Huo v Z and S Camberwell
[2020] VCC 1466
•24 September 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-19-04075
| DONGJIE HUO | Plaintiff |
| V | |
| Z & S CAMBERWELL PTY LTD and KUN ZHANG | First Defendant Second Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3, 4, 5 August 2020 | |
DATE OF JUDGMENT: | 24 September 2020 | |
CASE MAY BE CITED AS: | Huo v Z & S Camberwell & Anor | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 1466 | |
REASONS FOR JUDGMENT
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Subject:Sale of land damages claim for alleged breach of contract or misleading or deceptive conduct
Catchwords: Sale of land – Correspondence by municipal council as responsible authority under Planning and Environment Act 1987 foreshadowing possible Heritage Overlay or interim Heritage Overlay restricting demolition of existing property and replacement with new house – Term of contract requiring disclosure of “notices” affecting property – Term breached by non-disclosure – Claim for damages for misleading or deceptive conduct – Statement under section 32 of Sale of Land Act 1962 misleading or deceptive – No reliance proved – Estate agent’s statements on behalf of first defendant misleading or deceptive – first defendant but not second defendant liable for misleading or deceptive conduct – Quantum of damages for breach of contract – Division 2, Part II of Sale of Land Act 1962 – No implied obligation in contract for vendor to comply with Division 2, Part II, of Sale of Land Act 1962
Legislation Cited: Sale of Land Act 1962 Division 2 of Part II, ss32, 48A; Building Act 1993 s137B; Australian Consumer Law ss18, 237, 243; Australian Consumer Law and Fair Trading Act 2012 ss8, 216(2), 217
Cases Cited:BP Refinery (Western Port) Pty Ltd v The Shire of Hastings (1977) 180 CLR 266; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; O’Brien v Smolonogov (1983) 53 ALR; Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334; Morton v Black (1988) 83 ALR 182; Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505; Williams v Pisano [2015] NSWCA 177; Houghton v Arms (2006) 225 CLR 553; Di Stasio Pty Ltd v R&K Services Pty Ltd [2018] VSCA 340; Carr v Finance Corporation of Australia Ltd [No 1] (1981) 147 CLR 246
Judgment: (1) Within 14 days of this day the parties must bring in short minutes to give effect to these reasons
(2) Costs are reserved
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Lithgow | Noh Legal |
| For the Defendants | Mr W Stark | Fumens Lawyers |
HIS HONOUR:
Background
1 The plaintiff, Mr Huo, was born in China. He has lived in Australia for 13 years and attended secondary school and university here. He carries on business exporting Australian wine to China. (Transcript (“T”) 34, Line (“L”) 10‑19) In 2017, he was looking to build his “dream home”. He was generally interested in the eastern suburbs of Melbourne and carried out online searches. (Ibid, L22‑31) His interest extended to the suburbs of Camberwell, Burwood, Glen Waverley and Mount Waverley. (T35, L1‑4) He carried out extensive online searches and actually visited more than 20 properties. This process took over six months. (Ibid L10‑16) He had a budget of $3 million which was to be furnished to him by his Chinese resident parents. (Ibid, L21‑24)
2 Mr Huo was not interested in an existing house, or renovating or extending an existing house. He wanted to build his own home “from scratch”. (T36, L1‑3)
3 In November/December 2017, he became aware of a property at 128 Wattle Valley Road, Camberwell, via an online advertisement. There were delays in organising an inspection. Mr Huo said:
“I talk to the agent to have, have an inspection of the property, but it take a long time to actually get into the property, but I haven’t, I haven’t had a look inside the property, I only went to the front yard and the backyard, because I have no interest in the interior of the property. My intention, first intention was always to demolish the property and then build a new one.” (T36, L12‑19)
4 The agent representing the owner of 128 Wattle Valley Road, Camberwell, was of Chinese ethnicity known in English-speaking circles as Janssen. He and Mr Huo communicated both in English and Mandarin, and via the Chinese social medium “WeChat”. (Ibid, L20‑31)
5 According to a certified translation, WeChat included the following message from Mr Huo to Janssen:
“Hello, I’m sorry to bother you again. May I ask if this house will be annotated as heritage by the council? You also said that it’s a traditional house, I’m a little worried about it now. 26/12/2017, 3.34pm.” (T37, L17-20)
6 Janssen responded by transmitting an online property report relative to the house furnished by the Victorian Government entity “Land Victoria”. (Court Book (“CB”) 988) The report, next to the words “Planning Overlay:” stated “None”. (Exhibit A) Mr Huo said that he also had telephone discussions with Janssen on the subject and was assured by Janssen that “the land is clean”. (T39, L4‑7) Mr Huo realised that if he purchased this property to implement the plan to build his “dream home”, he would have to obtain a demolition permit. He was concerned about the timing of these matters:
“I’m a bit worried about the timing because it will take time to design a house, then submit the applications, it take maybe a few weeks to get this, like application to proceed. Then to get … the applications finished or complete, it take a long time. I’m worried about during this period of time whether there is changes made by the Council.” (Ibid, L12‑18)
7 According to Mr Huo, Janssen said:
“You don’t have to worry because all this process will be very, very quick and won’t take a long time.” (Ibid, L18‑20)
8 Mr Huo was provided by the agent with a statement under s32 of the Sale of Land Act 1962. This section and the prescribed form require vendors of real estate to disclose to purchasers, or potential purchasers, a number of important matters relative to the land the subject of the proposed sale. Mr Huo said he did not read it; rather, he left it to his friend to read because he, Mr Huo, was not an expert. He admitted his unnamed friend was not an expert either. His concern appeared to be to identify the location of an easement. (Ibid, L24‑29)
9 No auction date had been fixed for the property, so any proposed sale would be “off market” if it occurred at this stage. (T40, L2‑3) At the suggestion of Janssen, Mr Huo offered $3.25 million.
10 The Vendor Statement made under s32 of the Sale of Land Act 1962 consisted of some 13 sections, the last of which provided for the attachment of various items, such as certificates. Section 3 was headed “Land Use”, sub-paragraph 3.4 was headed “Planning Scheme”, and the notice stated “Attached is a certificate with the required specified information”. The relevant certificate was constituted by a property report given by Land Victoria. It described the zoning as follows: Neighbourhood Residential Zone (NRZ), Neighbourhood Residential Zone – Schedule 3 (NRZ3). Next to the heading “Planning Overlay”, the word “None” appeared. (CB 611). Also attached to the statement was a Planning Permit issued 3 November 2017.
11 The discussions between Janssen and Mr Huo, as previously noted, were occurring immediately after Christmas 2017 on 26 December, so the permit was less than two months old. It provided for “construction of an extension (garage) to the existing dwelling and a double-storey dwelling to the rear of the existing dwelling (2 x dwellings) on a lot in accordance with the endorsed plans.” The permit included some 14 conditions and provided that it would expire if the development did not start within two years of the issue date or if it was not completed within four years of the issue date. (CB 625‑629)
12 In a Valuation dated 7 May 2018, obtained by the ANZ Bank for mortgage lending purposes relative to a proposed loan to Mr Huo, the property at 128 Wattle Valley Road, Camberwell, was described as follows: It was said to have a site area of 1,031 square metres, with the house “built about 1930” with a “1970’s approx addition”. The living area was measured at 253.00 square metres. Its marketability was shown as “moderate”. The valuer commented:
“The subject property comprises an inter-war art deco period dwelling with basic 1970’s style rear extension and dated renovation situated on a larger than average, regular shaped level allotment on the well regarded although secondary thoroughfare Wattle Valley Road within the prestigious eastern Melbourne locality of Camberwell.”
The valuer also observed, “The dwelling is in need of reasonably major renovation works …” (Exhibit C)
13 Mr Huo signed the Vendor Statement as having received the original on 27 December 2017. (CB 582, T40, L16‑20) He received the statement from Janssen in Janssen’s office in Kew. (Ibid, L27-29) He seems to have received an electronic version of the statement and a proposed Contract of Sale on 27 December 2017. (CB 988, Ibid, L30‑T41, L3) Mr Huo said he attempted to discuss the issue of demolition with Janssen on a number of occasions without success: “I think he’s probably kind of busy, he keep forgetting my questions. Every time I ask him he said the house is clean.” This was Janssen’s response, according to Mr Huo, whenever he raised the issue of heritage listing. (T41, L31‑T42, L7) Mr Huo said, “I keep telling him I’m going to build – demolish the house and then build a new house for myself.” (T42, L10‑12)
14 Mr Huo signed the contract contemporaneously with signing the Section 32 Statement. (CB 575, T42, L21‑24) The price shown was $3.25 million, written in manuscript by Janssen. An earlier proposed price of $3.2 million was struck out and superseded. (CB 577, T43, L1‑8) Settlement was appointed for 27 March 2018. A 10 per cent deposit was expressed to be payable either on 28 or 29 December. The manuscript was not entirely clear.
15 Mr Huo said that he took the signed contract, signed by him on 27 December and by the second defendant, Mr Zhang, on behalf of the owner, the first defendant, Z & S Camberwell Pty Ltd (“Z & S”), on 28 December to a legal practitioner recommended to him by Janssen. (CB 575, T44, L26‑31) The law firm was known as “Vstar Lawyers”. (T45, L7‑8) This firm apparently has Chinese speaking practitioners. (Ibid, L10‑11)
16 Mr Huo then proceeded to engage a builder to design and carry out preparatory work for the erection at 128 Wattle Valley Road, Camberwell, of his “dream home”. (T45, L21‑31) Mr Huo received an email dated 22 January 2018 from a Mr “Jackie Ma”, registered builder, on behalf of Galaxy Homes. He quoted a price for the design and construction of the proposed “dream home” at $1.5 million. The quotation called for a 4 per cent deposit. The 4 per cent was said to include ―
“all the design work, structural engineer drawing, drainage plan, energy rating report, soil report, land surveyor, building permit costs, site visitor, council meeting, issue dispute, and re-establishment survey.” (CB 647)
17 Mr Huo accepted the quotation and paid Galaxy $60,000. The first step in the process was to obtain a Demolition Permit. (T46, L25‑31)
18 The proposed plan included a two-storey building with a garage, study, cinema room, meals and family area on the ground floor and sleeping accommodation upstairs. (T47, L6‑9) The proposed house would be the sole structure on the site, with the existing house at 128 Wattle Valley Road being removed. (T42, L10‑15)
19 The second defendant, Mr Zhang, who is the principal and controller of the first defendant, Z & S Camberwell Pty Ltd, said that in 2010 his family lived in Ashwood in a townhouse. Later, he said “our parents immigrate here so we moved to Glen Waverley in 2016.” I took the reference to “our parents” to mean Mr Zhang’s parents and his parents-in-law. Mr Zhang is the father of twin boys and he and his wife have made tentative enrolments for them at a number of eastern suburbs schools, namely Scotch College, Camberwell Grammar and Trinity Grammar. They investigated houses in more inner eastern suburbs such as Camberwell and Canterbury. Mr Zhang said:
“Then I went to the property on the subject site, 128 Wattle Valley Road and then saw that block ‑ it’s really big and then the price, the agent told me is ‑ is I think it’s reasonable and worthwhile because the window didn’t want to put on market waiting for a quick sale and then I put an offer in.” (T179, L5‑10)
20 He said he could not remember the price at which he purchased. (Ibid, L10‑11) The contract which showed the purchaser as Mr Zhang “and/or nominee” was signed by the vendor, a Mr White, on 20 May 2016, having been signed by Mr Zhang on 17 May. The price was $2,303,000. (CB 392‑396) Upon his accountant’s advice, Mr Zhang exercised the right of nomination such that title to 128 Wattle Valley Road, Camberwell, was taken by Z & S. (T180, L22‑29)
21 Mr Zhang approached a planning consultancy known as “EEG”. They advocated the construction of three or four townhouses on the site. Ultimately, he was dissatisfied with EEG. Mr Zhang said, “So then we didn’t get together so I don’t think they can give me a good plan, so that’s why we changed.” (T181, L19‑20) He or his company then retained Mr Paul O’Shea of CS Town Planning upon the recommendation of one of his friends. (Ibid, L22‑25) Settlement of Z & S’s purchase occurred in August 2016. It seems Mr Zhang wanted to move into the house himself, but this proved impossible. The previous owner “left a lot of rubbish” and there was difficulty in obtaining vacant possession. The solicitors had to engage the police to remove the vendor’s son. (T181, L28‑T182, L8) Mr Zhang then did some “cleaning up” and some refurbishment.
22 Following his abortive discussions with EEG, Mr Zhang consulted CS Town Planning. (T162, L8‑19) Mr O’Shea said that his consultancy was engaged relative to 128 Wattle Valley Road, Camberwell, and that Z & S, the first defendant, was the “contact for our … office”. (T114, L25‑26) Mr Lithgow, counsel for the plaintiff, took Mr O’Shea to a number of documents relative to this, though they were not tendered as exhibits.
23 The first letter he was taken to was from the City of Boroondara. Toward the end of the letter a section appeared under the heading, “Potential Future Heritage Controls”. (T116, L26‑28) Mr O’Shea said the matters referred to under that heading did not concern him. (T117, L4) He believed that he had sent a copy of the letter to Mr Zhang. (Ibid, L7‑8) This letter seems to concern the permit for dual occupancy, granted in November 2017 and attached to the Section 32 Statement provided by the vendor’s agent to Mr Huo before he signed the contract to purchase the property. Speaking of the Heritage Overlay proposal, Mr O’Shea said:
“They had not yet formally included it, and it posed Heritage Overlay. So for that reason, this issue of a future heritage control was very much in the backdrop of the assessment of this planning permit application. You’ll notice in this letter, council have merely flagged the possibility of this property being included in Heritage Overlay. That hadn’t really been the issue with the proposal the week before as being inconsistent with that overlay.” (T117, L12‑20)
24 Another letter to which Mr O’Shea was taken was addressed, “Hello, Colin and Alan”. Mr O’Shea addressed Mr Zhang as Alan, and Colin was one of his business partners. The letter describes four projects “at various stages on the go at this stage”. (T118, L21‑22) As to 128 Wattle Valley Road, Camberwell, the letter proposed obtaining a permit for two dwellings, a four‑bedroom house at the back with modifications to the existing structure at the front. (Ibid, L23‑28)
25 Mr O’Shea was taken to a further letter by way of email to Mr Zhang relative to the Wattle Valley Road property. It discussed “possibly get[ting] four units or you’d have to settle for three on this block”. (T119, L19-20) Mr O’Shea said, “We’re certainly looking at developing four on the property.” (Ibid, 20-21) Mr Zhang had asked Mr O’Shea whether it would be possible to develop 128 Wattle Valley Road to accommodate four houses and Mr O’Shea had responded that this was unlikely and Mr Zhang might have to settle for three. (T119, L11‑29) Mr O’Shea said he advised that four units would be “unachievable” and “It would be a better approach to attempt three on the site with two driveways.” (T120, L1‑3)
26 Despite the earlier reference to a heritage overlay being under consideration by council, Mr O’Shea was not particularly concerned about issues of timing. There was no urgency to proceed with the development, lest it be overtaken by the Heritage Overlay. He was influenced in his view by the fact that the planner at council in charge of the application, Kristian Cook, “never raised the issue of the Heritage Overlay”. (T121, L27‑28) He said Heritage Overlays take a long time to impose, “can take a minimum of 12 months [in the absence of an interim decision] to introduce a planning scheme.” (T122, L2-3) The imposition of the Overlay requires ministerial approval from the Minister for Planning. (T121, L28‑T122, L9)
27 He said future planning amendments are given significance in planning determinations only if they are “seriously entertained” which meant, he said, “it has to be what’s called `on the minister’s desk for signing’.” (T122, L12‑13) Further, he noted that there would be, as part of the process, a need for an independent panel hearing. (Ibid, L14‑22) In any event, he said, a heritage overlay would be concerned without the retention of the facades of heritage buildings, thereby preserving the streetscape and the contribution to that streetscape which the buildings make. Even if a heritage overlay were brought in swiftly on an interim basis, overtaking the permit application, it would not necessarily lead to rejection of the permit application because the proposal Mr O’Shea was advancing for Z & S retained most of the existing building. (T122, L29‑T123, L9, T124, L11‑18) Different considerations, he said, would exist if permission were being sought for the erection of an entirely different building. (T124, L26‑31) For all these reasons, “any changes that could come about as a result of that overlay were not front of [his] mind, as pertinent in the assessment of this application”. (T125, L12‑14)
28 The permit, issued in November 2017, as previously noted was included in the Section 32 Statement.
29 In accordance with the quotation which Galaxy had given, Mr Huo paid $60,000 to that company. (T46, L25‑27) Correspondence proceeded between Mr Huo and Jackie of Galaxy Homes and a number of plans were prepared for the proposed “dream home”. (T48) Jackie of Galaxy Homes sent an email to “Jessica” relative to 128 Wattle Valley Road, asking her to “have the owner sign the attached report and consent form so that we can apply for the Demolition Permit ASAP” (CB 704). Mr Zhang said he was happy to cooperate as long as, pending settlement, “not any damage on the house”. (T204, L19‑20) Mr Zhang said he instructed his selling agent, “I’m okay with that, but as long as they’re doing the job after the settlement.” (Ibid, L16‑17) He said he had also been asked to sign documents consenting to disconnection of the gas meter or the water connection, but since a tenant was still in possession, he believed he could not give such consent in the middle of January. (T204, L1‑12)
30 Eventually, following advice from his solicitor, Mr Zhang signed the consent to a Demolition Permit application. Settlement occurred in March. (T205, L3‑5) A firm or organisation known as “Vic Master Demolition” apparently sought consent to demolish the property at 128 Wattle Valley Road, Camberwell, presumably under the authority of Galaxy Homes and at the request of Mr Huo. The response was said to be under s29A of the Building Act 1993 and stated, “A planning permit is required for the demolition work applied for and has not been obtained. Consent to the proposed demolition is refused.” This response was dated 24 April 2018; that is, after settlement of the sale to Mr Huo. (CB 733)
31 In light of this response, Mr Huo engaged law firm, Mills Oakley (T50, L29‑31) with a view to obtaining the permit required as a pre‑condition to the demolition. Mr Andrew Vicendese of Mills Oakley provided advice by email of 7 August 2018 to Mr Huo. By letter dated 19 February 2018 addressed to Z & S Camberwell Pty Ltd at 28 Kerrie Road, Glen Waverley, which is Mr Zhang’s address, Mr Zoran Jovanovski, Manager Strategic Planning, of Boroondara City Council, advised Z & S with respect to 128 Wattle Valley Road, that interim Heritage Overlays had been imposed on a number of properties, including the Wattle Valley Road property, coming into effect 8 February 2018 and to expire 1 March 2019 in the expectation that a final overlay would have been adopted by then. The letter stated that, as a result:
“ any proposals for demolition and other buildings and works on your land are likely to trigger a requirement for a planning permit. This requirement for a planning permit is also likely to apply for demolition, and buildings and works that have already commenced. Please ensure you stop work and contact Council’s Statutory Planning Department …” (CB 238)
32 It was presumably the imposition of the interim Heritage Overlay which led to the requirement for a Planning Permit as a pre‑condition to a demolition consent. The content of the final Overlay would be the subject of a Planning Panel hearing. Mills Oakley advised in their email that exclusion of 128 Wattle Valley Road required persuasion of the Planning Panel and “an argument will need to be made which disproves that your Property meets the above listed criteria”; viz, that it contributes to the heritage qualities of the precinct in which it is located. The email continued:
“Unfortunately, as you are aware, we have been unable to engage a heritage expert that is both available to appear at the Panel Hearing and able to support your objection. Of the several experts we consulted, David Bick, Ian Coleman of Coleman Architects, Robyn Riddett of Anthemion Consultancies and Oona Nicolson of Ecology & Heritage Partners provided us with preliminary desktop opinions on your position. The common view among those heritage experts is that your Property is of heritage value which justifiably fits into and contributes to the Precinct, and therefore meets the above listed criteria. We understand that you consulted Peter Barrett who also shared this view. Robyn Riddett also noted that Context, the firm which conducted the Camberwell Heritage Gap Study, have performed many alike studies and attacking their methodology would be ineffective.” (CB 757‑758)
33 Mr Vicendese said that from Mills Oakley’s ―
“… own desktop appraisal, we cannot find any justified reasons to disagree with the preliminary heritage advice that we have received. If it is your view that there is an argument, we would be happy to hear your thoughts and assess if there is any scope to progress an objection on that basis.” (CB 758)
34 They concluded that, in the absence of support from heritage experts, “we unfortunately consider there to be very limited prospects of success in objecting at the Panel Hearing.” (CB 758) They suggested Mr Zhang might advise Planning Panels Victoria that he wished to withdraw his attendance application. (CB 735) Mills Oakley rendered a bill of $7,563.60 for its advices as to this matter. (CB 759)
35 Mr Huo said that he paid the Mills Oakley account. In light of the advice, he concluded:
“So my best option is to have a renovation and rent it out. Because I can’t do anything about the house, I can’t remove the heritage overlay therefore I can’t touch the facade, can’t touch the house.” (T52, L6‑10)
36 Mr Huo said he undertook renovations entailing the removal of the carpet, replacing it with a timber floor, replacing lights, benches and “that sort of thing”. (Ibid, L12‑14) He then – or perhaps more accurately, the company, Z & S – put the property out for rent. It remains tenanted. (Ibid, L18‑19) As far as Galaxy Homes were concerned, Mr Huo accepted liability for the work that Galaxy had done for him, but sought a refund of the balance of the $60,000 fee that he had paid. Jackie declined to make any refund.
37 As a result, Mr Huo instructed solicitors to commence proceedings. (Ibid, L21‑30) They filed a complaint in the Magistrates’ Court of Victoria at Dandenong. The claim was initially brought in the name of MAG Financial and Investment Ventures Pty Ltd, but the proceeding appears to have been amended so as to be brought in the name of Mr Huo himself. The relief sought was payment of $60,000 or, alternatively, damages of $60,000, restitution of $60,000 or equitable damages of $60,000, together with further or other relief. (CB 744‑749)
38 The proceeding was initially defended, but in July 2019, the parties settled the proceeding on terms that $45,000 was paid by Galaxy to Mr Huo in settlement of his claim, plus his costs as assessed on the standard basis by the Law Institute of Victoria’s legal costing service. Terms of settlement to this effect were signed on 3 July 2019 by the solicitors for the parties to the proceeding. (CB 785‑788) The costs claim was compromised at $13,000. (CB 791, T53, L15‑20) Mr Huo’s costs as between solicitor and own client were $22,576.80. (CB 1006, T53, L24‑28)
Plaintiff’s claim
39 By his Amended Statement of Claim, Mr Huo says that he entered into a written agreement with Z & S whereby it agreed to sell him the property at 128 Wattle Valley Road for the sum of $3.25 million. This agreement was said to be “partly written, partly oral and partly implied”. The written portion was constituted by the Contract of Sale of Real Estate and Vendor Statement, the oral portion was said to be constituted by discussions between Mr Huo and “representatives of [Z & S] in or around December 2017 regarding [Mr Huo’s] intended use of the Property and the purchase, that being [his] intention to demolish the existing dwelling and redevelop the Property”. The implied portion was said to derive from the necessity “to give business efficacy” to the contract.
40 There were said to be terms of the contract between the parties that the property was not affected by any Heritage Overlay and there were “no notices, or any particulars of any notice, order, declaration, report or recommendation of a public authority … or approved proposal directly affecting the Property as at the date of the Agreement.” Reference was made to clause 4 of the Vendor Statement. The provision of the Vendor Statement prior to execution of the Agreement was said to be an implied term of the Agreement and a requirement imposed by s32 of the Sale of Land Act 1962, and the statement was required to contain ―
“(a)a description of any easement, covenant or other similar restriction affecting the Property (whether registered or unregistered) and particulars of any existing failure to comply with the terms of that easement, covenant or restriction; and
(b)the particulars of any notice, order, declaration, report or recommendation of a public authority or government department or approved proposal directly and currently affecting the Property being a notice, order, declaration, report, recommendation or approval [sic] proposal of [Z & S which] might reasonably be expected to have knowledge.”
41 Reference was made to s32C(a) and 32D(a). It was said there was an implied term of the Agreement that any attempt to exclude, modify or restrict the provisions of the relevant Division of the Sale of Land Act 1962 was void and of no effect. Reference was made to s32N of the Sale of Land Act.
42 In breach of the Agreement, it was said that Z & S “had actual, or, constructive, alternatively acting reasonably should have had actual, knowledge that the property was at all material times identified for Amendment C274 – Camberwell Heritage Gap Assessment Overlay to the Boroondara Planning Scheme”, and that Heritage Overlay was not identified in “the s32 [Statement] or the Agreement or at all.” Z & S’s knowledge was said to derive from letters to it from the Boroondara City Council dated 24 April 2017, 2 November 2017 and 19 February 2018.
43 Mr Huo said he had suffered loss and damage as a result of the breach represented by the difference between the contract price and the market value of the property, having regard to the Heritage Overlay, the $15,000 which was not recovered from Galaxy Home Group Pty Ltd, and the costs and expenses of Mr Huo’s proceeding against Galaxy, which were not recovered from Galaxy under the Compromise Agreement. He also claimed loss and damage constituted by costs of contractors engaged on the proposed demolition and design of the property.
44 It was said that Z & S had retained the purchase price of the property, despite Mr Huo’s having paid it under a mistake of fact or law, namely that the property was not subject to the Heritage Overlay. Restitution was sought either for the whole of the purchase price or the price variation.
45 Next, it was said that Z & S and Mr Zhang had made representation to Mr Huo that:
(a)the Property was not subject to any easement, covenant or other similar restriction affecting the Property in accordance with s32C(a) of the Sale of Land Act;
(b)the Property was not the subject of any notice, order, declaration, report or recommendation of a public authority or government department affecting the Property of which Z & S and Mr Zhang might reasonably be expected to have knowledge in accordance with s32D(a) of the Sale of Land Act;
(c)that Mr Huo buys the Property subject to any encumbrance shown in the s32 statement other than mortgages or caveats; and
(d)that Z & S warrants that it has no knowledge of any notice or order affecting the Property which will not be dealt with at settlement, other than the usual rate notices and any land tax notices.
46 Reference was made to General Condition 1.1(a) of the relevant Contract of Sale and General Condition 2.4(d) of that contract. These representations were said to have been made in trade and commerce by defendants who “stood to gain direct benefit from the consideration paid to them under the Agreement, being the Contract Price, and without any reasonable grounds and without proper and reasonable regard as to their accuracy and [truth]”. Various matters were alleged as to why the representations were said to be in trade and commerce. Reference was also made to s4 of the Australian Consumer Law “insofar as the representations related to a future matter”.
47 In reliance on the representations, it was said Mr Huo entered into the Agreement with Z & S, paid the contract price to Z & S, and paid money to third party contractors “to make arrangements to demolish the existing dwelling on the Property and design a new dwelling for construction”. These representations were, it was said, “false, misleading and/or deceptive” in that the property was at all material times subject to the imposition of the Heritage Overlays and thus there were restrictions on the use and development of the Property as at the date of the Agreement”. In making their representations, the defendants engaged in misleading or deceptive conduct.
48 Mr Zhang, it was said, was the sole director of Z & S and therefore in control of it, and was involved and made the representations and caused Z & S to make the representations “by approving the content and signing each of the Vendor’s Statements on or about 26 December 2017, and the Contract of Sale on about 28 December 2017”. It was said that, insofar as the defendants did not “author or review” the relevant documents, they were guilty of misleading or deceptive conduct by silence or omission. Mr Zhang, according to the Amended Statement of Claim, was “a person who engaged in, and was otherwise involved in, the conduct that caused [Z & S] to contravene s18(1) of the Australian Consumer Law.” These pieces of conduct were said to have caused loss and damage to Mr Huo. There was also a claim for “common law misrepresentation”.
49 The prayer for relief sought damages, or alternatively damages and compensation, under the Australian Consumer Law, restitution, equitable damages or “a declaration pursuant to ss237 and 243 of the Australian Consumer Law that the Agreement is void ab initio”.
Defence
50 In their defence, Z & S and Mr Zhang said it was a term of the Agreement that Z & S made “no warranty as to the condition of the land and without limiting the generality of the foregoing, [Mr Huo] expressly acknowledges that Z & S has given no warranty to the effect that the land is not subject to pollution or contamination by industrial wastes or other similar substances.” Further, that Z & S made “no warranty as to the condition of improvements erected on the land nor that the improvements comply with the Victoria [sic] Building Regulations 2006 or the requirements of the municipality thereunder. [Mr Huo] shall not make any requisition or objection or claim any compensation in respect of any non‑compliance with the Regulations and shall not call upon [Z & S] to bear all or any part of the costs of complying with the Regulations.”
51 There was reference to the existing Planning Permit (PP17‑00448) annexed to the Vendor Statement, with Z & S making no representation or warranty to Mr Huo about the nature, effect, validity or effectiveness of the Planning Permit. Further, “[Mr Huo] will not make any representation, objection or claim, ask [Z & S] to take any action, or to incur any Cost or delay Settlement because of any matter relating to the nature, effect, validity, effectiveness or otherwise of the Planning Permit”.
52 The defendants denied that s32C and s32E operated to imply terms into the Agreement, likewise, s32N. The defendants said they did not recall receiving any of the letters from the Boroondara City Council relied on by Mr Huo.
53 The defendants denied that there was any difference between the contract price and the market price of the property, taking account of the Heritage Overlay, as at the date of the Agreement. They denied any responsibility for Mr Huo’s outlays. They denied the balance of the material allegations in the Amended Statement of Claim, asserting that they did not disclose a cause of action and were therefore frivolous or vexatious.
The Sale of Land Act
54 Since Division 2 of Part II of the Sale of Land Act 1962 entitled “Section 32 statement” features prominently in the plaintiff’s case and necessarily in the defendant’s defence, it is appropriate to say something as to its terms.
55 Section 32(1) requires a vendor under a contract for the sale of land to provide a statement including the specified information and attachments of documents before the purchaser signs the contract.
56 Section 32A requires the notice to contain particulars of mortgages or charges affecting the land which are not to be discharged at settlement, including the amounts owing and secured, together with particulars of rates, taxes and charges and similar outgoings.
57 Section 32B requires particulars of insurance “if the contract for the sale of the land does not provide for the land to remain at the risk of the vendor until the purchaser becomes entitled to possession ...” It also requires provision of particulars of insurance under s137B of the Building Act where the land includes a residence constructed within the previous six years.
58 Section 32C requires the provision in the statement of particulars of easements and covenants, designations of the land as being in a bushfire prone area, and particulars of the existence of any planning scheme, the zoning under that scheme, and “the name of any planning overlay affecting the land”.
59 Crucially for present purposes, s32D provides:
“Notices made in respect of land to be disclosed in section 32 statement
A section 32 statement must contain the following details in respect of any notices made in respect of the land—
(a) particulars of any notice, order, declaration, report or recommendation of a public authority or government department or approved proposal directly and currently affecting the land, being a notice, order, declaration, report, recommendation or approved proposal of which the vendor might reasonably be expected to have knowledge;
(b) whether there are any notices, property management plans, reports or orders in respect of the land issued by a government department or public authority in relation to livestock disease or contamination by agricultural chemicals affecting the ongoing use of the land for agricultural purposes;
(c) particulars of any notice of intention to acquire served under section 6 of the Land Acquisition and Compensation Act 1986.”
60 Section 32E requires provision of particulars of building permits issued in the preceding seven years for residential property.
61 Section 32F requires particulars of material relative to owners corporations where such corporations are part of the relevant plan of subdivision.
62 Section 32G requires information as to infrastructure contribution requirements.
63 Section 32H requires particulars of utility services not connected to the land.
64 Section 32I requires provision of title search information, including a “Register Search Statement”.
65 Section 32J allows information to be conveyed or provided by the attachment of a certificate, notice, or insurance policy.
66 Section 32K deals with the supply of false information or failure to supply information. Should such a thing occur, the purchaser is entitled to rescind the sale contract “at any time before the purchaser accepts title and becomes entitled to possession ...” There is a provision to excuse a failure to provide a statement or relevant information where it is found that the vendor “has acted honestly and reasonably and ought fairly to be excused for the contravention”, and the purchaser is in substantially as good a position as if the provisions had been observed.
67 Section 32L renders it an offence to supply false information knowingly or recklessly or to fail to supply information or the relevant statement.
68 Section 32M provides that a purchaser is also provided with a right to rescind upon the service of a notice of intention to acquire land under the Land Acquisition and Compensation Act 1986, unless the purchaser has accepted title and become entitled to possession.
69 Section 32N prohibits contracting out, and renders attempts to contract out “void and of no effect”.
70 Division 2A requires a vendor offering land for sale “on which there is a residence” to provide a due diligence checklist in the form approved by the Director of Consumer Affairs Victoria, which the Director is required to make available “on the Internet site for Consumer Affairs Victoria.”
71 It will be seen that under Division 2 – that is, the Division dealing with the “Section 32 Statement” – a purchaser is given a right of rescission up until settlement in the event that he or she is not provided with a Statement or the Statement provided is incomplete or otherwise defective. There is nothing in Division 2 which would constitute any information expressly or implicitly provided in the Statement as a contractual warranty. Conversely, there would appear to be nothing to exclude the possibility that a purchaser may have a contractual or another statutory remedy for any deficiencies or inaccuracy in the s32 Statement.
Conclusions
Rescission
72 Mr Huo no longer seeks to have the Contract of Sale rescinded or declared “void ab initio”. I can put those matters aside.
Claim in contract
73 As previously noted, according to the Amended Statement of Claim, the contract for the sale of the house at 128 Wattle Valley Road was “partly written, party oral and partly implied”. The implied portion, according to the particulars to paragraph 4 of the Amended Statement of Claim, was said to arise by law and to give business efficacy to the agreement. The Amended Statement of Claim, paragraph 8, also asserted that there was an implied term of the agreement that, prior to executing it, Z & S was obliged to provide Mr Huo with a statement in accordance with s32 of the Sale of Land Act 1962. The second part of the statement is correct and accurately states the effect of s32(1) of the Sale of Land Act. There is nothing in that section or the other sections in Division 2 of Part II of the Act which would render this obligation part of the sale contract to which the statement operates as a prelude. This obligation does not become part of the contract “by the operation of the law”. Nor is it obvious why such a term would be implied to give business efficacy to the sale contract.
74 The requirements for the implication of a term to give business efficacy to a written contract, apparently complete in itself, were stated by the majority of their Lordships in BP Refinery (Western Port) Pty Ltd v The Shire of Hastings (1977) 180 CLR 266. Lord Simon of Glaisdale, speaking for himself, Viscount Dilhorne and Lord Keith of Kinkel said that in their view:
“... for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.” ((1977) 180 CLR 266, 283)
75 In the present case, the obligation to provide a s32 statement is statutory and imposed by the terms of s32(1) itself. It is not obvious why any implication of such an obligation is necessary or that the contract would not be effective without it. Further, as Mr Stark, on behalf of the defendants, pointed out, Special Condition 6(c)(ii) of the contract provides:
“This Contract constitutes the entire agreement between the parties with respect to the sale and purchase of the property and there are no conditions, warranties or other terms effecting the sale or purchase except those included in this Contract …”
Sub-paragraph (i) of the same Special Condition provided:
“any information, representation, comment, opinion or warranty by the Vendor, the Vendor’s agent or the Vendor’s solicitor was not supplied or made with the intention or knowledge that it would be relied upon by the Purchaser and that the Purchaser shall not be entitled to rely on any information, representation, comment, opinion or warranty except those included in this Contract.” (CB 579)
76 The plaintiff also relied on General Condition 2.4(d) of the Contract of Sale which provided:
“2.4The vendor further warrants that the vendor has no knowledge of any of the following:
…
(d) notice or order affecting the land which will not be dealt with at settlement other than the usual rate notices and any land tax notices.” (CB 582)
77 Mr Stark, on behalf of the defendant, drew attention to General Condition 2.5 which states:
“The warranties in general conditions … 2.4 are subject to any contrary provisions in the contract and disclosures in the section 32 statement required to be given by the vendor under section 32 of the Sale of Land Act 1962 in accordance with Division 2 of Part II of that Act.” (CB 582)
He said Special Condition 5, which stated inter alia in paragraph (a), “the vendor makes no warranty as to the condition of the land …”, and in paragraph (b), “the vendor makes no warranty as to the condition of improvements erected on the land …” (CB 576)
78 It is difficult to see how these provisions, either separately or in combination, are apt to exclude the warranty given in the General Conditions and relied on by the plaintiff. The existence of a heritage overlay, or notice of action foreshadowing such an Overlay, is not a matter going either to the condition of the land or the condition of the improvements on the land. It follows that the provisions of General Condition 2.4(d) form part of the contract. The matters said to constitute the notice or notices are, presumably, three letters from the Boroondara City Council dated respectively 24 April 2017, 2 November 2017 and 19 February 2018, referred to in the Particulars to paragraph 9 of the Amended Statement of Claim. The warranty in General Condition 2.4(d) of the contract appears by its terms to speak as at the date of the contract. Since as at that date, Z & S and Mr Zhang could not have knowledge of a letter written in February of the following year, the letter of 19 February 2018 can be put to one side. The letter of 24 April 2017 was written on the council’s letterhead and addressed to Z & S Camberwell Pty Ltd at 28 Kerrie Road, Glen Waverley, Victoria. It referred to a consultation on a Municipal Wide Heritage Gap Study entitled “Camberwell Heritage Gap Assessment”. It identified 128 Wattle Valley Road, Camberwell as the subject property and advised, “your property has been identified for the proposed Heritage Overlay as either an individually significant heritage place or as part of a proposed heritage precedent.” It provided guidance as to how further information as to the assessment and study might be obtained and continued:
“At this time we are seeking your feedback on the draft Camberwell Heritage Gap Assessment before Council considers whether to progress to a planning scheme amendment to apply Heritage Overlay to the properties identified. Please note, a Heritage Overlay has not been applied to your property as part of this initial assessment process.”
It set a deadline for “feedback” of 29 May 2017. (CB 517)
79 A letter dated 2 November 2017, similarly addressed, informed Z & S:
“The purpose of this letter is to inform you that Amendment C274 is on public exhibition from 9 November to 11 December 2017. You now have the opportunity to provide your feedback on the proposed changes to the planning controls.
Your property has been identified for the proposed Heritage Overlay as either an individually significant heritage place or as part of a proposed heritage precinct.
Amendment C274 proposes to implement the recommendations of the Camberwell Heritage Gap Assessment to include twenty-one (21) individual heritage places, eleven (11) heritage precincts and two (2) precinct extensions in the Heritage Overlay to the Boroondara Planning Scheme.” (CB 552)
The letter invited written submissions by 11 December 2017. (CB 552) The proposed amendment referred to the subject property as being part of a heritage precinct known as the “Hampton Grove precinct”. (CB 554) There was also a similarly addressed letter dated 9 August 2017 in which a representative of Z & S was invited to attend the Urban Planning Special Committee of Council dealing with the Camberwell Heritage Gap Assessment. (CB 547)
80 In Closing Submissions, paragraph 9, Mr Lithgow, on behalf of the plaintiff, said:
“It cannot seriously be disputed that:
(a)the Council letters are a notice or recommendation of a public authority (the council);
(b)directly and currently affect the land (the property at 128 Wattle Valley Road); and
(c)are a notice of which the vendor might reasonably be expected to have knowledge.”
81 In making this submission, counsel seems to be referring to some phrases derived from s32 of the Sale of Land Act upon the assumption that the relevant provisions of s32 are to be regarded as part of the contract or that assertions in the notice are to be regarded as contractual. For reasons already explained, I have not accepted that premise. The question I now have to determine is whether these letters, individually or jointly, can be regarded as a “notice” for the relevant General Condition. The paragraph treats rate and land tax assessments as “notices” for the purposes of the General condition. Whilst these letters might, in a general sense, be regarded as a notice or notices bringing to the notice of the addressee material information about the property, it is not self-evident that they can be regarded as notices in the sense in which the contract supposes that rate or land tax assessments can be regarded as notices. Nevertheless, given the width of meaning of the noun “notice”, there is no reason not to regard the letters as being notices for the purposes of the General Condition.
82 The Shorter Oxford Dictionary gives the following meanings (inter alia) to the noun “notice”: “information, intelligence, warning; instruction to do something ... a an announcement by one of the parties to an agreement (esp concerning a tenancy or employment) that it is to terminate at a specified time, b a sign, placard, etc conveying some information or intelligence; the text of such a sign etc ...” The letters from the council included information as to the heritage study and a warning of the possible imposition of a planning overlay or interim overlay. There was an instruction as to how Z & S might make contentions for council’s consideration. The letters sit comfortably within these definitions and meanings.
83 The relevant warranty would be breached only if it appeared that the defendants, or more particularly the first defendant of whom the second defendant, Mr Zhang, is principal, had knowledge of these “notices”. Mr Zhang said, “I can’t recall any of this letter”. (T221, L24) He agreed that the letters were addressed to his residence. (Ibid, L27-30) He said the letters might have been received and dealt with in some way by other members of his extended family, some of whom speak and read English, others of whom do not. Mr Zhang’s residence was also the registered office of the first defendant. According to Mr Zhang, any important correspondence for his company would be routed through his accountant’s office. (T223) Mr Zhang said that letters addressed to his residence would be dealt with if there were bills or invoices, but if they were of any other type, then they would simply be ignored. (T221) For the purposes of considering whether the present warranty was breached, it would be necessary to find a breach to determine that Mr Zhang, as the directing mind of the first defendant company, had knowledge of this correspondence; not merely that he had “constructive notice” or ought reasonably to have knowledge, but that he actually did have such knowledge. This question for determination raises a difficult issue. It is difficult to believe that correspondence directed to a company’s registered office, which by statute since time immemorial is made the means to communicate on a formal basis with that company, can simply be ignored. There are myriad statutory provisions which deem documents posted to or left at a company’s registered office to have been served on that company. A regime in which communications so addressed to the company are simply ignored, as Mr Zhang says was the case here, is at odds with all the statutory rules relative to companies in Australia. Ultimately, with some hesitation, I reject Mr Zhang’s evidence on this point as being inherently improbable. Granted that other cultures may approach these matters differently from this country’s commercial and legal culture, Mr Zhang’s evidence on this point must be rejected as inherently implausible.
84 The plaintiff establishes a breach of the warranty included in the contract by virtue of this General Condition.
Misleading or deceptive conduct – nature of cause of action
85 The cause of action for misleading or deceptive conduct was first created by sections 52, 82 and 87 of the Trade Practices Act 1974 which created a cause of action for damages and other relief for misleading or deceptive conduct exclusively in the Federal jurisdiction. The applicability of that cause of action was restricted to Federal jurisdiction being extended by reference to the various legislative powers of the Commonwealth Parliament. The Commonwealth Parliament did not then have power to legislate as to contractual matters, generally, or business dealings, generally. The cause of action now exists as both part of state and federal law. At the federal level it is part of the Australian Consumer Law which is constituted by Schedule 2 to the Competition and Consumer Act 2010 of the Commonwealth. As part of state law it has force by virtue of s8 of the Australian Consumer Law and Fair Trading Act 2012.
86 Section 18 of the law provides:
“18 Misleading or deceptive conduct
(1) A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2) Nothing in Part 3-1 (which is about unfair practices) limits by implication subsection (1).”
87 Section 236 provides a right to damages to an aggrieved person who has suffered loss or damage “because of conduct of another person” which contravened a provision of Chapter 2.
88 One of the High Court’s early pronouncements on this cause of action came in its decision in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191. Gibbs CJ said:
“The words of s. 52 have been said to be clear and unambiguous ... Nevertheless they are productive of considerable difficulty when it becomes necessary to apply them to the facts of particular cases. Like most general precepts framed in abstract terms, the section affords little practical guidance to those who seek to arrange their activities so that they will not offend against its provisions. It has been held that the section is not confined to conduct that is intended to mislead or deceive ... There is nothing in the section that would confine it to conduct which was engaged in as a result of a failure to take reasonable care. A corporation which has acted honestly and reasonably may therefore nevertheless be rendered liable to be restrained by injunction, and to pay damages, if its conduct has in fact misled or deceived or is likely to mislead or deceive. The liability imposed by s. 52, in conjunction with ss. 80 and 82, is thus quite unrelated to fault ...” (1982) 149 CLR 191, 197.
89 The sections to which his Honour refers are sections of the Trade Practices Act 1974.
In trade or commerce
90 A significant restriction on the scope of the cause of action is that it extends only to conduct engaged in “in trade or commerce”. Misleading or deceptive conduct engaged in other than in trade or commerce is beyond the scope of the relevant provisions, though it may engage other statutes or legal rules.
91 O’Brien v Smolonogov (1983) 53 ALR 107 concerned the application of the phrase “in trade or commerce” in s53A of the Trade Practices Act 1974 which prohibited the making of false or misleading statements concerning the nature of an interest in land in connection with the sale of an interest in land, the then equivalent of s30 of the Australian Consumer Law. Reversing a judgment for the plaintiff obtained at trial, the Full Court of the Federal Court, Fox, Sheppard and Beaumont JJ, said:
“The learned Judge accepted that the sale of land by private contract, without more, may not be in trade or commerce but his Honour pointed to the fact that the conduct here complained of involved an invitation by the appellants to the public at large to treat with them. This was done by public advertisements inviting the conduct of negotiations over the telephone. In this way, the learned Judge held, the ordinary means of trade or commerce were utilised for the purpose of selling their land and it follows that the conduct of the appellants was something done in trade or commerce for the purposes of the [Trade Practices] Act.” (1983) 53 ALR 107, 111.
92 They referred to a number of Australian and United States authorities. Their Honours then said:
“In the present case, it cannot be suggested that the lands acquired by the appellants became trading stock ... Nor is it a case where the taxpayer’s activities amounted to more than the mere realisation of a capital asset and constituted the carrying on of land development ... The land itself was not used for any business activity: it was not used for farming or grazing.
It follows, in our opinion, that the only possible feature of the case which could conceivably be relied upon to suggest that the impugned conduct occurred in trade or commerce was the resort by the appellants to a newspaper as a medium of public advertisement of the land and the use made by the parties of the telephone for the purpose of conducting negotiations. ... But, in our view, the mere use, by a person not acting in the course of carrying on a business, of facilities commonly employed in commercial transactions, cannot transform a dealing which lacks any business character into something done in trade or commerce.” (1983) 53 ALR 107, 113, 114.
93 Mr Stark, on behalf of the defendants, contended that these principles applied here so as to exclude this transaction from the terms of s18 of the Australian Consumer Law.
94 Mr Lithgow, on behalf of the plaintiff, contended that the present was quite different from O’Brien’s case. He referred to another decision of the Full Court of the Federal Court in Bevanere Pty Ltd v Lubidineuse (1985) 59 ALR 334. In that case the subject matter of the sale was a beauty clinic business. The appellant vendor sought to have a judgment against it for misleading or deceptive conduct set aside on the basis that, since the sale of the business was a one-off capital transaction, rather than one of a series of transactions engaged in as part of a business, it could not be regarded as a piece of trade or commerce. The Full Court, Morling, Neaves and Spender JJ, dismissed the appeal. The appellant vendor advanced the “general proposition that the sale by a corporation of its only capital asset, where the corporation is not engaged in the business of buying or selling such capital assets, does not constitute conduct in trade or commerce” (1985) 59 ALR 334, 339. The vendor relied on O’Brien’s case in support of this proposition. The appellant said that the concept “in trade or commerce”:
“... necessarily connoted a course of conduct as opposed to isolated and unusual or extraordinary conduct. ... It was submitted that, whilst the appellant engaged in trade or commerce when conducting the beauty clinic, the sale of the clinic was not something done in trade or commerce because the sale terminated the appellant’s ability to engage in trade or commerce.” (1985) 59 ALR 334, 341
95 The Full Court rejected this contention, saying, “the making of the arrangements necessary to dispose of the clinic were part and parcel of the totality of the appellant’s activities in trade or commerce.” (Ibid) Their Honours noted that the vendor might acquire or establish a new business, and it was therefore far from evident that the sale of the clinic represented a termination of its engagement in trade or commerce. Mr Lithgow referred to Morton v Black (1988) 83 ALR 182, a decision of Burchett J at first instance in the Federal Court of Australia. The subject matter of the sale was a rural property. His Honour concluded that the relevant representations made by telephone were to be regarded as in trade or commerce. He found that primary producers were, in the sale of crops grown by them or stock bred or reared, engaged in trade or commerce, remarking:
“... no-one suggests that a manufacturer may not be subject, in relation to a sale of his manufactured goods, to the provisions of s 52 of the Trade Practices Act, simply because he is a manufacturer, and I see no reason a primary producer is not in a precisely similar position with regard to a sale of the goods he produces. If that is so, the reasoning of the Full Court in Bevanere’s case seems to me to demand that a sale of the capital asset, by virtue of the ownership of which the primary producer has been carrying on his business, may also be a transaction in trade and commerce.” (1988) 83 ALR 182, 185
96 Next, Mr Lithgow referred to Vella v Permanent Mortgages Pty Ltd [2008] NSWSC 505, a decision of Young CJ in Eq (as he then was). This was a case of very complex facts. It concerned not the sale of land or indeed any other asset, but rather “the raising of finance over a capital asset in circumstances where the raising of finance was for non private and domestic purposes” [629]. His Honour concluded that the documents under debate showed that what was being sought was a business loan, and the conduct was therefore in trade or commerce [630]–[631]. His Honour distinguished O’Brien v Smolonogov where, as his Honour interpreted the decision, the land had not been used in trade or commerce.
97 According to Mr Stark, on behalf of the defendants, the principles in O’Brien v Smolonogov applied in the present case so that the conduct in question should be regarded as not having been engaged in in trade or commerce. He referred to Williams v Pisano [2015] NSWCA 177, a decision of the Court of Appeal of New South Wales. This case once again concerned a sale of a residential premises. The Court, Bathurst CJ, McColl and Emmett JJA, concluded unanimously that the representations in question did not constitute conduct engaged in in trade or commerce. Emmett JA, with whom Bathurst CJ and McColl JA concurred, said:
“In ordinary circumstances, a person who sells his home, whether by private treaty or by auction and whether he conducts the negotiations personally or through a real estate agent, would not be said to be undertaking those activities in the course of a trade or business or in a business context. Whether or not an estate agent is used and whether or not that agent advertises the house, by preparing brochures or other advertisements, and whether or not the agent sells by auction or merely negotiates a private treaty, the sale will normally remain a sale by the vendor of his house and not an act done in a business context. It is relevant to consider the character of the parties involved, which includes whether they are people who have engaged in or are about to engage in commercial activities, whether the transaction is motivated by business, as distinct from personal, reasons and whether the person whose conduct is under attack played an active part in the transaction. The mere use of an estate agent does not bring about the result that the sale of a capital asset by a householder is a transaction occurring in trade or commerce.” [38]
98 His Honour also said:
“The mere fact that a joint owner of a residential property engages, jointly with the other joint owner, in the renovation of the property with a view to selling the property at a profit, in circumstances where the joint owners reside in the property as their home for a significant period of time prior to the renovations, does not of itself lead to the conclusion that conduct engaged in connection with the sale of the property is conduct in trade or commerce. It is not uncommon for an owner or joint owners to engage in such activities with respect to more than one property. That of itself, however, does not mean that the conduct engaged in in connection with the sale of each property constituted conduct in trade or commerce where the property is clearly lived in as a home.” [44]
99 Mr Stark said that these principles apply to the present case, leading to a finding that the sale was not carried out in trade or commerce. Mr Stark noted that at the time of the sale Mr Zhang was overseas and “did not play an active part in the negotiation”. He denied that Mr Zhang should be regarded as “experienced in development”. Mr Stark said:
“In addition, the second defendant had been acting in the usual and common course of selling a residential property and was not in better bargaining position in the property sale transaction comparing [sic] to the plaintiff. The second defendant submits that this is not a matter ought to be considered pursuant to the Australian Consumer Law.” (Closing Submissions [102])
100 He noted that in Williams v Pisano the Court reached its conclusion, despite the fact that Mr Williams carried out improvements with a view to enhancing the value of the relevant property for resale and intended to do likewise with a nearby property which he intended to purchase. Mr Stark said:
“The defendants submit that the circumstances of this case [are] even less compelling than Mr Williams’ efforts in Williams v Pisano. Here, although renovations and the construction of a new dwelling were proposed, no steps were taken towards that venture (save for obtaining a planning permit).” (Closing Submissions [106])
101 Mr Stark said no finding should be made that Mr Zhang was engaged in the business of development. He had not, at the relevant time, renovated the property at No 128. All he had done was obtain a permit. He referred to evidence adduced from planning consultant Mr O’Shea, saying:
“Ultimately, the evidence showed that the second defendant was himself personally involved in 2 successful applications for planning permits, neither of which has been pursued.” (Closing Submissions [114])
102 He said Mr Zhang’s evidence was that, following renovation, he intended to live in one unit and his uncle would live in another.
103 Once it be concluded, as Mr Stark said it should be, that the sale of the property by Z & S was not in trade or commerce, there was no basis upon which Mr Zhang could be liable, and the proceeding as against him should be dismissed. He reviewed Mr Zhang’s history with the property at No 128, and said, “That is not ... action in trade or commerce.”
104 In my view, the relevant conduct should be regarded as in trade or commerce.
105 First, if this transaction were to be regarded as a capital transaction, a one-off rather than as a step in a continuing business, Bevanere’s case shows that this would not be conclusive against a finding that the transaction and the conduct undertaken by the vendor was in the course of trade and commerce.
106 Secondly, as Emmett JA said in one of the passages quoted from his judgment in Williams v Pisano, it is necessary to consider the character of the parties. The vendor in this case is a proprietary company, apparently a “one man” company controlled by Mr Zhang. This is the typical vehicle chosen for small-scale business enterprises in the Australian economy.
107 Mr Lithgow pointed out that Z & S, the first defendant, held Australian Business Number registration and was registered for the payment of Goods and Services Tax. It had a Tax File Number. (CB 397, 399 and 513) He noted that it was registered on the Australian Business Register in the category of House Construction. (CB 415–7) He noted that the notice of acquisition filed for the property showed that it was not to be Z & S’s principal place of residence. He referred to the loan transaction undertaken and characterised as being for “borrower’s business investment”. (CB 404) As noted above [25], Z & S initially aspired to construct four residential units on the block at No 128. Draft accounts for Z & S show the cost of purchasing No 128, namely $2,441,245, as being part of the “costs of goods sold”. A gross profit of $801,930 was reported as being “gross profit from trading”. (CB 1147) In the balance sheet for the year ending 30 June 2017, the cost of acquiring No 128 is booked as “work in progress”. The accounts are drawn up, in other words, upon the basis that Z & S is in the business of buying and selling land. (T238–9) Mr Zhang said this was the way matters were characterised by his accountant. (T238, L8–11)
108 Mr Stark, in his Closing Submissions, observed that these accounting statements were drafts, in the sense that they had not been signed off by Mr Zhang as sole director. However, despite these matters having been raised in cross-examination, Mr Zhang was not re‑examined on the point. The documents were produced on subpoena by Z & S’s accountant, and there was no evidence from Mr Zhang that these draft accounts had been or would be repudiated by him. There was no re‑examination at all. (T250, L22)
109 These considerations, as urged by Mr Lithgow, in my view exclude the principle of O’Brien v Smolonogov. In contrast to the situation in O’Brien’s case, No 128 was part of Z & S’s trading stock. The sale and the conduct entailed in it on the part of Z & S was therefore conduct engaged in in trade or commerce.
110 Mr Lithgow obtained extensive evidence from planning consultant Mr O’Shea as to advice which he had given Mr Zhang in a number of different matters. Mr Stark has observed that many or most of those matters did not proceed as projects beyond the lodging of permit applications or perhaps not even that. There is the further consideration that in seeking, as Mr Lithgow did, to characterise Mr Zhang as a property developer, it appeared that the transactions in question involved different corporate vehicles, albeit that in each case Mr Zhang was the contact person for Mr O’Shea. Mr O’Shea said that when Mr Zhang “engaged our company ... he engaged us on a variety of projects and each engagement had a different organisation attached to it.” (T112, L11–14)
111 In popular parlance, business people are frequently referred to as carrying on their enterprises through various entities. This of course elides the question whether the trade or commerce thereby engaged in is engaged in by the various companies or by the entrepreneur controlling them. It is not necessary, however, for the purposes of the plaintiff’s case on misleading or deceptive conduct against Mr Zhang to secure a finding that he was engaged as principal in his own trade or commerce as distinct from being engaged in Z & S’s trade or commerce as an employee or corporate organ: Houghton v Arms (2006) 225 CLR 553. In a joint judgment holding that an employee could be directly liable for misleading or deceptive conduct engaged in in the course of the trade and commerce conducted by a corporation, the Court said:
“It is not to the point that Mr Houghton and Mr Student themselves [viz the defendants who were seeking to have the judgment against them set aside] were not business proprietors or that their activities were an aspect or element of the trade or commerce of WSA (and of Australian Cellar Door) but not of “their” trade or commerce. Mr Houghton and Mr Student nevertheless engaged in conduct in the course of trade or commerce and were thus within the ambit of the [Fair Trading] Act.” (2006) 225 CLR 553, 565 [35]
112 It is sufficient on this point to find that Mr Zhang was engaged in trade or commerce, albeit that of his company Z & S.
113 The Amended Statement of Claim referred to s4 of the Australian Consumer Law in connection with alleged misleading or deceptive conduct. Mr Stark observed that no argument or factual allegations appeared to have been made as to future matters said be misleading or deceptive. I can put this matter to one side.
Misleading or deceptive conduct – factual allegations
114 I turn, now, to the question as to whether the plaintiff has proven, as against the defendants, that they engaged in conduct which was “misleading or deceptive” in the sense used in the Australian Consumer Law. As I read the Amended Statement of Claim, the alleged misleading or deceptive conduct was constituted by representations described in paragraph 18, which in paragraph 19 were said to be “without any reasonable grounds and without proper and reasonable regard as to their accuracy and truthfulness.”
115 Paragraph 22 alleges that the representations were “false, misleading and/or deceptive in that the Property was, at all material times, subject to the imposition of the Heritage Overlays and thus there were restrictions on the use and development of the Property as at the date of the [sale] Agreement.” The representations alleged to have been made and to be misleading or deceptive were set out in paragraph 18 of the Amended Statement of Claim in these terms:
“(a) The Property was not subject to any easement, covenant or other similar restriction affecting the Property in accordance with Section 32C(a) of the [Sale of Land] Act;
(b) The Property was not the subject of any notice, order, declaration, report or recommendation of a public authority or government department affecting the Property of which the Defendant might reasonably be expected to have knowledge in accordance with Section 32D(a) of the [Sale of Land] Act;
(c) That the Plaintiff buys the Property subject to any encumbrance shown in the section 32 statement other than mortgages or caveats [General Condition 1.1(a) of the Contract of Sale]; and
(d) The First Defendant warrants that it has no knowledge of any notice or order affecting the Property which will not be dealt with at settlement, other than the usual rate notices and any land tax notices [General Condition 2.4(d) of the Contract of Sale].”
116 Also relevant is paragraph 6 of the plaintiff’s Reply. This alleged further representations as follows:
“a. The first defendant engaged Janssen & Co Kew Pty Ltd (Janssen) as its authorised real estate agent to market and sell the Property.
b. On 26 December 2017 at 11:49 am, the plaintiff sent an sms Xiang Yan (Yan) from Janssen “oh would it possible to forward me the document S32?
c. On 26 December 2017 at 11:51 am, Yan sent an sms to the plaintiff with a file named “COS & S32.pdf”.
d. On 26 December 2017 at 3:34 pm, the plaintiff sent an sms Yan as follows “Hi, sorry for bothering you, may I ask, will this property be listed as a heritage by the Council? As you said it is an old/traditional house, I have some concern about this”.
e. On 26 December 2017 at 3:41 pm, Yan sent an sms tha plaintiff an image of the “Property Report” related to the Property.
f. On 26 December 2017 at 3:42 pm, Yan sent an sms the plaintiff as follows “This property is very clean now. If you guys want to avoid future troubles, You can buy it now and then submit applications. After you submit application, any changes by the Council wont’s affect the property”.
g. On 26 December 2017 at 3:46 pm, the plaintiff sent an sms Yan as follows “there are plannings for submitting applications, is it too rush?”.
h. On 26 December 2017 at 4:55 pm, Yan sent an sms the plaintiff as follows “nah, you worry too much”.
i. Each of the sms sent by Yan to the plaintiff were sent within the scope of the authority given to him by the first defendant, through its sole director, the second defendant.”
117 In a further submission on behalf of the plaintiff provided at my request, Mr Lithgow said that the oral evidence referred to above shows that Mr Huo received numerous assurances from vendor’s agent, Janssen, that the property in question was “clean”. He referred also to a series of documents in the form of SMSs and related documentation which he annexed to that submission. In a responding submission, Mr Stark on behalf of the defendants said that these documents were not included in the Court Book and were not tendered at trial; accordingly, they should not be considered. I accept Mr Stark’s contention. Mr Lithgow made no application to reopen his client’s case. (cf Di Stasio Pty Ltd v R&K Services Pty Ltd [2018] VSCA 340) The case being closed without the additional documents having been put into evidence, I must put them aside.
118 The additional representations pleaded, appearing only in the Reply, were made in response to paragraph 27 of the defendants’ Defence to the Amended Statement of Claim. That paragraph entailed an assertion on behalf of Mr Zhang that, since he was not a party to the agreement referred to in paragraph 18 of the Amended Statement of Claim, viz the sale agreement, the claims against him under paragraph 18 did not disclose a cause of action and were frivolous, vexatious, etc. Appearing in that context, they would seem to be advanced solely in defence of the claim against Mr Zhang and not relative to the claim against Z & S at all. The entire effect of this manner of pleading, and the failure to put into evidence the documents that are said to be the principal proof of these allegations, appearing as an apparent afterthought in the Reply, is perplexing to say the least. The evidence which was before me provided partial proof for these matters. As narrated earlier in these reasons, Mr Huo’s evidence established that Mr Zhang acted as the sale agent for Z & S. This was common ground. Again, Mr Huo’s evidence, which was not challenged, entailed his having received the s32 Statement. The balance of the representations said to have been made in the SMSs remain unproven in their precise terms since they track the text of SMS transmissions not proven as evidence. It was submitted on behalf of the plaintiff that he had given uncontradicted evidence of being given assurances by Janssen before signing the contract that the property was “clean” in the context of heritage controls. ([12] and T38-T41). Whilst these pleaded representations are not made good, something substantially identical has been proven. The cause of action for misleading or deceptive conduct has been made good as to this. This conduct was engaged in by Janssen as agent for Z & S. As Mr Stark observed, Mr Zhang was overseas. Janssen was the agent of Z & S. He was not Mr Zhang’s agent. No claim for damages for misleading or deceptive conduct has been made good relative to these matters as against Mr Zhang.
119 It was common ground that the s32 Statement was furnished to Mr Huo as signed by Mr Zhang. It included the following:
“4.1 – Notice, Order, Declaration, Report or Recommendation
Particulars of any notice, order, declaration, report or recommendation of a public authority or government department or approved proposal directly and currently affecting the land, being a notice, order, declaration, report, recommendation or approved proposal of which the vendor might reasonably be expected to have knowledge.
Not Applicable”
120 I have already explained why in my view the correspondence from Boroondara City Council can be regarded as a “notice”. The council is plainly a public authority. I have rejected Mr Zhang’s evidence that he was unaware of this correspondence. This paragraph is therefore misleading or deceptive. It will be noted, however, that this paragraph is not specifically pleaded as a relevant representation or piece of misleading or deceptive conduct.
121 Aside from the Section 32 Statement, one further piece of misleading or deceptive conduct has been proven. I return, therefore, to the Amended Statement of Claim, paragraph 18.
122 As to paragraph 18(a), a proposal or notice of a proposal to impose a heritage overlay or an interim heritage overlay is not, in my view, an “easement, covenant or other similar restriction”.
123 As to paragraph 18(b), deriving as it does from the s32 Statement, I have already explained why such a representation is misleading or deceptive and was conveyed or made by the provision of the s32 Statement.
124 As to paragraph 18(c), I do not agree that the correspondence relative to the proposed or interim heritage overlay could be regarded as an encumbrance in the sense that a mortgage or a caveat could be regarded as an encumbrance.
125 As to paragraph 18(d), for reasons already explained, the council correspondence should be regarded as a notice “affecting the property”. It was not in fact dealt with at settlement, and there was no contemplation that it would be. This paragraph does identify misleading or deceptive conduct.
Misleading or deceptive conduct – causation
126 The right to damages under s236 of the Australian Consumer Law exists where loss or damage said to have been suffered by a plaintiff occurs “because of conduct” contravening the provisions of the chapter in which s18 of the law is situated. In a case such as the present, the causal link necessary to make good a damages claim is typically constituted by proof of reliance by the plaintiff, to his or her detriment, upon the representation or representations constituting the misleading or deceptive conduct. That is the way the Amended Statement of Claim in this instance proceeds, alleging at paragraph 21 that Mr Huo entered into the sale contract and took other action involving outlays of money “relying on the representations and induced thereby”.
127 It is notable that the representations referred to are the ones appearing in paragraph 14. It may be open to debate whether the reliance in paragraph 21 of the Amended Statement of Claim can be regarded as being linked to the matters alleged in paragraph 6 of the reply. The matters in the Reply are characterised as further “representations”. Assuming that there is an appropriate link, however, for reasons already explained, these representations set out in the reply have been made out only in one respect.
128 Of the representations in paragraph 18 found to have been misleading or deceptive, clause 18(b) derives from the s32 Statement. No causal link by way of reliance, however, is established relative to the s32 Statement and its contents. Mr Huo says he did not read it; rather, he referred it to a friend for advice relative to an easement. Since there was no reliance on the s32 Statement, any claim for damages based upon its misleading or deceptive nature must fail. [8] I recall no evidence that Mr Huo claimed to have relied in any way on any provisions of the contract. No reliance on the misleading or deceptive representation described in clause 18(d) of the Amended Statement of Claim is proven either.
Moneys paid under a mistake of fact
129 Given that the plaintiff has abandoned any attempt to rescind the relevant contract, a claim for the refund of the moneys paid on the basis of unjust enrichment must necessarily fail. To repay the price to the plaintiff and allow him to retain the real estate would itself constitute unjust enrichment, this time of the plaintiff himself. The claim for the repayment of moneys paid under mistake must therefore be taken as abandoned.
Loss or damage
130 I have sustained one contractual claim for breach of contract against Z & S. For various reasons, the claims for damages for misleading or deceptive conduct have failed as against the second defendant. I turn, first, to the various consequential and miscellaneous matters.
131 Mr Huo seeks damages for an outlay of $15,000 made to Galaxy Home Group Pty Ltd “on account of the proposed demolition of the existing dwelling and design of the new dwelling to be constructed on the property”. The evidence established that Mr Huo had paid $60,000 to Galaxy as an initial payment on a contract to demolish the existing house at No 128 and design and build Mr Huo’s “dream home”. [30 above] When this project had to be abandoned, Mr Huo sought a refund of his $60,000 outlay, which Galaxy refused to make. Mr Huo commenced proceedings in the Magistrates’ Court. [38] His claim was ultimately compromised for $45,000 plus costs assessed on the standard basis in the sum of $13,000. [38] His solicitor/client costs were $22,576.80 [Ibid].
132 Mr Stark, on behalf of the defendants, submitted there should be no award against them of these costs, because the loss was caused by Mr Huo’s actions in compromising the claim. In Closing Submissions, Mr Stark says, “He [Mr Huo] did not seek the defendants’ approval of the compromise; he did not even explain upon what basis he reached the compromise.”
133 I reject Mr Stark’s critique. The Court Book also includes a number of items of correspondence in Mr Huo’s evidence describing the actions taken by the principal of Galaxy, Mr Jackie Ma, in pursuit of the abortive “dream home” project. The Court Book includes a number of plans prepared by Galaxy. Mr Huo did not in his evidence explain the basis for the compromise, but self‑evidently the $15,000 represented the work which Galaxy had in fact undertaken on the project, and the correspondence and various administrative steps which it had taken in pursuance of the project.
134 Whether or not Galaxy would, in the circumstances, be entitled to recover payment for these matters as a matter of contract, I need not stay to consider, because if Galaxy were not entitled to succeed on that basis, it could succeed on the basis of a restitutionary claim. The $60,000 outlay was wasted because of the first defendant’s breach of contract and misleading or deceptive conduct. The $45,000 recovery, together with costs assessed on the standard scale, was, in the circumstances, a reasonable compromise which may be justified without any consent from Z & S.
135 The balance of Mr Huo’s solicitor and own client costs in the Magistrates’ Court are likewise recoverable. No circumstance was disclosed which would have supported recovery by Mr Huo in Court of costs on a full indemnity basis. Contrariwise, the very concept of an award of costs on the standard basis assumes that less than a full indemnity for the costs actually outlaid by the successful party is being provided. The balance of the solicitor/client costs should also be awarded as damages. I reject Mr Stark’s contention that the costs claimed were “grossly excessive”.
136 Mr Huo also sought recovery of his outlays to Mills Oakley solicitors with respect to the heritage overlay issue. Mr Huo considered challenging the imposition of the Overlay at a panel hearing held under the provisions of the Planning and Environment Act 1987, but ultimately abandoned this attempt. He incurred costs in the sum of $7,563.60 to obtain the advice that it was not worth pressing opposition to the imposition of the Overlay before the independent panel. [32]–[35]
137 Mr Stark said that this outlay was:
“... not causally connected to the alleged misleading and deceptive conduct. The plaintiff chose to obtain advice from that firm, and then chose not to act (allegedly based on that advice). However, the defendants submit that it is clear that the plaintiff did not provide the firm with the full picture in respect of the property. For example, he did not provide them with a copy of the already existing section 29A Consent to demolish the house from the local council ...; those are matters which clearly may have altered their advice.”
138 I am unable to follow Mr Stark’s reasoning here. The consent to demolish to which he referred was, upon the evidence, granted before council moved to impose the interim Heritage Overlay. The imposition of the Overlay “overtook” that consent. The rules under the planning scheme were altered forthwith by the imposition of the interim control and prospectively if the final Overlay were to be imposed. The effect of these processes would be to “move the goalposts”. I am not persuaded that in the circumstances there was some accrued right for Mr Huo, as successor to Z & S, to demolish the house despite the interim Heritage Overlay. The Mills Oakley costs should be awarded as part of the damages in favour of Mr Huo against Z & S.
139 I come, finally, to Mr Huo’s claim that, had the breached warranty in the contract been made good, he would have acquired a property more valuable than No 128 was in fact, as at the date of the contract. This depends crucially upon valuation evidence given by Mr Rann, on behalf of the plaintiff, and a consideration of the defendants’ valuation evidence given by Mr Les Brown of M3 Property (Vic) Pty Ltd.
140 Before turning to that expert evidence, however, it is necessary to consider a number of causation issues relative to valuation which were raised by Mr Stark in his Closing Submissions. Mr Stark said the premise underlying the plaintiff’s case was that, in the circumstances, it would not be possible to obtain a permit to demolish the house at No 128 clearing the way for Mr Huo’s “dream home”. (Closing Submissions [33]; He referred to T8, L5 and L13). He said the plaintiff’s counsel conceded the possibility that a demolition permit might have been granted despite the imposition of the Overlay. (T9–10) Mr Stark referred to the evidence of planning consultant Mr O’Shea. Mr O’Shea said:
“There’s a common perception out there that the introduction of a heritage overlay is an automatic blanket control on demolition and any altercation of a building in a heritage overlay, and that’s simply not the case.” (T123, L10–13)
141 He continued:
“[I]f your property is a contributory building under the Heritage Overlay the council [would] scrutinise what your proposal is, and the modifications you’re making to the building as part of that application much more closely than they [would] if you were operating in a not-contributory building. But it is not fair to say that if you have a contributory building, that alterations to your building are doomed to failure, you can’t alter your building. That’s just not true to say.” (T123, L25–T124, L3)
142 Mr Stark pointed out that Mr O’Shea, the consultant with carriage of the application on behalf of Z & S, was not concerned by the progress towards the imposition of a heritage overlay, which he seemed to be aware of. He noted at T125, L18–29 that the council’s planning officer did not refer to these matters as constituting an impediment to the grant of a permit or a likely future issue. This led Mr Stark to say (Closing Submissions [39]) that:
“[I]f the plaintiff had pursued an application to demolish the house on the property, his chances of succeeding were not negligible, even though the Heritage Overlay is now in existence.”
143 Mr Stark also referred to the possibility of having the property excluded from the Overlay based on alterations which had been made to a relevant property, presumably diminishing or destroying its heritage value. (T127, L22–T129, L3) Mr Stark’s examination of Mr O’Shea seemed to be premised upon the view that someone who was prepared to devote enough effort and expenditure to challenging a heritage overlay, for instance at the independent panel hearing, can be confident of having the relevant property excluded.
144 Mr O’Shea did not accept this view. Rather, he said that whilst effort was needed, what was ultimately key was demonstration that significant alterations had been made to a property so as to diminish or eliminate its heritage value. The valuations in the present case from the two experts, and one made for mortgage lending purposes, all referred to alterations having been made to No 128. However, heritage controls are principally concerned with the retention of the facade of the allegedly heritage building to preserve the contribution which it makes to the streetscape. (T123, L1–9) The photograph of the front of No 128 in Mr Brown’s valuation report at CB 317 depicts an apparently intact 1930s facade. The bank mortgage valuation said the 1970’s extension was set at the rear. See [12] above The planning proposal which Mr O’Shea worked on for Mr Zhang and Z & S, and for which a permit was issued, entailed substantial retention of that facade; hence, the onset of the Heritage Overlay was not an issue raised by the council’s planning officer, nor was it a matter which concerned Mr O’Shea, even though he was aware of the progress of the process. The matter is obviously otherwise where an owner, or prospective owner, contemplates demolishing the existing property in its entirety to replace it with a modern “dream home” as Mr Huo said he wanted to.
145 Mr Stark said that there was no suggestion that Mr Huo had told Mr Zhang of his intention to demolish the property and erect his “dream home”. It is difficult to know what significance to attach to this. Mr Zhang chose for his company to be represented by an agent. The manner in which he chose to conduct the sale deprived Mr Huo of direct contact with him. Normally, what is said to one’s agent, when the agent is acting in the proper scope of his agency, is regarded as having been said to the principal. Mr Stark suggested that perhaps the disclosure of an intent to demolish to the agent was made only after the purchase. Janssen was the defendants’ agent, or certainly the agent of Z & S. He was in their camp. There was no explanation for his not having been called as a witness. Mr Huo’s account of his dealings with Janssen therefore stands uncontradicted.
146 Mr Stark suggested that Mr Huo’s dealings with the State Revenue authorities relative to land tax and stamp duty left his credit impaired. The actions which Mr Huo took in commissioning Galaxy to design his “dream home”, plans for which were included in the Court Book and put into evidence, demonstrates the plausibility of the proposition that he disclosed his plans for the property to Janssen. There was nothing inherently improbable in that disclosure having been made at or prior to the execution of the contract. The attack on Mr Huo’s credit might have been effective had there been any contradictory evidence which might have been accepted. The crucial evidence was as to Mr Huo’s dealings with Janssen as Z & S’s agent. Janssen’s failure to give evidence was unexplained. Again, Mr Stark suggested Mr Huo could have moved to demolition with greater despatch. I am not convinced that this would have led to any different outcome on the demolition issue. Nor am I satisfied there was any undue lack of despatch. Of course, there would have been no need to rush if, as Mr Huo had been assured, the property was “clean”.
147 Acknowledging that the existence of the Heritage Overlay does not constitute an absolute bar, even in the present circumstances, to demolition, at the very least it renders success of a demolition application difficult and problematic. (T9-T10, L8–12) It is plausible to think that this consideration might have an adverse effect on value. I now turn to the valuation evidence.
148 Mr Rann of AdVal Property provided an expert evaluation report to Mr Huo’s solicitors. His report describes No 128 as follows:
“The subject property comprises a mid-war [scil constructed between the two World Wars, not in the middle of one of them], attic style residence incorporating multiple bedrooms and living areas. It has a liveable area (GBA) of approximately 250 m2, including a rear extension.
The dwelling is set back from the street frontage, presenting a large front garden. Ancillary improvements are modest.
The driveway is on the northern side of the site / building, being circa 2.9 metres wide, therefore access to the rear yard for another potential dwelling is problematic. Drawings associated with the Planning Permit indicate part of the dwelling requires demolition to enable vehicular access to the rear yard.
The land has an area of circa 1,031 m2.” (CB 43)
149 Valuing as at 27 December 2017, Mr Rann assessed the property as being valued at $3,250,000 based on the sale in December 2017 from the first defendant to the plaintiff for that sum of money. Mr Rann noted the existence of Heritage Overlay HO734, remarking that “we have regarded [this] when assessing the value”. He continued:
“Essentially any change in use requires a Planning Permit, which is a burdensome process for development of the site to its highest and best use.” (CB 54)
150 Mr Rann said:
“Camberwell is a popular and sought-after residential suburb which offers good amenity and access to public transport and the main road network. The locale is surrounded by favoured suburbs including Glen Iris.
In general, there was reasonable demand for development opportunities in 2017; unsophisticated buyers are driving prices up and experienced developers have to squeeze margins to maintain workflow. As such, premiums are evidenced for sites with Planning Permits that ‘de-risk’ projects and shorten development horizons.” (CB 61)
151 Asked to value No 128 taking into consideration the Heritage Overlay, he valued the property at $2,850,000, allowing for the Overlay. Without it, the valuation was $3,250,000. (CB 44)
152 Mr Les Brown of M3 Property carried out a valuation as at 28 December 2017 on behalf of the defendants. He valued the property as at that day, and on the basis of the existence of the Overlay, at $3,250,000. (CB 318)
153 The interim Heritage Overlay did not exist as at 28 December 2017, but it was a shadow over the property as at that date and had to be taken into account. (T267, L15–23) Mr Brown said:
“[T]here are three potential buyers for the property. One would be someone who wants to demolish and redevelop. One would be someone who wants to action the planning permit that’s in place. And another would be someone who wants to redevelop the dwelling and extend it at the rear, put a modern extension on the rear and maybe a swimming pool and use it as a single residence.” (T268, L19–24)
154 Mr Stark undertook a lengthy critique of the valuation provided by Mr Rann. He said, for instance, that Mr Rann misunderstood the concept of highest and best use. It was properly stated, he said, by Mr Brown, who regarded the highest and best use as being circumscribed by what the legal restrictions on the use and development of the property allow. On this point I respectfully agree with Mr Stark and Mr Brown. At paragraph 136 of his Closing Submissions, Mr Stark said:
“The defendants submit that in its simplest terms, a Heritage Overlay merely operates just like any other Council defined Zone area; one may or may not be able to demolish a dwelling which is subject to a Heritage Overlay. On the other hand one may or may not be able to build a 3 level house in say a Residential Zone.”
155 Mr Stark said that Mr Rann was inclined to minimise the value of the permit which Mr O’Shea had obtained for Z & S, saying that Unit 2, which would be at the rear of the property and behind the facade of the existing house, would be a very modest townhouse (T153, L14–15), and just not big enough for the prestige market. Mr Stark, at Closing Submissions [139], said that a consideration of the plans attached to and forming part of the permit would show that Unit 2 would be 285 square metres. He continued:
“With all due respect to Mr Rann, a four bedroom townhouse could not be considered to be ‘very modest’.”
156 Mr Rann, according to Mr Stark, showed himself to be partial rather than impartial. He displayed a limited knowledge of the Camberwell area, referring to relatively minor or distant shopping areas, for instance, and ignoring the most obvious and convenient major shopping centre for occupiers of No 128, namely the Middle Camberwell centre in Riversdale Road. He referred to a number of prestige schools, omitting many of the most obvious such as Siena College and Strathcona Baptist Girls Grammar School which were in the near distance.
157 Mr Stark’s critique is a strong and convincing one. On the other hand, whilst the “comparable properties” analysed for the purposes of valuation by Mr Rann were in the relatively close vicinity of No 128, Mr Brown’s “comparables” ranged far and wide across Camberwell, including quite distant properties such as 4 Moorhouse Street, 44 Currajong Avenue, 12 Kingsley Street, 26 Fermanagh Road, and 96 Broadway. These properties are in many cases not only relatively geographically remote, but part of different market sectors. (T295) Mr Brown said that his “comparables” might in many cases be geographically remote, but they were closer in time than those analysed by Mr Rann.
158 Mr Lithgow cross-examined Mr Brown at great length on the value to be ascribed to improvements. Without seeking to rehearse the cross-examination and Mr Brown’s responses, the upshot seemed to me to be that ascribing value to improvements is in some respects arbitrary and not a simple matter of costing what would need to be outlaid to replace an existing property. (T299) There are reasons for faulting the list of “comparables” used by both valuers. The explanation, presumably, is not that there were more appropriate “comparables” to be analysed, but rather, that the two valuers coming at it from different directions made the best selection that they could.
159 In my view, despite the convincing critique of Mr Rann’s valuation made by Mr Stark, ultimately it is more convincing than Mr Brown’s valuation. As noted above, Mr Brown said that likely purchasers for No 128 fell into three classes. The first class were those who intended to demolish and rebuild, as Mr Huo apparently did. For reasons already explained, I do not regard it as arguable that No 128 could simply be excluded from the Heritage Overlay. Again, there would be sufficient doubt attending the likely outcome of a demolition permit application to deter a well-informed buyer intending to demolish from purchasing this property now, or, if the purchaser was aware of the council correspondence through 2017, from purchasing it in December 2017. It is counter-intuitive to suggest that ruling out so significant a portion of the potential market for such a property would have, as Mr Brown’s valuation would have it, no adverse effect whatsoever.
160 The potential imminence of an interim overlay would be a deterrent to the first class of buyer. (T268, L25–T269, L5) Mr Brown said that the highest and best use of the property must be fixed by reference to the legal restrictions which apply to its development and use. (T270, L23‑27)
161 The effect of acceptance of Mr Brown’s opinion as to valuation is that the property was worth what Mr Huo paid for it, and no damages relative to the value of the land should be awarded.
162 I prefer the opinion of Mr Rann on the question of value. It follows that, had No 128 been as it was warranted in the contract of sale with Mr Huo – that is, free from the imminent threat of imposition of an interim or final heritage overlay – it would have been worth what was paid for it. As it was, however, falling short of its warranted quality, it was worth some $400,000 less than it would have been had the terms of the contract been fulfilled. This shortfall in value is recoverable by Mr Huo from the first defendant as damages for breach of contract. Likewise, had Mr Huo not been misled that No 128 could be used for a new “dream home”, I believe he would not have purchased it. He would not have overpaid for it or incurred various pieces of wasted expenditure.
163 For reasons explained, the claim for misleading or deceptive conduct against the second defendant fails. A similar claim for misrepresentation as against both the defendants must likewise be dismissed.
Disposition
164 I will direct the parties to bring in short minutes to give effect to these reasons.
Costs
165 I have heard no argument on the question of costs, and so I will reserve them.
Postscript
166 After I had dictated the above, and whilst it was awaiting final proof-reading prior to publication, my Associate received an email on the evening of 9 September from the solicitor for the plaintiff stating that he wished to bring to my attention s48A of the Sale of Land Act 1962. The email continued:
“The effect of this section is to align the Act [viz, the Sale of Land Act] with the Australian Consumer Law and creates for a purchaser a right to damages for a breach of section 32 of the Act. There is no requirement of ‘trade and commerce’ for the purposes of section 48A.”
167 The email apologised for the lateness of the submission and observed that it would not require “the calling of any further evidence but [was] ... simply a submission of law”.
168 Mr Stark, counsel for the defendant, objected to my giving any consideration to these matters. He continued:
“With all due respect, it is entirely inappropriate for a practising lawyer to attempt to make a further submission after the close of his client’s case, on a matter that never formed a part of that case, without any proper basis for doing so.”
169 Almost 40 years ago, in the course of considering a challenge to competency of an appeal, Mason J (as he then was) expressed dissatisfaction with the conduct of the appellants’ case where the appellants’ legal representatives had filed further submissions and affidavit material after the close of oral argument before the Court. His Honour observed that this further material was submitted “without leave having been given by the Court”. He continued:
“The impression, unfortunately abroad, that parties may file supplementary written material after the conclusion of oral argument, without leave having been given beforehand, is quite misconceived. We have to say once again, firmly and clearly, that the hearing is the time and place to present argument, whether it be wholly oral or oral argument supplemented by written submissions.” Carr v Finance Corporation of Australia Ltd [No 1] (1981) 147 CLR 246, 258
170 His Honour’s strictures have been repeated in the High Court and elsewhere on many occasions subsequent. Mr Stark’s objection is well taken. In the circumstances, I cannot treat the email from the plaintiff’s solicitor as other than an application for leave to present further material which has not at this stage been acceded to. The present email does not merely refer to an additional authority, but seems to invite the Court to give judgment for the plaintiff upon a cause of action which was neither pleaded nor argued during the course of the hearing. Aside from a need further to amend the Statement of Claim and at the very least the prayer for relief, the defendants would be entitled to the opportunity to revisit their pleadings and make further submissions.
171 Section 48A of the Sale of Land Act provides as follows:
“Application of Australian Consumer Law and Fair Trading Act 2012
(1) Sections 125, 195 and 196 and Part 8.2 (except section 213) of the Australian Consumer Law and Fair Trading Act 2012 extend and apply (with any necessary modifications) to this Act as if any reference in those provisions to the Australian Consumer Law and Fair Trading Act 2012 were a reference to this Act.
(2) For the purposes of subsection (1), section 209 of the Australian Consumer Law and Fair Trading Act 2012 applies as if a reference in that section to any section of the Australian Consumer Law and Fair Trading Act 2012 were a reference to section 125 of that Act (as applied by subsection (1)).
(3) For the purposes of subsection (1)—
(a)section 210 of the Australian Consumer Law and Fair Trading Act 2012 applies as if a reference in that section to Part 3.1 or Part 6.3 of the Australian Consumer Law and Fair Trading Act 2012 were a reference to this Act;
(b)section 212 of the Australian Consumer Law and Fair Trading Act 2012 applies as if a reference to prescribed proceedings were a reference to—
(i) proceedings for an offence against a provision of this Act; or
(ii) proceedings on an application for an injunction under section 201, 202, 203, 205 or 206 of the Australian Consumer Law and Fair Trading Act 2012 (as applied by subsection (1)) against a person alleged to have contravened a provision of this Act; or
(iii) proceedings on an application for an order under section 216, or for damages under section 217, of the Australian Consumer Law and Fair Trading Act 2012 (as applied by subsection (1)).
(4) In this section—
this Act includes the regulations.”
172 For the purposes of the present dispute, I accept that the solicitor’s email correctly characterises the effect of the section.
173 Until the Court is rendered functus officio by the authentication of final orders, it retains jurisdiction to allow a party to advance further material in support of its case if the interests of justice favour that course. The obvious unfairness to the other party and the interests of finality and efficiency in the administration of justice furnish strong presumptions against that course being adopted in any particular instance. The presumption becomes the stronger the later in the process that the attempt to adduce new material arises. In an exceptional case the interests of justice may require a party to be allowed to revisit its pleadings and adduce supplementary evidence and argument, even after written reasons for judgment had been delivered: Di Stasio Pty Ltd v R&K Services Pty Ltd [2018] VSCA 340. In Di Stasio’s case, the application for leave was made by summons supported by affidavit material explaining how the matters then being pressed had not been put before the Court before the end of the trial.
174 Returning to the present matter, it is in my view unnecessary to proceed to that level of formality. It is not evident that the interests of justice would favour allowing these new matters to be raised unless their acceptance had the potential to alter the outcome which would otherwise be reached in the proceeding.
175 The effect of s48A is to incorporate by reference, subject to certain amendments, enforcement provisions from the Australian Consumer Law and Fair Trading Act 2012. As so incorporated, s217 of that Act would entitle a person, such as the present plaintiff, “who suffers loss, injury or damage because of a contravention of a provision of [the Sale of Land Act]” to “recover the amount of the loss or damage or damages in respect of the injury ...” Likewise, s216(2) would enable the court to make a compensation order requiring a person to “pay the amount of any loss or damage suffered by the injured person as a result of the breach [of the provisions of the Sale of Land Act] to the injured person.”
176 In all instances, therefore, what would need to be proven would be a causal link between the damage claimed to have been suffered by Mr Huo and the breach or contravention of the Sale of Land Act. I have already explained why the s32 Statement provided on behalf of Z & S was in contravention of the requirements of s32. Yet, because Mr Huo did not rely on that Statement, there would be no causal link established between the breach of contravention and the loss of which he complained.
177 Since reliance on s48A and the other provisions to which it refers would not alter the outcome of the proceeding, there can be no question of the plaintiff’s being allowed to raise it at this late stage.
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