IDI Enterprises Pty Ltd v Classified Transport Pty Ltd

[2011] SASCFC 123

SUPREME COURT OF SOUTH AUSTRALIA

(Full Court)

IDI ENTERPRISES PTY LTD & ANOR v CLASSIFIED TRANSPORT PTY LTD

[2011] SASCFC 123

Judgment of The Full Court

(The Honourable Chief Justice Doyle, The Honourable Justice Vanstone and The Honourable Justice Peek)

3 November 2011

TRADE AND COMMERCE - TRADE PRACTICES ACT 1974 (CTH) AND RELATED LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - CHARACTER OR ATTRIBUTES OF CONDUCT OR REPRESENTATION - STATEMENTS AS TO FUTURE MATTERS AND PROMISES

TRADE AND COMMERCE - TRADE PRACTICES ACT 1974 (CTH) AND RELATED LEGISLATION - CONSUMER PROTECTION - MISLEADING OR DECEPTIVE CONDUCT OR FALSE REPRESENTATIONS - PARTICULAR CASES - REAL ESTATE TRANSACTIONS

The appellant agreed to pay a total of $280,000 for a hotel business - the parties signed a written contract reciting a price of $201,000 on the basis of the appellant’s representations that a further $79,000 by way of a vendor loan would be repaid in instalments and that if the respondent had that loan agreement drawn up by her solicitor the appellant would sign it - settlement was executed on the basis of the written contract but the appellant later refused to pay the outstanding $79,000 or to sign the loan agreement drawn up by the appellant’s solicitor - whether representations made as to future conduct may constitute misleading or deceptive conduct for the purposes of the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987 (SA).

Held: A specific representation made by a person who, at the time of making it, has a positive intention of acting in a way contrary to that representation, may constitute false or misleading conduct within the meaning of the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (SA) irrespective of the non-inclusion of that representation in the written contract executed by the representor and representee.

Whether the trial Judge erred in assessing damages for misleading or deceptive conduct as the loss of the benefit of the appellants’ representation and promise that the respondent would be paid a total amount of $280,000 – whether the trial Judge erred in finding that the value of the hotel business was established to be $280,000.

Held: The trial Judge was correct in finding the value of the hotel business to be $280,000 – the trial Judge was correct in awarding $79,000 as damages for the false or misleading conduct.

Appeal dismissed.

Trade Practices Act 1974 (Cth) s 52, 87; Fair Trading Act 1987 (SA) s 56; Misrepresentation Act 1972 (SA) s 7, referred to.
Cohen v Centrepoint Freeholds Pty Ltd (1982) 66 FLR 57, applied.
Maybury v Atlantic Union Oil Company Ltd (1953) 89 CLR 507; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd (2004) 218 CLR 471; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; Nassif v Fahd [2007] NSWCA 269; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, considered.

IDI ENTERPRISES PTY LTD & ANOR v CLASSIFIED TRANSPORT PTY LTD
[2011] SASCFC 123

Full Court:  Doyle CJ, Vanstone and Peek JJ

1. DOYLE CJ:          I have had the opportunity to consider the reasons of Peek J.  I agree with him that the appeal should be dismissed.  I agree in substance with his reasons for so concluding.  There is nothing that I wish to add.

2. VANSTONE J:     I agree that the appeal should be dismissed.  I agree with the reasons of Peek J.

3. PEEK J.   This is an appeal against a decision of a District Court Judge that the purchaser of an hotel business was liable to pay to the vendor an amount of $79,000 in addition to the price specified in the written contract.

   Background

4. The respondent, the plaintiff below, (‘Classified Transport Pty Ltd’) had originally purchased the business and the lease of the Railway Hotel in Freeling, South Australia, in 2001 for an amount of $140,000.  Its director and manager, Ms Kerrie Price (‘Price’), had then borrowed a further $140,000 to renovate the premises.  In mid-2005 she put the hotel on the market and engaged Mr Maurice Saponari (‘Saponari’) of Langfords, hotel brokers, nominating an asking price of $400,000 plus stock at valuation. 

5. A potential buyer emerged but ultimately the sale did not proceed.  In mid-2006 Saponari was re-engaged to market it for the same price.  He was still in the process of preparing marketing materials for the sale when its availability came to the attention of the second appellant, the second defendant below, Ms Glenda Carter (‘G Carter’).  She and her husband, Mr Wayne Carter (‘W Carter’), were then residing in New South Wales but they wished to make a fresh start and were looking at country hotels in the price range of $200,000 to $400,000.  To that end they had travelled in South Australia and Victoria in June/July 2006 and spoke to a salesperson at Langfords who suggested to them that they might look at the Railway Hotel.

6. The Carters went to the Railway Hotel unannounced on about 2 July 2006, met Price there and were shown over it.  They subsequently came back from New South Wales to Freeling with their two children to look at the hotel a second time, but again returned to New South Wales without concluding any agreement.

7. On 18 July 2006 G Carter was appointed the sole director and secretary of the first appellant, the first defendant below (‘IDI Enterprises Pty Ltd’), whose sole shareholder was also G Carter.

8. The Carters visited the hotel again on 13 August 2006 and on the following morning of 14 August 2006 had a conversation in the hotel kitchen with Price about a sale of the hotel.  Accounts of the witnesses differ, but Price’s version was that she made it clear that she was not prepared to sell the hotel for anything less than $280,000 but G Carter persuaded her to sign a contract for sale of the hotel in the amount of $200,000 on the basis of her representations that a further $80,000 would be by way of a ‘vendor loan’ to be repaid in instalments and, further, if Price had the agreement to pay $80,000 recorded in a separate loan agreement to be drawn up by her solicitor, G Carter would sign such document when it was prepared.

9. It was agreed that Saponari would prepare the contract in the amount of $200,000 but that he was not to be informed of the arrangement concerning the payment of the additional $80,000 vendor finance. 

10. Price further said that these figures were then agreed to be adjusted after she told Saponari of the $200,000 amount in a telephone call during that kitchen meeting and he recommended raising it to $201,000 to overcome the need to comply with certain statutory obligations; the vendor loan was accordingly adjusted to $79,000.  Price said that she had a hotel employee come in and witness that they had orally agreed in those terms.  The Carters both denied there was any such conversation and said that the only offer they made was to purchase the business for $200,000 and that it was agreed that that figure would be increased to $201,000 after Kerrie had spoken to her broker. 

11. Both sides agreed that later that same afternoon Saponari came to the hotel with a contract written up in the sum of $201,000 with the purchaser being stated to be “GLENDA MARY CARTER AND/OR NOMINEE”.  Price and G Carter both signed it.  Nothing was said to Saponari about any amount of vendor finance. 

12. Settlement on the sale of the hotel was delayed but proceeded on 25 October 2006 with ‘IDI Enterprises Pty Ltd’ being substituted as the purchaser prior to settlement.

13. Price said that soon after settlement she presented G Carter with a statutory declaration purporting to confirm the indebtedness for the $79,000 and that she took it saying that she would speak to her solicitor about it.  Since nothing came of that, Price then had two separate loan agreements prepared by her solicitor which she handed to G Carter some few months afterwards, but none were ever signed.  G Carter denied in evidence that any documents of that kind were ever proffered to her.

14. Price further said that she personally approached G Carter several times between November 2006 and March 2007 asking about promised instalment payments and, whilst her requests were deflected by G Carter, it was never suggested to her that no further monies were due.  G Carter denied that any such approaches occurred.

15. It is agreed that after settlement the Carters carried out some improvements to the hotel, ultimately on-sold it in March 2007 for $300,000 plus stock and returned to New South Wales.  Price said that she continued to call the Carters inquiring about payment of the $79,000 but received no meaningful response until she was eventually told by W Carter that she would not be paid anything.  In evidence, W Carter acknowledged receiving one such call from Price but said her request for money was made on the footing that she had sold them the hotel too cheaply.  G Carter denied awareness of any demand having been made by Price for any monies prior to her solicitors’ letter of demand of 14 September 2007.

16. At trial, a number of hotel patrons were called by the respondent and each gave evidence of being present during conversations between August 2006 and March 2007 when the alleged indebtedness to Price was spoken about or acknowledged by G Carter and/or W Carter.

    The legal issues at trial

17. The respondent claimed damages for breach of what it said was a collateral contract with respect to payment of the further $79,000.  Further, it relied on what it said was knowingly misleading and deceptive conduct by the Carters which led to the formation of the agreement for sale of the hotel and settlement of the sale.  It sought remedies under the Trade Practices Act 1974 (Cth) and also asserted causes of action for damages for misrepresentation under s 7 Misrepresentation Act 1972 (SA) and for deceit at common law. Finally, and comprehensively, it asserted promissory estoppel.

18. The appellants maintained that: the written contract with the price of $201,000 was an entire contract; it was in fact the only contract or agreement; there was never any discussion or agreement about a further payment of $79,000; that there was no misleading and deceptive conduct; and that the respondent could not at law recover under any of the asserted causes of action.

    The trial Judge’s distillation of the essential factual issues

19. His Honour distilled the essential factual issues as follows:

    [206]There were a number of minor disputes but the significant factual issues raised by the plaintiff’s case were as follows:

    (1)     Did the Carters negotiate with Kerrie from an asking price for the hotel of $400,000 down to $320,000 and then to $280,000 as Kerrie said, or was there only one offer of $200,000?

    (2)     Did Kerrie and Glenda orally agree, on 14 August 2006, to the sale and purchase of the hotel for $280,000, of which $201,000 would be formally recorded as the contract sum and the balance of $79,000 would be vendor finance to be recorded by way of a separate agreement?

    (3)     If yes, did they then agree that the defendants or one of them would pay that balance of $79,000 to the plaintiff by eight monthly instalments of $9,000 and one of $7,000, that if for some reason the hotel or their property in New South Wales was sold in the meantime, the balance owing to Kerrie would be paid from the proceeds and that they would have a separate agreement drawn up to record that loan?

    (4)     If yes, was Kylie Dawson present when those terms were confirmed between Kerrie and Glenda?

    (5)     Did Kerrie prepare and give to Glenda any one or all of the statutory declaration and the two loan agreements to which she referred and did Glenda take them and say she would refer them to her solicitor for advice?

    (6)     Did either Glenda or Wayne speak to particular persons at or near the hotel at various times before or after settlement, confirming their indebtedness to Kerrie for vendor finance of $79,000 or $80,000? 

    (7)     Did Kerrie personally approach Glenda in November and December 2006 and on various occasions up to March 2007 asking for repayment of loan moneys and did Glenda never, on any such occasion, deny the asserted debt?

    (8)     During a telephone conversation with Wayne after the Carters had returned to New South Wales, did Kerrie ask Wayne when the loan was going to be repaid and did Wayne not then dispute the debt but otherwise refuse to make any payments to Kerrie?

    The resolution of those factual questions falls to be determined not merely by an evaluation of the credibility or the reliability of the principal parties, but also having regard to the credibility of the accounts of those witnesses who tended to corroborate the plaintiff’s account and, as well, the documentary materials tendered in evidence. 

    The trial Judge’s consideration of the possibility of illegality

20. Although never asserted or pleaded by either party, his Honour was right to address the matter.  His Honour decided that the plaintiff’s claim should not be defeated on the basis of illegality and stated:

    … the issue was never pleaded by the defendants (refer Harry Goudias v Akakios[1]) so it does not appear I should decide it and, in the event, the evidence did not ultimately reach the height of establishing any level of mutuality about a possible attempt to defraud the revenue.  Whilst, accepting the plaintiff’s case, there may have been grounds for suspicion about such a plan on the part of the defendants, Glenda and Wayne denied the existence of the suggested arrangement.  Kerrie’s evidence was to the effect that they were seeking an off-the-record arrangement for their own reasons, that she then believed that unless it was put into effect there would be no sale and that she was prepared to go along with it, albeit that she required it to be documented.  Her latter requirement and indeed the steps she subsequently took to have a formal loan agreement prepared and signed, argue against her complicity in any such scheme.

    [1] (2007) 97 SASR 93.

21. The matter of possible illegality is not raised on appeal and I do not consider that in the circumstances it is necessary to consider the matter further.

    The trial Judge’s approach to the evidence

22. The learned trial Judge scrutinised the evidence of the numerous witnesses called by both sides at depth.  His approach was logical and painstaking.  He carefully considered the opposing arguments of the parties and gave full reasons for his resolutions of the various conflicts in the evidence.  I do not disagree in any significant way with his Honour’s approach to the evidence.

    The trial Judge’s findings as to the credibility of the witnesses

23. The respondent called a number of witnesses who gave evidence of being present at various conversations during which the Carters made statements which were entirely consistent with their position at trial and confirmatory of the respondent’s position.  The appellants at trial attempted to attack this evidence but its cumulative effect was overwhelming.  His Honour accepted those witnesses and it would be futile to contend that such acceptance is to be overturned on appeal.  After considering the evidence of each of the witnesses in considerable detail his Honour stated:

    [216]Attempts were made by the defence to discredit all those parties, either because of their closeness to Kerrie or because of bad blood between them and the Carters, or both, but individually, and in a collective way too, I found myself satisfied they were witnesses of truth.

24. His Honour also considered carefully the evidence of the Hotel Broker, Saponari who was an independent witness and whose evidence was at odds with the Carters in a number of areas.  His Honour stated:

    [217]Of particular significance was the evidence of Saponari, who spoke of a level and frequency of dealing with the Carters and of detail that cannot sit with their respective claims to have had virtually nothing to do with him.  I very much prefer and accept his evidence over that of the Carters and he was truly independent.  His claimed level of dealing with them cannot be reconciled with their account of things, but it does mesh with Kerrie’s claim, which I accept, that Glenda told her she did not like him and did not want to deal with him.  I found him to be a reliable witness who had no axe to grind and, with the single reservation as to the accuracy of his unaided recollection of actual figures negotiated, I accept everything he said.

25. As to the parties and the major witnesses, his Honour found as follows:

    [218]Whilst the steps taken by Kerrie, at some considerable expense, to have the loan agreements prepared might be regarded as self-serving acts and not truly corroborative of her account, the fact, as I find it, that she gave them to Glenda and that Glenda took them without disputing a liability is pertinent because Glenda’s own account was a firm denial that she ever received either and, indeed, she said she first heard of any claim by Kerrie about a debt at about the time of the letter of demand.  There is no doubt that Kerrie had had those documents prepared at that earlier time and at some considerable cost, and I find it inconceivable (whatever of Glenda’s denial of indebtedness) that they were not then presented to her for execution.

    [219]Conversely, I had no confidence whatsoever in the credibility of either Glenda or Wayne.  For reasons already discussed, each presented unconvincingly in the witness box and, in particular, Glenda’s claimed lack of recall about certain matters, her continued requests for repetition of questions asked and her rote responses to any propositions which either troubled her or with which she did not agree, led me to conclude that she could not be relied upon at all.  By way of contrast, Wayne was over-confident, glib and dismissive.

26. In my view, these findings were entirely justified.

    The trial Judge’s main findings as to the agreement reached on 14 August 2006

27. His Honour made many specific factual findings as to disputed events before, during and after 14 August 2006 but is unnecessary to refer to all of them.  His Honour’s main findings as to the agreement arrived at on 14 August 2006 were as follows: 

    [223]… I then find that at the commencement of their discussions on 14 August, Kerrie told Glenda that she would accept their offer to pay $280,000 for the hotel. 

    [224]I am further satisfied and find that at this point of their conversation, Kerrie suggested they arrange settlement matters through Saponari but that Glenda said that she did not like him and did not want to deal with him, and said ‘Can we do this on our own and just get him to deal with the legalities of it all?’.

    [225]Those findings necessarily reject the position taken by both Carters that the only offer ever made to purchase the hotel was one of $200,000 made on 14 August, an offer that was then adjusted and accepted in the sum of $201,000.  …

    [226]I am satisfied and find that in that conversation of 14 August, Glenda told Kerrie that she could not raise the $280,000 purchase price that had been discussed and asked if Kerrie would accept $200,000 then and $80,000 in monthly instalments.

    [227]I then find that the conversation and events proceeded as Kerrie related and in the sequence I have set out in discussing her evidence above.  I find that ultimately Kerrie and Glenda agreed that the written contract would be for $201,000, that there would be an additional ‘off the record’ payment of $79,000 to be provided by way of vendor finance and repaid by Glenda by eight monthly instalments of $9,000 and one of $7,000, and that it would be confirmed later by a separate written agreement.

    The trial Judge’s findings as to the intent of Ms G Carter as at 14 August 2006 and the issue of misleading and deceptive conduct

1. His Honour made a number of factual findings concerning the asserted misleading and deceptive conduct by the appellant G Carter.  On the basis of those findings, his Honour made further specific findings as to the intent held by her at relevant times and found that she had intentionally engaged in misleading and deceptive conduct right from the very beginning.  His Honour stated:

   [242]On the basis of those findings, I am satisfied and find that the conduct of Glenda was on and from 14 August misleading and deceptive, and intentionally so.  I find that she did not herself or through the first defendant then have any intention of ever paying the $79,000 to the plaintiff and that her proposal to split up the purchase price in the manner I have found was engineered with a view to procuring the hotel for $201,000 only and later disavowing the existence of any verbal agreement to pay the balance. 

   [243]Her stratagem was to hint at some kind of ‘under-the-counter’ arrangement as an explanation for her proposal and as a means of ensuring that neither Saponari nor the settlement solicitors were told of it and nothing was then recorded in writing.  It was an explanation which, in her naïveté, Kerrie accepted.  Glenda then sought to bolster that position by proffering the further $5,000 advance and with it the elaborate ‘agreement’ recording the existence of only one contract price.  In addition and to assuage any concerns held by Kerrie, I am satisfied she and Wayne spoke publicly about the debt, assuming that they were safe in doing that in the absence of any written document.  Further, Glenda deliberately deflected Kerrie from her pursuit of any instalment payments by not disputing the first defendant’s indebtedness but otherwise proffering numerous excuses for their delay and by receiving from her and promising to attend to the statutory declaration and the two loan agreements she was given.  Both defendants were thus successful in stalling any action by Kerrie before the first defendant on-sold the hotel and the Carters left the State.

   [244]I am further satisfied and find that at all relevant times, Glenda acted and purported to act on behalf of the first defendant, whether or not its precise identity was then disclosed, and that by virtue of her proprietorship of that entity, she was its instrument for all purposes. 

   The trial Judge’s award of $79,000 via modification of the written contract and as damages for breach of contract

2. The respondent primarily asserted its claim for the non-payment of any of the amount of $79,000 as a claim for damages.  In fact, it could simply have asserted a claim for the non-payment of a debt, but this makes no relevant difference in the present case.

3. The defendants contended at trial that the combined effect of the parol evidence rule together with clause 26 of the written contract (the “entire contract” clause) and the inconsistency of the terms of the written contract with the existence of a collateral oral contract meant that the appellant could not enforce an asserted collateral contract to pay an additional $79,000 in relation to the transaction.  His Honour accepted that this would usually be the position and referred to well accepted authorities such as Maybury v Atlantic Union Oil Company Ltd,[2] Equuscorp Pty Ltd v Glengallan Investments Pty Ltd,[3] Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd[4] and Nassif v Fahd.[5]

   [2] (1953) 89 CLR 507.

   [3] (2004) 218 CLR 471.

   [4] (2004) 219 CLR 165.

   [5] [2007] NSWCA 269.

4. However, having found that the Carters’ conduct was wilfully fraudulent and “misleading and deceptive”, his Honour proceeded to make orders under s 87(2) of the Trade Practices Act 1974 (Cth) varying the terms of the written contract so as to remove any inconsistency with the oral agreement. Having made such orders modifying the written contract, his Honour then awarded the plaintiff the amount of $79,000 as for breach of contract.

5. The appellants complain that his Honour was precluded from taking this course.  I consider that it is not necessary to resolve that question in the light of the alternative bases upon which his Honour gave judgment.

   His Honour’s alternative bases of an award of $79,000

6. His Honour stated that he based an award of the amount of $79,000 on a number of alternative bases.  First, his Honour based it on his finding of misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (SA). Second, his Honour found the defendants to be liable for the tort of deceit and/or for damages for misrepresentation pursuant to s 7 Misrepresentation Act 1972 (SA) in the same amount. Third, his Honour found that the defendants were estopped from relying upon the contention that the oral collateral contract was unenforceable by reason of the doctrine of promissory estoppel.

7. Accordingly, his Honour awarded the amount of $79,000 plus costs and interest be paid to the plaintiffs. 

   The grounds of appeal

8. The grounds of appeal are that the learned trial Judge:

   1.erred in finding that the first and second appellants engaged in misleading or deceptive conduct.

   2.erred in finding that the respondent was entitled to recover damages against the first and second appellants for misleading or deceptive conduct and misrepresentation as set out in paragraph 245 of the judgment.

   3.erred in granting the respondent the relief set out in paragraph 246 of the judgment pursuant to section 87(2) of the Trade Practices Act 1974.

   4.     erred in finding that the first and second appellants were liable in tort for deceit.

   5.     erred in finding that the oral collateral contract is enforceable.

   6.erred in finding that the first and second appellants are estopped from denying the oral collateral contract.

   7.erred in finding that the respondent is entitled to any damages for breach of contract.

   8.erred in assessing damages for misleading or deceptive conduct and misrepresentation as the loss of the benefit of the appellants’ promise to pay the respondent $79,000.

   9.     erred in finding that the value of the hotel was established to be $280,000.00.

   The appeal

9. On appeal, it was stated in the appellant’s outline of argument that “The appellant does not challenge the finding in favour of the respondent that the oral collateral contract was made as Price alleged” and it was confirmed orally on the hearing of the appeal that this was the position of both appellants.

10. However, it was submitted that it was unfair of the Judge to make the strong finding of fraud that he did because fraud was not specifically pleaded in the statement of claim.  I reject that submission.  It was specifically pleaded that “The representations were false and misleading” and that:

    23.2Carter was knowingly concerned in and a party to the breaches of s 52 of the Trade Practices Act by IDI or alternatively aided, abetted, counselled or procured those breaches within the meaning of s 75B of the Trade Practices Act in that she made the representations knowing they were false.

11. I consider that this is a sufficient pleading of fraud in the circumstances.  In any event, it is quite plain that the case was run on both sides at trial on the clear basis that the plaintiffs were alleging fraud (of the kind ultimately found to be established) and the defendants were denying it.

    Grounds of appeal 1 and 2: damages for misleading or deceptive conduct

12. As stated above, his Honour found that G Carter made oral representations that further documentation would be signed, and $79,000 would be paid in a series of instalments, for the purpose of inducing the vendor to sign a written contract at a figure $79,000 less than her minimum price of $280,000.  Further, his Honour found that the representations were misleading and deceptive in that G Cater assured Price that she had a firm intention to do what was represented when in fact she at all times intended to avoid doing those very things.

13. The main alternative basis upon which his Honour found that the defendants were liable to pay damages in the amount of $79,000 was as follows:

    [245]I find that the plaintiff is entitled to recover damages against the first defendant for misleading and deceptive conduct under s 52 and s 82 of the Trade Practices Act 1974 (Cth) and against the second defendant under s 7(1) of the Misrepresentation Act 1972 (SA), ss 56 and 84 of the Fair Trading Act 1987 (SA) and ss 52, 75B, 82 and 87(1) of the Trade Practices Act on the footing, as I have found it, that she was directly and knowingly concerned in that deceit and in causing the plaintiff loss and damage.

14. G Carter was herself responsible for her misleading and deceptive conduct under the provisions of the Fair Trading Act 1987 (SA). Having regard to the fact that G Carter was the secretary, the sole director and the sole shareholder of the first appellant (IDI Enterprises Pty Ltd)), it was not suggested at trial, or on appeal, that that company was not also responsible for that conduct. In my view, his Honour was correct in imputing that conduct to IDI Enterprises Pty Ltd which was therefore also liable in relation to it.

15. However, such liability is subject to a preliminary question: may such representations made as to future conduct constitute misleading or deceptive conduct for the purposes of the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987 (SA)? I consider that, in the circumstances of the present case, the answer to that question is in the affirmative. My reasons follow.

16. Although there is continuing argument as to whether the entry into a contract containing promissory terms as to future conduct with a subsequent refusal to adhere to those terms can per se constitute such conduct, it seems clear that if a person makes a specific representation that he or she will carry out a promise and, at the time of making it, has a positive intention of not carrying it out, this will constitute false or misleading conduct irrespective of whether such promise is incorporated in a contract or not.

17. The exact limits of this principle may be imprecise, but it clearly extends beyond the situation of a deliberate fraudulent scheme.  In some circumstances it will include a case such as a representor having no reasonable grounds for belief in his ability to carry out the promised conduct.  Thus in The Law of Misleading or Deceptive Conduct[6] Mr Lockhart states:

    [4.20]Promises and predictions will usually also embody a statement about the present intention of the speaker which, in the colourful language of a general law decision, ‘is as much a fact as the state of [the speaker’s] digestion’.  This will be most obvious where the future statement consists of, or is accompanied by, express words indicating that the speaker believes that an act will be done or an event will occur.  Even where an express statement of that kind is not made, promises and predictions ‘ordinarily [convey] the meaning … that the maker of the statement had a particular state of mind when the statement was made and, commonly at least, that there was a basis for that state of mind’.  Promises usually ‘represent impliedly that the promisor has a present intention to make good the promise and … that he has the means to do so’, while a prediction will generally imply that the speaker honestly and not fancifully believes that the future event referred to will happen.  Hence, s 52 will be contravened by a statement as to the future if the speaker ‘did not believe that the conduct or event [to which it referred] would come to pass or … there was no basis for [such a] belief’.   …

    [4.21]In the absence of an admission as to lack of belief in a promise or a prediction, proof of what has been described as a ‘blameworthy state of mind’ in this context will generally involve leading sufficient evidence as to the information available to the speaker at the time the promise or prediction was made to enable the requisite lack of belief or recklessness to be inferred. 

    In Holt v Biroka Pty Ltd, for example, certain promises were found to have been made with reckless indifference as to their fulfilment because the defendant’s ‘activities seem to have been so confused and disorganised that it could not make the promises … with any reasonable expectation of fulfilling them’.  …

    [4.22]Although there is little doubt an express statement that a contractual promise will be fulfilled may breach the prohibition in accordance with the principles discussed above, there has been considerable debate in the case law as to whether the same may be said of mere contractual promises.  …

(Citations omitted)

[6]    Colin Lockhart, The Law of Misleading or Deceptive Conduct (LexisNexis Butterworths, 2^nd ed, 2003) 106-108.

1. For present purposes, it seems clear that where there is an actual finding of a fixed intention not to carry out the represented conduct, s 52 (and corresponding provisions in the State legislation) will apply.  A clear application of this principle is to be found in the decision of the Federal Court in Cohen v Centrepoint Freeholds Pty Ltd.[7] The applicants, who had entered into leases for three basement shops in the Melbourne Centrepoint Mall, had accumulated large arrears of rent and made complaints about alleged breaches of the lease, mainly concerning the unsatisfactory air-conditioning system, the inadequate cleaning service and the large number of vacant shops. Following litigation and a conversation relating to the tenants’ complaints, during which two managers of the respondent company gave certain assurances to one of the applicants, the parties executed a preliminary agreement which contained cl(f) providing: “Each side agrees to promote the interests of the centre in accordance with the lease with the other lessees and the public.” Subsequently, the parties entered a supplementary agreement releasing each other from all claims, costs and demands connected with the litigation and the terms of rental were adjusted. The applicants later purported to rescind the supplementary agreement, which they alleged they had been induced to enter as a result of the misleading or deceptive conduct of the managers of the respondent company, contrary to s 52 Trade Practices Act 1974 (Cth), and sought relief accordingly. Smithers J found that as at the time of giving the assurances, the lessor had no intention of carrying them out and that this constituted “misleading conduct” contrary to s 52 Trade Practices Act 1974 (Cth). His Honour stated:[8]

   In the result I am satisfied that in giving to Mr Cohen the assurances referred to above in respect of the letting of the basement shops the respondent engaged in misleading conduct and Mr Cohen was misled by it.  The respondent did not intend to use its best endeavours to let at all, or to let the vacant shops to suitable tenants on the best terms available.

   I am similarly satisfied that the assurances concerning air-conditioning and cleaning constituted misleading conduct and misled Mr Cohen.  The assurance concerning air-conditioning was misleading because Mr Alter had no intention that the respondent would do anything about it.  The assurance concerning cleaning was misleading for the same reason.

   …

   But the really important matter was that of the tenant vacancies.  A full complement of active traders was vital.  The absence of an attitude or intention on the part of the respondent to let shops in the basement to suitable tenants on the best terms obtainable rendered the assurances given to Mr Cohen not only misleading but misleading in a respect that had serious consequences.  The result has been that since November 1980 none of the basement vacancies has been filled, a situation far removed from the original concept of the Centrepoint basement.

   I am satisfied that the probability is that had Mr Cohen not believed that the respondent did intend to use its best endeavours to find suitable tenants for the basement and to let the vacant shops to such tenants on the best terms available at the time, the applicants would not have entered into the agreement of 22nd December 1980, and that they would not have done so but for the assurances given to Mr Cohen concerning the air-conditioning and cleaning of the basement.

   [7] (1982) 66 FLR 57.

   [8] Ibid 87; 88.

2. In the present case the learned trial Judge made a far reaching finding that G Carter had devised a scheme whereby, from the very start, she positively intended to avoid payment of any of the $79,000 component of the purchase price of the hotel but made specific oral representations to Price that she would pay the $79,000 to her in instalments so as to induce her to sign a written contract.  This was a serious finding of fraud (obviously including a finding of “misleading or deceptive conduct”) but, in my view, the evidence was sufficiently strong to support it and his Honour made no error of reasoning or approach that would justify setting aside that finding of fact.

3. Accordingly, as stated above, his Honour was entitled to make the alternative finding as to liability that he did, namely that the appellants were liable for damages directly based upon his factual finding of misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) and the Fair Trading Act 1987 (SA). As is obvious, such a basis of liability did not rely upon either the existence or enforcement of a collateral contract or the rewriting or setting aside of the written contract; rather, it relied upon his Honour’s explicit findings that the appellants deliberately used a stratagem involving a number of means of artifice (including promises of entry into a collateral contract) which together constituted “misleading and deceptive conduct” in the particular facts of the present case.

4. In my view, grounds 1 and 2 of appeal should therefore be rejected.

   Grounds of appeal 8 and 9:  assessment of quantum of award

5. Grounds of appeal 8 and 9 complain of his Honour assessing damages for misleading or deceptive conduct (and, in the alternative, for misrepresentation and deceit) as the loss of the benefit of the appellants’ promise to pay the respondent $79,000.

6. I consider that his Honour was correct in his reasoning that the decision of the High Court in Marks v GIO Australia Holdings Ltd[9] justified the awarding of the amount of $79,000.  In that decision, the familiar distinction between “expectation” loss and “consequential” loss as postulated in the joint judgment of Mason, Wilson and Dawson JJ in Gates v City Mutual Life Assurance Society Ltd[10] was referred to. McHugh, Hayne and Callinan JJ stated:[11]

   [38]It can be seen, therefore, that both ss 82 and 87 require examination of whether a person has suffered (or, in the case of s 87, is likely to suffer) loss or damage “by conduct of another person” that was engaged in the contravention of one of the identified provisions of the Act. That inquiry is one that seeks to identify a causal connection between the loss or damage that it is alleged has been or is likely to be suffered and the contravening conduct. But once that causal connection is established, there is nothing in s 82 or s 87 (or elsewhere in the Act) which suggests either that the amount that may be recovered under s 82(1), or that the orders that may be made under s 87, should be limited by drawing some analogy with the law of contract, tort or equitable remedies. Indeed, the very fact that ss 82 and 87 may be applied to widely differing contraventions of the Act, some of which can be seen as inviting analogies with torts such as deceit (eg, s 52) or with equity (eg, s 51AA) but others of which find no ready analogies in the common law or equity, shows that it is wrong to limit the apparently clear words of the Act by reference to one or other of these analogies.

   [39]   Gates did not hold to the contrary.  …

   …

   [42]… a comparison must be made between the position in which the party that allegedly has suffered loss or damage is and the position in which that party would have been but for the contravening conduct.  And even this inquiry may not conclude the question.  Analysing the question of causation only by reference to what is, in essence, a “but for” test has been found wanting in other contexts and it may well be that it is not an exclusive test of causation in this area either.  But that is not a question which we need to consider in this case.  For the moment it is enough to say that s 82 requires identification of a causal link between loss or damage and conduct done in contravention of the Act.

   (Footnotes omitted)

   [9] (1998) 196 CLR 494.

   [10] (1986) 160 CLR 1.

   [11]   Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, 510; 512-513.

1. Similarly, Gaudron J stated:[12]

   [13]…  Non-performance is, in effect, the loss of a contractual promise which, itself, is a valuable right.  That loss must be compensated by an award of damages in the sum that represents the value of that right.  Moreover, other losses may be sustained in consequence of the breach and, if so, they, too, must be compensated by an award of damages.  On the other hand, the law of tort confers no right over and above a right to recover damages for loss sustained in consequence of the wrongful act involved.

   [14]When regard is had to the different nature of contractual and tortious liability it is apparent that the so-called different “measure of damages” in contract and tort is no more than a convenient way of indicating that the wrong involved and, thus, the loss occasioned by a breach of contract is of a different kind from that involved in and occasioned by the commission of a tort. …

   [15]Once it is appreciated that references to the “established measures of damages ... [for] contract and tort”, as in Gates, signify different kinds of loss and not different methods by which loss is measured, it is irrelevant to inquire as to the appropriate measure of damages for the purposes of ss 82 and 87 of the Act. Rather, the task is simply to identify the loss or damage suffered or likely to be suffered and, then, to make orders for recovery of that amount under s 82 or to compensate for or prevent or reduce that loss or damage under s 87 of the Act.

   …

   [17]Not only is it misleading to speak of “expectation” loss and “reliance” loss in the context of s 82, but there is no basis for thinking that relief under s 82 is to be confined by analogy either with actions in contract or in tort.  With regard to that last matter, all members of the Court are agreed.  We differ only in our approach to the question whether, in the circumstances, the appellants suffered or were likely to suffer loss or damage.

   [12] Ibid 502-504.

2. In the present case, it may well be that the correct analysis is simply that the respondent only parted with the hotel asset on the basis of the fraudulent and misleading representations that the total amount of $280,000 would be paid and in such circumstances, the correct measure of loss is the difference of $79,000.

3. However, even if one were to take the more conservative approach that the loss in such circumstances is the difference between the value of the asset and the amount paid, I do not consider that ground of appeal 9, which complains that there is no evidence of what the value of the hotel was, is made out.  I consider that in the present circumstances of the respondent vendor going to the open market through an experienced broker and selling at arms length, the Judge was justified in taking the figure ultimately negotiated with the second appellant purchaser as sufficient evidence of value for the purposes of an award under the Trade Practices Act 1974 (Cth) having regard to the fact that the purchaser abstained from calling any expert evidence to challenge its correctness.

   Other grounds of appeal

4. In my view, it is clear that his Honour’s award may be supported on the basis referred to above and, accordingly, it is unnecessary to deal with the other grounds of appeal.

   Conclusion

5. I would dismiss the appeal.