal Manufactures Limited [2003] NSWCA 213. That decision acknowledged there may be a positive duty to speak, the absence of which requires a ‘background of other facts known to both parties which make what was actually said so incomplete that it conveys a misrepresentation.’

72 The reasonable expectation has also been described as ‘entitlement to expect’ or ‘entitlement to infer’: see Hill J in Warner v Elders Rural Finance 113 ALR 517.

73 As implicitly acknowledged by the Court of Appeal in Metalcorp, the tests are not mutually exclusive. Suffice to note that a positive duty is not required though may form part of the background facts against which non-disclosure is to be assessed.

74 We think there is in practice very little difference between the two tests, namely ‘an obligation or duty to disclose’ or a ‘reasonable expectation of disclosure’. Each requires an analysis of the particular facts of the case and circumstances in which the non-disclosure occurred. The appellants would have the test elevated to requiring a separate identifiable duty whether at common law or otherwise, but we do not read any of the recent cases as requiring that elevation. Indeed it would be unusual for that to be the case in the context of consumer protection legislation.

75 In any event, we agree with the Tribunal that s 52 of the Act and the Codes of Conduct establish a separate obligation on agents not to mislead such as would have satisfied the elevated test were that necessary.

76 We are satisfied that the Tribunal was entitled to conclude that the context in which the purchase was made gave rise to a reasonable expectation that the fact of the murders should have been disclosed. Prospective purchasers were not told that 6 Collins Street was the site of the Gonzales’ murders and this was not readily ascertainable through standard searches. Prospective purchasers were not even told that the house was a deceased estate and there was nothing to indicate this in the contract documents or advertising material. The appellants contend that the fact that the contract did not refer to the beneficiaries was not their fault. The assessment required by s 52 is not a fault-based one. The inquiry is directed to the objective consequences of omissions. Further, consistent with the decision to market the property without mentioning the murders, a positive representation was made to Ms Lin that the current owners were in the process of moving out and this was consistent with the condition and presentation of the house. There was ample evidence before the Tribunal to allow it to reach the conclusion it did.

77 Consequence of Misleading Conduct. The conduct complained of must be ‘misleading or deceptive’ or ‘likely to mislead or deceive’. It has been said that the later phrase makes it clear that it is unnecessary to prove that the conduct in question actually deceived or misled anyone. See McHugh J in Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60 at [112].

78 Whether or not conduct is misleading or deceptive is an objective question to be determined by the court. Evidence that a person has in fact been misled is not conclusive but is admissible and may be relevant and persuasive.

79 Similarly to inducement as discussed earlier, an assumption of fact (rebutable by evidence to the contrary) may be made that where a representation induces a person to act, it may be assumed that the person acted in reliance on the representation. See for example Gould v Vaggelas (1985) 157 CLR 215 at 236, 238.

80 We accept that Mr Kwok and Ms Lin would not have entered into the contract to purchase the Gonzales property had they known that that property was the site of the triple murder. It is not a defence to this claim that the respondents were negligent in not checking or could have discovered the matter by proper inquiries, see Neilsen v Hempston Holdings Pty Ltd 65 ALR 302 at 309. Again, the fact that the house was the location of a triple murder was not a matter that would be revealed through standard searches or inquiries.

81 Impact of decision on agents’ duty to vendor. To the extent that s 42 imposes a statutory duty for the protection of consumers it varies the agent’s duty to the vendor. The appellants point to this as justifying an argument that the statutory obligation should not extend so far. We do not agree. The imposition of the statutory obligation means merely that the agent’s obligation to the vendor is not able to be ascertained simply by reference to common law.

82 That is not to say that the obligations are inconsistent, to the contrary it is incumbent on the agent to be aware of his or her duty regarding consumer obligations and to ensure that in accepting instructions from a vendor that the vendor is apprised of the statutory requirements and how they frame the way in which the agent will conduct business for the vendor. If this is done in advance the agent is not at risk of impeaching his fiduciary duty to the vendor nor at risk of action from the vendor. The fact that the vendor does not have an independent duty to the purchaser is not to the point. The legislation in establishing the consumer protection standards recognises that agents stand between the vendor and the purchaser and are responsible for informing the purchaser as to the property being examined.

83 Many of the appellants’ criticisms have sought to shift attention to the consumer’s conduct. As was said by a United States court many years ago in relation to the United States law proscribing unfair or deceptive acts or practices in trade or commerce (the Wheeler-Lea Amendment of 1938, the historical source of s 52 of the Trade Practices Act, and s 42 of the State Act):

‘The law is not made for experts but to protect the public – that vast multitude which includes the ignorant, the unthinking and the credulous, who, in making purchases, do not stop to analyse and too often are governed by appearances and general impressions.’ ( Aronberg v Federal Trade Commission (1943) 132 F 2d 165 at 167.)
Rules of Conduct

84 In light of the findings above we agree with the decision of the Tribunal that each of the appellants were in breach of rule 3(1) of the Rules of Conduct (failed to act honestly, fairly and professionally) and that Mr and Ms Hinton breached rule 3(2) of the Rules of Conduct (mislead or deceived parties in negotiations or a transaction).

Merits

85 While the Appeal Panel’s discretion to grant leave is not qualified by the ADT Act (see, for example, Sunol v Collier [2006] NSWADTAP 51 at [29]), it should be exercised with caution and in the interests of justice. It is not enough that the appellant disagrees with the decision. The Appeal Panel is not designed to be a second trial level of the Tribunal. As McHugh J said in CDJ v VAJ (1998) 197 CLR 172 at [111] the power to permit an appeal on a question of fact is ‘not intended to have the practical effect of obliterating the distinction between original and appellate jurisdiction’. Appeal Panels must recognise the importance of not interfering with soundly-made decisions. An appellant should normally, we think, demonstrate on persuasive grounds that a substantial injustice would result if the decision was allowed to stand.

86 We have rejected the appellants’ arguments on points of law. So an application for extension which gives emphasis to errors on points of law is not open.

87 In the application for extension to the merits on other grounds, under the heading ‘rejection by the member of independent testimony’ the appellants refer to the failure of the Tribunal to accept the evidence of Mr Markerian and Ms Kalejian, two witnesses produced by the appellants. This evidence is dealt with at length by the Tribunal: see [78] to [96] of the Tribunal’s reasons. In our view the Tribunal carefully examines this evidence. This point is, we expect, raised under the ‘merits’ heading as the appellants recognise that it requires more for findings of primary fact to be set aside on error of law grounds than that a member of the Tribunal was ‘overly impressed’ (to use the appellants’ words) with other evidence (in this instance the television station manager who has no record of a phone call from Mr Markerian questioning statements made by the purchasers about their state of belief on a television show). See generally R v. District Court of the Metropolitan District Holden at Sydney; Ex parte White (1966) 116 CLR 644 at 654; Azzopardi v. Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156-7Glass JA at 156-157; and recently, Prakash v Health Care Complaints Commission [2006] NSWCA 153 at [86] per Basten JA.

88 In considering leave applications, Appeal Panels should be wary in acceding to objections to the fact-finding process which would manifestly have failed as error of law points.

89 We have reviewed the transcript and the findings made by the Tribunal in relation to Mr Markerian were open to it. Further the Tribunal at first instance had the benefit of observing the witnesses as they gave evidence.

90 The application for extension to the merits also seeks to revisit the way the Tribunal dealt with the evidence in relation to the ‘concealment’ and ‘materiality’ issues. These submissions seek to shift the focus of the inquiry to the conduct of the purchasers. We have dealt earlier in our reasons with the fallacy of this position. The two statutory provisions (s 52 of the Act and s 42 of the Fair Trading Act) have as their focus the conduct of the agents.

91 Accordingly, there is no substantial injustice that might arise if an extension of the appeal to its merits were not granted, see Obradovic v Commissioner for Fair Trading, Office of Fair Trading [2006] NSWADTAP 45 at 11, 15.

Orders

Appeal dismissed.