J Renee Nominees Pty Ltd - v - Mastrogiannis
[2013] VCC 1381
•23 October 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted |
COMMERCIAL LIST
EXPEDITED CASES DIVISION
Case No. CI-12-00794
| J RENEE NOMINEES PTY LTD (ACN 108 366 810) | Plaintiff |
| v | |
| ANNA MASTROGIANNIS & ANOR (ACCORDING TO THE SCHEDULE ATTACHED) | Defendants |
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JUDGE: | Her Honour Judge Kennedy | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9, 11, 12, 13, 16 and 17 September 2013 | |
DATE OF JUDGMENT: | 23 October 2013 | |
CASE MAY BE CITED AS: | J Renee Nominees Pty Ltd - v - Mastrogiannis & Anor | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 1381 | |
REASONS FOR JUDGMENT
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Catchwords: Trade Practices – claim for return of deposit following rescission of contract for sale of property – whether representations made to induce entry into the contract – whether representations would give rise to relief under 9 Fair Trading Act1999 (Vic) / s18 Australian Consumer Law 2010 (Cth); for innocent misrepresentation; and/or for negligent misstatement – whether in the alternative there was a fiduciary relationship such as could give rise to a breach of fiduciary duty – whether alternatively the plaintiff was entitled to rescind pursuant to s27(8) of the Sale of Land Act 1962 (Vic) – counterclaim for damages for failure to complete – quantum of damages – whether director of proprietary company also liable under contract.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr L. Magowan | PCL Lawyers |
| For the First Defendant | Mr T. Sowden | Zervos Lawyers |
HER HONOUR:
1 The plaintiff corporation seeks the return of a deposit of $98,000 following the rescission of a contract for the sale of a property at 23 Solway Drive Glen Waverley (the property) by the first defendant, a real estate agent’s representative.
2 The plaintiff claims that it was induced to enter into the contract by reason of certain misleading or deceptive conduct engaged in by the first defendant pursuant to s9 of the Fair Trading Act1999 (Vic) (FTA) / s18 of the Australian Consumer Law 2010 (Cth) (ACL);[1] for innocent representation and negligent mis-statement.
[1] The relevant consumer protection provisions of the FTA were effectively replaced by the Australian Consumer Law on 1 January 2011 (and, since 1 July 2012, contained in chapter 2 of the Australian Consumer Law and Fair Trading Act 2012). Depending on the date of the representations, it is possible that both the FTA and the ACL will have application in this case (the FTA continuing to operate in respect of the conduct which occurred prior to such repeal – see Interpretation of Legislation Act 1958 (Vic) s14(2)). However, given no relevant material differences were highlighted and the representation was alleged to be “ongoing” up until date of the contract in February 2011, reference will be made to the ACL hereinafter.
3 Alternatively, it claims return of the deposit on the basis of a breach of fiduciary relationship and/or s27(8) of the Sale of Land Act 1962 (Vic) (SLA).
4 The first defendant denies that the alleged representations were made and/or that they would constitute causes of action in any event. The first defendant also denies the existence of a fiduciary relationship and the application of s27 (8) of the SLA.
5 The first defendant also counterclaims against both the plaintiff and the individual director, Ms Kalaiselvi Gomez, for the reduced sale price received on resale as well as a lost deposit given the plaintiff’s failure to complete the purchase.
6 An earlier claim based on unconscionability was abandoned by the plaintiff.
7 An earlier claim based on the relevant apportionability provisions of the Wrongs Act1958 (Vic) and/or the Competition and Consumer Act2010 (Cth) was also abandoned by the first defendant.
8 The issues are therefore:
· Were the representations (or any of them) made?
· If yes, do they give rise to any cause of action?
· Did a fiduciary relationship exist between the plaintiff and the first defendant?
· Is the plaintiff entitled to rescind the contract by virtue of non-compliance with section 27(8) of the SLA?
· If the plaintiff fails, what is the quantum of the loss and damage recoverable by the first defendant on the counterclaim?
· Is the first defendant also entitled to recover damages against the second defendant (individual director)?
9 The plaintiff obtained a judgment against the second defendant (conveyancing company) on 11 July 2012 in default of defence for damages to be assessed. However, Counsel for the plaintiff indicated that he did not wish to pursue such assessment and that no monies had been received in respect of this judgment.
Background
The parties
10 The plaintiff is the trustee of the J Renee Family trust; the sole director and shareholder of the plaintiff being Ms Gomez.
11 Ms Gomez is a computer programmer with a degree in electronics engineering who migrated from Singapore some 25 years ago. Both as director of the plaintiff and on her own behalf, Ms Gomez has on a number of occasions acquired, developed and sold properties. She is, or has been, also a director of a number of other companies (e.g. Jacintha Investments Pty Ltd; Nathans Solutions Pty Ltd; and Choices in Life Pty Ltd) and has retained both accountants and lawyers.
12 Ms Gomez gave her testimony in English and presented as fluent in that language.
13 The first defendant is a single (divorced) woman who has been a real estate agent’s representative since 2002 and purchased the Solway Drive property with her then husband in May, 1994. She subsequently lived there with her children and her elderly mother.
14 She also gave her evidence in English.
Background prior to 2010
15 Prior to 2004 Ms Gomez bought around 5 or 6 different properties which she would rent out and then sell after a few years.
16 At some stage in about 2003 Ms Gomez met Ms Mastrogiannis whilst Ms Mastrogiannis was working for Williams Real Estate in Mount Waverley at which time Ms Mastrogiannis’ director introduced them. Ms Mastrogiannis then assisted Ms Gomez in relation to the sale of a property at Roberts Street.
17 In 2004 Williams was the listing agent for a property in Foxley Street, Glen Waverley. Ms Gomez subsequently went into partnership with a Mr Ong to purchase and renovate this property in March 2004. The partnership broke down with Ms Gomez alleging that Mr Ong assaulted her. However, the matter was ultimately mediated and resolved and Foxley Street sold through Noel Jones.
18 At around this time it appears that Ms Gomez visited Ms Mastrogiannis’ home at Solway Drive (which was near Foxley Street) during the breakdown of her relationship with Mr Ong. Ms Mastrogiannis’ evidence was that she expressed interest in her home at that time noting the “beautiful view”. She also provided the details of a solicitor for Ms Gomez to use in relation to her dispute with Mr Ong.
19 In May 2004 Ms Gomez purchased a property at 2 Dorgan Street Mount Waverley. The agent on the contract note was Williams with the reference being Ms Mastrogiannis. Ms Gomez claims that she purchased this property on the “recommendations” of Ms Mastrogiannis.
20 In February 2006 Ms Gomez determined to sell one of her properties at Henderson Court Glen Waverley. Ms Mastrogiannis provided sales data to Ms Gomez in relation to Glen Waverley property generally, but was not involved in the ultimate sale of this property which went through another agent.
21 By 2007 Ms Gomez had put 3 units on Dorgan Street and thereupon sold them (through the plaintiff entity). The agent was Barry Plant with the reference being Ms Mastrogiannis (she had ceased to be an employee of Williams Real Estate and had joined Barry Plant by this time). The development made money and Ms Gomez was “very happy” with the result.
22 In August 2008 Ms Gomez (and/or Nominees) purchased a property at 27 Portsmouth Street, Mount Waverley to develop. The agent was Barry Plant with the reference being Ms Mastrogiannis. There appear to have been substantial delays associated with this development.
2010
23 During 2010 the two women were having regular conversations in relation to the development of Portsmouth Street, with Barry White having an exclusive sales authority in relation to the units at that property during 2010.
24 However, Ms Gomez alleges that in early 2010, when she was driving, Ms Mastrogiannis rang her on the phone and invited her to buy her property at Solway Drive. It was during this conversation that the critical representations were allegedly made, although Ms Gomez alleges that they were also “ongoing.”
25 In November 2010 a contract of sale was signed in relation to unit 2, 27 Portsmouth Street at $662,000 with settlement due on 15 January 2011.
26 There is considerable divergence as to what transpired between the parties thereafter and, as will be seen below, it was even unclear precisely when Ms Gomez says she inspected the property. Ms Mastrogiannis’s evidence, however, was that the price for Solway was negotiated and agreed at an inspection of the property in December 2010 after the Portsmouth unit was sold.
27 The objective evidence suggests negotiations were well advanced by December. Thus, by email of 7 December 2010, Ms Mastrogiannis forwarded an email attaching “comparable sales” to Ms Gomez saying “see how you go with your banker.” The document appears to contain the results of a search of properties sold in Glen Waverley between “$0 and $1,500,000”. Although it is true that a number of the results show prices at more than $1 million, there are also a substantial number listed below that price.
28 The evidence of Ms Mastrogiannis was that this email was forwarded after Ms Gomez had inspected her property whereupon she requested comparable sales.
29 The evidence of Ms Gomez was that she had told Ms Mastrogiannis that she had to speak to her bank to get money for purchasing the property. Further that these were supposed to be comparable sales “showing me that the property was worth a million dollars.”
30 By email of 9 December, Ms Mastrogiannis also forwarded a selection of photographs of her property.
31 By email of 14 January 2011 Discount Legal conveyancers provided a copy of the contract of sale and section 32 to Ms Gomez “as requested by you”.
32 On 2 February 2011 a contract of sale for the property at Solway was executed at a café for the price of $980,000 with a deposit of $98,000 and settlement due (in 6 months) on 2 August 2011.
33 The form of the contract was different to that earlier provided. The evidence of Ms Mastrogiannis was that this was because Ms Gomez had requested that the contract be in the REIV standard form (though Ms Gomez rejected the suggestion that she wanted a REIV form). Her evidence was also that she provided Ms Gomez with one of the originals of the contract, although this was also disputed by Ms Gomez.
34 Ms Gomez gave Ms Mastrogiannis a cheque but asked her to hold off cashing it until she had sorted things with the bank; she later provided 2 cheques instead.
35 By contract dated 19 March 2011, Ms Mastrogiannis then purchased a property at 2011 Malvern Road, Malvern East for $787,500.
36 A section 27 statement was later provided in relation to Solway Drive dated 2 February 2011. It was executed on 4 March 2011.
37 On 11 May a truss estimator, Ms Costabile, provided an estimate for roof framing at $12,900, (without tiles) to Ms Gomez, advising her that she would need to consult an engineer given the issues involved with supporting a heavy tiled roof.
38 There was again divergence in the evidence as to how this email came to be generated with Ms Gomez suggesting that an alteration to the roof was the idea of Ms Mastrogiannis, and Ms Mastrogiannis suggesting that Ms Gomez came up with the idea of altering the roof (as will be discussed further below).
39 It appears that Ms Gomez thereafter got “cold feet”. However, she alleges this followed seeking valuations from her bank and speaking to another agent, a Mr Ievoli.
40 Meanwhile on 20 May, 2011, Ms Mastrogiannis executed the section 27 statement and released the deposit to the vendor in relation to the Malvern Road property.
41 A further disputed conversation therein occurred which Ms Gomez alleges culminated in her asking Ms Mastrogiannis for her money back “or I’m going to take you to court.”
42 By correspondence of 26 July 2011 the plaintiff’s solicitors thereafter forwarded a letter seeking a demand of the deposit.
43 By correspondence of 27 July 2011 Ms Magrogiannis’ solicitors issued a Notice of Rescission to the Plaintiff company (for failure to deliver the transfer of land within 10 days before settlement).
44 Meanwhile Ms Mastrogiannis was served with a notice of rescission dated 31 August 2011 in relation to the Malvern property for failure to pay the balance due.
45 The Solway property was later listed for sale, but passed in at a vendor’s bid of $750,000 in September 2011.
46 Two later offers were also received of $800,000 and $780,000.
47 In February 2012 these proceedings were commenced.
48 Then by contract dated 3 May 2012 Ms Mastrogiannis signed a further contract to sell the Solway drive property for $815,000.
Witnesses
Ms Gomez
49 Ms Gomez gave evidence and was cross examined. Having had an opportunity to observe her demeanour, I am unable to be satisfied that her evidence may be relied upon. As will be referred to below, there were also aspects of her testimony that lacked credibility.
50 Consistent with her experience in buying and selling properties; retaining professional advisors; and with setting up business entities, Ms Gomez presented as someone who was capable of looking after her own interests. Thus, at many points in cross examination she requested that Counsel “define” words for her. She also declined to answer questions without checking or looking over documents and, at times, queried whether there was any documentary evidence in support of a proposition put to her.
51 Although competency and self interest are perfectly acceptable characteristics for a business person, Ms Gomez generally sought to understate her own experience and intelligence in the giving of her evidence. For example, she sought to make a point that she relied on “Anna’s recommendations” which evidence was not credible.
52 She was also reluctant to make appropriate concessions, for example, she needed to be asked three times before she would admit that the interests of a purchaser and a vendor are not the same. There were also many examples wherein she gave long winded and argumentative answers to simple questions calling for a simple responsive answer.
53 Some of her evidence was also improbable and against the surrounding objective evidence. For example, Ms Gomez’s position was that at no stage was she carrying on a mortgage broking business. Her justification that she gave out business cards (suggesting otherwise) because they had her contact details was unconvincing.
54 In giving her evidence Ms Gomez also had some significant gaps in her memory. Although this may be understandable on insignificant matters, this also related to matters of some importance. For example, in relation to the issue of inspection. Under examination she said that she had never really seen inside the property (around the time of December 2010) and only inspected it a “couple of days before” she signed the contract. However, under cross examination she admitted going into the house when she delivered some herbal remedies to Ms Mastrogiannis in about 2005 – which she “totally forgot”. When later pressed, she also agreed that she saw Ms Costabile after inspecting the property and that she saw Ms Costabile before Christmas (although even this was unclear as she later suggested she could not recall when she saw Ms Costabile).
55 Her initial evidence that she did not inspect the property until a couple of days before she signed the contract was not probable since it is hardly likely that she would be seeing her banker (as the email of December suggests) if she had not even inspected the property.
56 As will be seen below, her memory as to the pivotal representations was also not precise.
Ms Mastrogiannis
57 Ms Mastrogiannis presented as a relatively unsophisticated and hard working woman committed to her family. Although she became somewhat exuberant at times, she presented as a genuine and honest witness.
58 The plaintiff submitted that her evidence was generally not credible. In particular because:[2]
[2]Plaintiff’s Outline of Submissions dated 13 September 2013, 3.
· That it was not likely that Ms Gomez approached Ms Mastrogiannis first as she claimed given, in particular, that she did not receive photographs of the property until December 2010 and did not inspect the property until shortly before signing the contract;
· That her evidence was unsatisfactory as to the events of 2 February 2011;
· That her evidence that she did not make the suggestion about the roof was unlikely given her close relationship with Ms Costabile;
· That there were various matters the subject of evidence which had not been put.
59 However, the matters alleged do not suggest that it was unlikely that Ms Gomez approached Ms Mastrogiannis early in 2010. Rather, the evidence suggested that the parties’ negotiations were well advanced by December 2010 given the email of 7 December suggests Ms Gomez was about to see her banker. I also do not accept that Ms Gomez only inspected the property shortly prior to signing the contract (which, as described above, was at odds with some of her own evidence).
60 In relation to the meeting of 2 February 2011, the plaintiff highlighted that there was some disparity between the pleading filed and the oral evidence of Ms Mastrogiannis that she was asked to provide an REIV version of the contract. The plaintiff also noted that there was evidence of the conveyancer providing a copy of the contract of sale to Ms Gomez in May 2011 which was said to be more consistent with her version that she had not received the contract at the meeting.
61 However, the evidence of Ms Mastrogiannis about the different form of the contract is consistent with the documentation tendered. There is also no evidence of Ms Gomez seeking a copy of the contract shortly after signing (which might be expected if she had really never been given one). Her request some months later is also consistent with her having misplaced the document herself.
62 The fact that Ms Costabile was a friend of Ms Mastrogiannis does not mean that it is more likely that the suggestion for the new roof came from Ms Mastrogiannis rather than Ms Gomez. Even on the evidence of Ms Mastrogiannis, she introduced Ms Costabile as her friend.
63 Finally, although there were some matters not put, I generally considered that matters of significance were properly put.
64 Overall, then, the matters raised did not undermine the overall strength of Ms Mastrogiannis’s evidence. It is also important, as will be seen below, that despite Ms Gomez’s concern for documentary evidence in the witness box, there is no documentary evidence at all which supports that the alleged representations were made.
65 In the light of the matters discussed above, I have generally accepted and preferred the evidence of Ms Mastrogiannis over that of Ms Gomez.
Other evidence
66 There were two further lay witnesses called in the case, Ms Costabile and Mr Ong.
67 Ms Costabile was a “truss” estimator (trusses being wood structures which hold up a roof). Her evidence was that Ms Gomez came to see her around the first or second week of December 2010. She stated that she was interested in buying Ms Mastrogiannis’s house and that she wanted to do a few changes including putting a pitched roof to aim for the “Asian market”. She also claimed she was “developing houses” and had been developing properties for the last 7 – 8 years. Ms Costabile told her she would not be able to provide an estimate until after the new year.
68 In fact Ms Costabile did not provide anything to Ms Gomez until she forwarded the email of 11 May (telling her that the roof trusses would be roughly $12,900 but that she would need to retain an engineer). She was thereafter told to put the job on hold.
69 Despite her close association with Ms Mastrogiannis (she was matron of honour at Ms Costabile’s wedding) her evidence was generally credible and cohesive insofar as it went. Her evidence was inconsistent with Ms Gomez who denied introducing herself as a developer.
70 Mr Ong was formerly in a business venture with Ms Gomez relating to Foxley Street. He confirmed that the two settled their dispute with both parties retaining lawyers and with terms of settlement being executed.
71 His evidence was inconsistent with the evidence of Ms Gomez in that he alleged that the claim that he assaulted her was an “outright lie”. However, it was generally of little probative value and took the matter no further for either party.
Valuation evidence
72 There were two valuers called in the case: Mr Hay for the plaintiff; and Mr Castran for the first defendant.
Mr Hay
73 Mr Hay is a fully licensed real estate agent and member of the Real Estate Institute of Victoria. He qualified as a valuer in 1982 and has extensive experience in valuing all types of properties for some 25 years.
74 He inspected the property on 31 August 2012 and described the market as improving strongly in the first half of 2010, peaking in April. On the basis of a Direct Comparison Approach, he estimated the property as at 2 February 2011 at $825,000 to $875,000 with the midpoint of the range of $850,000 being adopted on the basis of a kerbside valuation.
75 In oral evidence he suggested that, having considered 3 further sales that he was not aware of at the time, the $850,000 was probably at the “upper end” of a reasonable range.
76 However, under cross examination he accepted that the range he had originally given of $825,000 to $875,000 could still be the range just an “optimistic” range particularly given he had not had the benefit of going inside the house.
77 Mr Hay was a generally straightforward witness and there was little criticism made of his evidence save that he did not give evidence as at the relevant time in February 2010. However, if the plaintiff’s evidence was to be believed, the alleged representation was “ongoing” and operative up until the date of signing in February 2011.
78 It is true, however, that Mr Hay did not have the benefit of actually internally inspecting the house. Although this did not appear to generally impact on the reliability of his valuation, under cross examination he did accept that his original range of $825,000 to $875,000 was still sound given this fact.
Mr Castran
79 Mr Castran is a certified practising valuer and licensed estate agent with some considerable experience in valuations since about 1976.
80 He inspected the property and interviewed the ultimate purchaser. He opined that the fair market value of the property as at 2 February 2011 was $980,000. In so doing he also used a comparable sales analysis but utilising different sales (which gave a higher rate per square metre as compared with Mr Hay).
81 Under cross examination he accepted that the Glen Waverly secondary school was equivalent to one of the elite private schools in Melbourne and that a number of his “comparable sales figures” were based on properties within this zone and also close to the station and shops (being in the “sweet spot”).
82 It was also agreed that the subject property was not in the school zone and was 1.6 km to the train station and 1.1 km to Centro shopping centre.
83 When asked about the fact that the property was passed in in September 2011 he said he had given it consideration in his valuation by interviewing the purchasers and looking at the (inferior) marketing campaign wherein the purchasers were “intimidated” by the fact that there was an elderly lady present.
84 He also suggested that although “credence” would have to be given to the ultimate sale price of $815,000 in May 2012, one would need to be sure that it was presented properly to a vendor not unwilling but not anxious to sell.[3]
[3]Spencer v Commonwealth of Australia (1907) 5 CLR 418.
85 There were criticisms made of Mr Castran which included:
· That he chose properties in the “sweet spot” which this property was not;
· That he sought to value the property on the basis of marketing as an estate agent, particularly in relation to the subsequent passing in of the property;
· that he did not have the evidence of the subsequent offers.
86 I consider that Mr Castran did primarily seek to value as a valuer on the basis of comparable sales, similar to the approach of the plaintiff’s own valuer. He was understandably reluctant to take into account particular conduct at an auction without adequate evidence.
87 Secondly, I accept his evidence was that offers to buy and sell were not themselves admissible as to valuation which was also consistent with the approach of the plaintiff’s own valuer.
88 However, although the evidence of Mr Castran was that the “sweet spot” was over valued by Mr Hay given the school was full, there was no direct evidence of this. As indicated already, he also accepted that the school was equivalent to one of the elite private schools and was a “consideration”. Some of his chosen properties also appear to be much closer to the station and amenities than the subject property where he accepted that a premium would be paid.
89 Overall then, if it was necessary to determine, I would prefer the evidence of Mr Hay given I have some concerns as to the comparable sales figures utilised by Mr Castran.
90 This evidence suggests, however, that a figure of $875,000 would still be within the appropriate range for the property (albeit at the upper end of that range).
Whether representations were made
91 The plaintiff alleges that Ms Mastrogiannis made the following representations as to the value of the property between early 2010 and January 2011 (the “valuation representations”): [4]
[4] Amended Statement of Claim (“ASOC”) dated 29 May 2013 [11 (a), (b), (c) and (g)]; note that [11(d) and (h)] were abandoned at trial.
(a) the Solway Drive property was worth more than $980,000;
(b) the Solway Drive property was worth over $1 million;
(c) the Solway Drive property was worth $1,050,000;
…
(g) that she would provide Ms Gomez with her valuation of the Solway Drive property at more than $1 million in writing; …
92 The plaintiff also alleges that Ms Mastrogiannis made the following representations between early 2010 until January 2011 as to renovations as follows (the “renovations representations”): [5]
[5]ASOC dated 29 May 2013 [11(e) and (f)].
(e) a good profit could be made out of the Solway Drive property with cosmetic renovations;
(f) with renovations to the value of $50,000, the Solway Drive property would be able to be sold for at least $1.3 million; …
Evidence of Ms Gomez
Valuation representations
93 The evidence of Ms Gomez was that Ms Mastrogiannis called her in early 2010 while she was driving. They talked briefly about Portsmouth but then the conversation turned to her wanting to sell her property at Solway Drive. Ms Mastrogiannis said she wanted to move to Malvern and she also needed to give back some money to her brother in Greece. She asked whether Ms Gomez wanted to buy her property and said:
The property is worth more than a million dollars, it is worth about a million and 50, but I can give it to you for 980 because I’ll be saving on, you know, agent’s fees and so on.
94 Ms Mastrogiannis also said she wanted to give the property to her because she wanted her to renovate the property and put it back on the market again with her.
95 Ms Gomez said she could not commit to anything because she had to sell Portsmouth.
96 There were further alleged conversations between early 2010 and the execution of the unit 2 contract for Portsmouth in November 2010 wherein Ms Gomez alleges Ms Mastrogiannis asked whether she had thought about the property. Ms Gomez said she could not commit at that stage.
97 As indicated already, in around 7 December 2010 Ms Mastrogiannis forwarded the list of “comparable sales.” The evidence of Ms Gomez was that these were “supposed” to be comparable sales showing that the property was worth a million dollars. This was because “that’s what she was telling me, that the property was a million dollars and more, and these properties were about the same price…”
98 However, her evidence was that they did not agree on price until they signed the contract.
99 Under cross examination, she also denied that Ms Mastrogiannis said she “wanted” between 1 million and 1.05 million. She maintained that she said it was “worth” that much.”
100 As indicated already, her case was that the representation “of the value” started from 2010 and it actually “continued” throughout the year. Further, that until the date that the contract was signed, that representation was “there”.
101 However, when asked what the words were that were actually used under cross examination her evidence was:
Do you recall them [the words she used]?---She said that in Glen Waverley a lot of the properties are selling for a million dollars and her property was worth 1,000,050. I don't recall exactly the exact words, but this is the gist of it, you know. Her property was worth 1,000,050 and she would give it to me for 980,000 because she doesn't have to pay agent's fees and do marketing and things like that. Like I said on Monday, I don't exactly recall the exact words of what it was, but that was the gist of it.
102 She did however claim to “clearly remember” that Ms Mastrogiannis actually mentioned that it was “worth” more than a million, in fact it was $1.05 million.
Other representations
103 Ms Gomez claimed that the provision of the comparable sales was also consistent with an earlier statement that Ms Mastrogiannis had made that she would actually give her something in writing that the property was worth more than a million dollars (although the timing was unspecified).
104 Ms Gomez also gave evidence that during her inspection, Ms Mastrogiannis recommended some renovations including changing the roof and doing a patio:
She suggested all these renovations were what was necessary to bring the property back up to that mark of 1.2 and 1.3, between that sort of mark, and it will cost about $50,000 and in my head I know roughly it would cost that much to do it.
105 Timing was also unclear with regard to these other alleged statements.
106 Thus, under cross examination she suggested that it was actually early 2010 that Ms Mastrogiannis said a good profit could be made out of Solway with cosmetic renovations.
107 She further said that Ms Mastrogiannis “started” saying she would provide something in writing that her property was worth more than a million dollars in early 2010 and “continued saying that”.
Evidence of Ms Mastrogiannis
108 The evidence of Ms Mastrogiannis was that she had put her property on the market privately on the internet (with no board) in 2007-8 following a bitter divorce. However, she had taken it off the market in a context where her children were upset about the possible sale of the family home. She stated that Ms Gomez brought up the topic of her property with her in about February 2010 stating that she was “sick of doing developments.” This was in a context where there were a number of problems with the Portsmouth development. Ms Gomez asked Ms Mastrogiannis how her property was going whereupon she advised her that it was off the market.
109 Further that when Ms Gomez asked her again later Ms Mastrogiannis said “[i]f I sell my property I’m not going to sell less than 1, 1 million and 50.” This was in a brief conversation at Portsmouth in about February 2010.
110 The evidence of Ms Mastrogiannis was also that the topic of Solway continued to be raised by Ms Gomez between April and November. However she denied ever saying that the property was “worth” more than $980,000; rather “[a]lways I say, ‘I want’”.
111 She also denied agreeing to provide a valuation in writing and said that Ms Gomez did not ask for anything like that.
112 She further denied saying that the Solway property would sell with a good profit if renovations were carried out and/or that with renovations of $50,000 the property would be able to be sold for at least $1.3 million.
113 The evidence of Ms Mastrogiannis was also that the price was actually negotiated at the time of an inspection in December 2010 after the Portsmouth unit was sold. At that time, Ms Gomez asked to look at the property. When she arrived she wrote things down that she was going to do to renovate the property including decking and rendering for which she needed $50,000. She also brought up the issue of the roof and said it needed to be changed. Ms Mastrogiannis said that they liked the flat roof which did not bother them given the house was on the high side. Ms Gomez however asked for a trades contact whereupon Ms Mastrogiannis recommended her friend, Ms Costabile for her to talk to.
114 In terms of negotiations, Mastrogiannis commenced with “I want 1 million to 1 million and 50….” However, the two negotiated with a price of $980,000 ultimately settled upon.
115 Under cross examination Mrs Mastrogiannis accepted that it was part of her trade to deal in the value of properties. However, she rejected the suggestion that she would say what the property was “worth” in dealing with the buyer, stating instead that the agent was always working for the vendor and trying to get the best possible price.
116 She also again denied saying it’s “worth” a million, a million and 50 but rather she said that she “wanted” a million or a million and 50.
Resolution
117 The plaintiff submitted that the evidence of the plaintiff was more credible than that of the first defendant. Particular factors included:[6]
[6] Plaintiff’s Outline of Submissions dated 13 September 2013, 1 – 6.
· the valuation representations were likely to have occurred given the property was significantly overvalued at the time;
· the first defendant had a significant motivation to make the representations;
· the representations were of a nature one would expect an agent to make;
· the “comparable sales” provided were generally in excess of $1 million;
· that the first defendant acted for herself in relation to her own sale;
· the first defendant sought to hide the transaction from her employer;
· the first defendant requested certain items from the property although they were not part of the contract.
118 However, although I have generally preferred the evidence of Mr Hay, the property was not “significantly overvalued”; its value being one of which different minds could clearly differ. Any overvaluation was certainly not clearly such as would make the alleged representations more likely to have occurred.
119 Secondly, although it is true that any vendor would want to sell a property at the best price, the evidence of motivation was not such as to make it more likely that Ms Mastrogiannis would make the kind of representations alleged in this case. Thus, the property was not even formally on the market at the beginning of 2010 with no objective evidence that Ms Mastrogiannis was desperate to sell. Instead, the account of Ms Mastrogiannis that Ms Gomez raised the issue in a context where she was sick of developments appeared consistent with the difficulties with the Portsmouth property.
120 Thirdly, Ms Mastrogiannis’s evidence that agents are generally acting for a vendor and do not make representations as to value was credible and not the subject of any relevant challenge (including by evidence from one of the agents).
121 Next, as indicated already, the “comparable sales” document was merely a computer generated search, and did not make it more likely that the representations alleged took place. The results included properties both above and below the price of $1 million.
122 With the benefit of hindsight, it was certainly undesirable for Ms Mastrogiannis to act for herself in relation to her own sale. However, this was not withheld from Ms Gomez who (ultimately) conceded herself that the interests of a purchaser and vendor are not the same.
123 Further, Ms Mastrogiannis was candid in suggesting that she wished to keep the arrangement private. This, however, does not assist the plaintiff.
124 Finally, the evidence of Ms Mastrogiannis was that on the day of the signing, Ms Gomez offered for her to take curtains and light fittings because she was going to gut the property. It was because of this offer that she later asked for the curtains. This explanation was credible and, in any event, related to a peripheral matter only.
125 I therefore do not consider that the matters raised weighed against the general credibility of Ms Mastrogiannis .
126 There were, moreover, a number of matters which suggest that the evidence of Ms Gomez should be rejected.
127 Firstly, there are the general issues with her credit that have been identified earlier.
128 Secondly, and even at its highest, the critical representations as to value lacked precision given Ms Gomez admitted that she did not recall the “exact words” used.
129 Next, as I have indicated already, there is no objective contemporaneous evidence to support the making of the representations. This is relevant in two ways.
130 Firstly, given Ms Gomez appeared to be well aware of the importance of documentary evidence it appears highly improbable that she would not record or confirm the making of the alleged representations if they had been made.
131 Secondly, given the vagueness and imprecision of the representations generally, the absence of a reliable contemporaneous record or corroboration poses serious difficulties of proof given the plaintiff has the onus in this case.[7]
[7]Watson v Foxman & Ors (1995) 49 NSWLR 315, 319.
132 Finally, Ms Mastrogiannis remained firm under both examination and cross examination in denying the making of the representations. I found her to be an honest reliable witness.
133 Although not highly significant, the other oral (non-expert) evidence in the case also generally casts further doubt on the reliability of Ms Gomez.
134 Overall, then, the plaintiff did not discharge her onus in establishing that the representations were made.
135 More particularly, I am not satisfied that any of the representations allegedly constituting the valuation representations were made. In particular, I accept that Ms Mastrogiannis made statements about what she “wanted” rather than proffering statements as to the “worth” of her property.
136 The failure to request a written valuation prior to execution of the contract also weighs against the specific allegation that Ms Mastrogiannis said she would provide a written valuation. Given my assessment of Ms Gomez, I consider that it is unlikely that Ms Gomez would fail to make such a request if such a representation had in fact been made.
137 In terms of the renovation representations, the representation that a “good profit” could be made is too vague to constitute an actionable representation.
138 In any event, for similar reasons as expressed in relation to the valuation representations, I am unable to be satisfied that the renovation representations were ever made.
139 There was also a lack of clarity as to when any such representations were made (in early 2010 or later, at an inspection).The unsatisfactory evidence about the inspection of the property also suggested that Ms Gomez’s evidence as to the alleged “renovation representations” was unreliable. Ms Gomez also admitted that Ms Mastrogiannis had no experience doing up properties which would make it highly unlikely that she would make the renovation representations.
140 The plaintiff has not established either that the alleged valuation representations or the renovation representations, or any of them, were made.
141 Given these findings, it follows that the claims based on the alleged “representations” must fail, being the claim under the ACL; the innocent misrepresentation claim; and the negligent misrepresentation claim.
142 It is unnecessary in such circumstances to consider whether the representations would give rise to a cause of action in any event. I will therefore only briefly express my views on this issue, below.
Do representations give rise to any causes of action (in any event)?
Trade or commerce
143 Firstly I do not consider that the representations, even if made, were made in trade or commerce such as to give rise to an action under the ACL.
144 There is authority for the proposition that contravening conduct in the context of a sale of private residential property (not utilised for any commercial business purpose) does not take place in trade or commerce.[8]
[8]O’Brien v Smolonogov & Anor (1983) 53 ALR 107; Liu v Liu & Anor [2011] SASC 183.
145 The plaintiff submitted that this authority was inapplicable here since, inter alia:[9]
[9]Plaintiff’s Outline of Submissions dated 13 September 2013 [23].
· The parties were an estate agent and part-time property developer;
· The transaction did not occur in isolation but was part of an ongoing commercial relationship;
· That the first defendant was already engaged in relation to the Portsmouth transaction;
· That the transaction occurred in a context wherein Ms Mastrogiannis was to obtain the property back to sell it for commission.
146 However, the definition requires consideration of the interest of the “impugned actor” in the dealing in issue who is alleged to have contravened the Act “in trade or commerce.”[10] Although I accept that Ms Mastrogiannis was a real estate agent’s representative, she was engaged in the sale of her own private home in the context of any representation made in this case.
[10] Colin Lockhart, The Law of Misleading or Deceptive Conduct (LexisNexis Butterworths, 2011), 2.14.
147 Secondly, although the two women had entered commercial arrangements at times (including in relation to the Portsmouth property) they were not such as to convert this private transaction into a commercial one. In any event, Ms Gomez had given no general retainer to Ms Mastrogiannis and had in fact used other agents at various times (e.g. she retained Noel Jones when she sold Foxley Street and Barry Plant when she sold Henderson Court).
148 Ms Gomez alleged that Ms Mastrogiannis “wanted her” to renovate the property and put it back on the market again with her and that this was the “understanding.” However, there was no objective evidence that she had committed to such an outcome. Ms Mastrogiannis also explicitly denied that she had an expectation that once Ms Gomez developed her property she would be the agent re-selling the property. I accept this evidence given my general preference for the first defendant’s evidence, and given also that it was consistent with the absence of any objective evidence that there was some commercial arrangement reached about the resale.
149 I therefore consider that the representations (if made) were made in the context of a private arrangement and am unable to be satisfied that they were made in trade or commerce.
150 There could therefore be no cause of action under s18 of the ACL (or s9 of the FTA) even if the representations were made.
Falsity
151 Even if the representations were made there was also no evidence that the valuation representations set out at paragraphs 11(a)-(c) of the ASOC were misleading or deceptive (or false) for the purpose of the ACL claim and/or the innocent misrepresentation claim.
152 A statement that her property was “worth” a certain amount could only operate as an opinion expressed by Ms Mastrogiannis. However, even if it could be said that this opinion did not eventuate, this does not necessarily mean that she has engaged in misleading or deceptive conduct unless there is contained in these representations an implied representation of present fact (which was misleading or deceptive).
153 A statement of a vendor that her property is “worth” a particular amount, may, at its highest, contain an implicit statement that the vendor honestly believes this to be true or, possibly, that there were reasonable grounds for the opinion which was within a reasonable range of latitude.
154 However, there was no evidence led to suggest that any such opinion was dishonestly held.
155 Moreover, even if some representation could be spelt out that the “valuation” was based on reasonable grounds and within a reasonable range of latitude, the plaintiff’s own evidence suggested that a figure of $875,000 was within the relevant range (albeit at the upper end).
156 However, the figure of $980,000 is only some 12%[11] above the $875,000 figure allowed for by the plaintiff’s own valuer.
[11] The amount of $105,000 (the difference between $980,000 and $875,000) is 12% of $875,000.
157 In those circumstances, I do not consider that a statement to the effect that a property was believed to be worth above $980,000, was misleading or deceptive (or false). This is particularly so given Ms Mastrogiannis was not holding herself out as a professional valuer and was giving a subjective opinion about her own property.
158 I also do not consider that the first defendant would have breached her duty of care for the purposes of the negligence misstatement claim.
159 Thus in Interchase, McPherson J suggested that a wide margin of error was permitted before even a formal valuer would be found to be negligent,[12] while in Derring a latitude of 20% appeared to be generally acceptable.[13]
[12]Interchase Corp Ltd (in liq) v ACN 010 087 573 Pty Ltd [2001] QCA 191 [21].
[13]Derring Lane Pty Ltd v Fitzgibbon [2007] VSCA 79 [116].
160 Even if a statement was made that the property was “worth” more than $980,000, an amount of $980,000 would fall well within a reasonable range of latitude. I do not consider such a statement of opinion to be misleading or false, nor to give rise to a breach of any duty of care.
Reliance
161 The plaintiff highlighted statements made by Ms Gomez to the effect that she relied on Ms Mastrogiannis and trusted her and also again suggested that the overvaluation of the property was significant
162 As indicated already, I do not consider that the property was significantly overvalued even on the plaintiff’s own evidence.
163 Secondly, given my issues with Ms Gomez’s evidence, I do not accept her self-serving statements that she relied on the alleged representations.
164 I also do not consider that any representation made by Ms Mastrogiannis about the worth of her own property was of a kind objectively likely to provide an inducement.[14]
[14]Lord Buddha Pty Ltd (in liq) v Harpur [2013] VSCA 101 [159].
165 I accept that the representation need not be the sole inducement and that it need only play some part in inducing entry into the contract. However, the plaintiff has not established that it really played any part in the present case in circumstances where even Ms Gomez (ultimately) agreed that the interests of a purchaser and vendor were different.
166 On the facts of this case the alleged representee also had experience in buying and selling properties and, on the findings above, was commercially astute and well able to take care of her own interests.
167 I am in fact satisfied that Ms Gomez was fully aware that the interests of Ms Mastrogiannis (at least in relation to this transaction) were in conflict with her own such that she did not really rely on any subjective expression of opinion as to the “worth” of her own property by Ms Mastrogiannis.
168 I am further satisfied that Ms Gomez did not rely on any representation that a written valuation would be provided. There was no evidence whatsoever that she ever sought such a valuation.[15] Rather the evidence was that she “never pushed for it.”
[15] And see Smith & Ors v FAI & Anor [2002] QSC 270 at [17] – [19].
169 Finally, insofar as the renovation representations are concerned, Ms Gomez accepted that Ms Mastrogiannis had no experience actually doing physical work doing up properties and that she had done her own figures which suggested that the $50,000 was “reasonable”.
170 I am unable to be satisfied that the plaintiff was actually induced to enter the contract in reliance on the alleged representations for the purposes of the ACL claim and/or the innocent misrepresentation claim in such circumstances.
171 The matters above also suggest that it was not reasonable for the plaintiff to rely upon any representation made in this case, for the purpose of the negligent misstatement case, particularly a representation as to the value of the representor’s own property.[16]
[16]Kestrel Holdings Pty Ltd v APF Properties Pty Ltd [2009] FCAFC 144 [97] and [103].
172 It follows that, even if the alleged representations were made out, I would be unable to be satisfied that the plaintiff relied on them for the purposes of the ACL, the innocent misrepresentations case and/or for a negligent misstatement case.
Other matters
173 The first defendant also submitted that the plaintiff would be unable to rescind for the purposes of the alleged innocent misrepresentation given she signed the section 27 statement and thereby affirmed the contract.[17]
[17]Outline of Submissions of the Defendant dated 16 September 2013 [7].
174 However, it is unnecessary to consider this submission further in the light of the other findings above.
Summary
175 Given the representations were not made in trade or commerce, there could be no cause of action under s18 of the ACL (or s9 of the FTA) even if the representations were made.
176 Even if a statement was made to the effect that the property was “worth” more than $980,000, an amount of $980,000 would fall well within a reasonable range of latitude. I do not consider such a statement of opinion to be misleading or false, nor to give rise to a breach of any duty of care.
177 Finally, even if the alleged representations were made out, I would be unable to be satisfied that the plaintiff relied on them for the purposes of the ACL, the innocent misrepresentations case and/or for a negligent misstatement case.
Fiduciary Relationship
178 The plaintiff pleads that a fiduciary relationship existed between Ms Gomez and the first defendant on two bases, namely[18]:
[18] ASOC dated 29 May 2013 [41] – [45].
a. Under the Estate Agents (Professional Conduct) Regulations 2008 (“the Regulations”); and/or
b. Under the general law.
Under Statute
179 The plaintiff submitted that at the time of the transaction, Ms Mastrogiannis was a “principal” within the meaning of regulation 5 of the Regulations, such that she was obliged to act in Ms Gomez’s best interests and also obliged to avoid a potential conflict of interest under regulation 12 (1) and (2).
180 Pursuant to s 5(a) a “principal” means:
(a) in relation to an estate agent, the person who engages the services of the estate agent to act on the person’s behalf;
(b) in relation to an agent’s representative, the person who engages the services of the estate agent, for whom the agent’s representative is performing the functions of an estate agent, to act on the person’s behalf.
181 Counsel for the plaintiff submitted that because the definition does not specify that the engagement is in respect of a “certain transaction”, it applies to all circumstances in which the agent is engaged.[19]
[19]Plaintiff’s Outline of Submissions dated 13 September 2013 [32].
182 However, it cannot be said that Ms Gomez ever engaged the services of Ms Mastrogiannis “to act on her behalf” in respect of the sale of her own property. As she herself admitted under cross examination, in order to engage an estate agent “you sign an authority” (which was not done in this case).
183 Ms Gomez did not appoint Ms Mastrogiannis “to act on her behalf” for the purposes of regulation 5 such that she was not a “principal” for the purposes of those regulations.
184 The obligations under regulation 12 therefore do not arise.
Under General Law
185 The plaintiff submitted that a fiduciary relationship existed under general law by virtue of the relationship of trust and confidence that existed between Ms Gomez and the first defendant.
186 In Hospital Products Ltd v United States Surgical Corp,[20] Mason J stated that the categories of fiduciary relationships are not closed. Furthermore, he stated:[21]
The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations … The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense (emphasis added).
[20] (1984) 156 CLR 41.
[21](1984) 156 CLR 41 [96] – [97].
187 Counsel for the plaintiff focused on the characterisation of the “broader relationship” between Ms Gomez and the first defendant.[22] In particular, he relied on:
[22] Plaintiff’s Outline of Submissions dated 13 September 2013 [39].
· The first defendant undertaking work over 6 years for Ms Gomez;
· That Ms Gomez gave evidence on a number of occasions that she “trusted” Ms Mastrogiannis and would only deal with her;
· That Ms Mastrogiannis was engaged as an estate agent in relation to Portsmouth Street at the same time as the relevant transaction.
188 For reasons given already I consider that Ms Gomez exaggerated her alleged “trust” on Ms Mastrogiannis in her evidence. Moreover, although she appeared to prefer Ms Mastrogiannis, there was no general retainer with Ms Gomez giving some of her properties to other agents.
189 Further, although Ms Mastrogiannis had undertaken work at various times for Ms Gomez (including in relation to Portsmouth) in a fiduciary capacity, I do not consider this elevated her to a fiduciary in the context of this particular transaction.
190 In APF Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 2),[23] his Honour Justice Heerey said:
[23] APF Properties Pty Ltd v Kestrel Holdings Pty Ltd (No 2) [2007] FCA 1561 [291] – [292]; note that the decision went on appeal to the Federal Court of Appeal, but not on this issue, see Kestrel Holdings Pty Ltd v APF Properties Pty Ltd [2009] FCAFC 144.
There has been a traditional reluctance to impose fiduciary obligations on parties to commercial transactions… However, joint ventures may attract fiduciary relations… But even in such a relationship there will be instances where the parties can choose their own interests ahead of the joint interest and in such matters there will be no fiduciary duties…
A person “may be in a fiduciary position quoad a part of his activities and not quoad other parts: each transaction, or group of transactions must be looked at”…
While the APF pyrethrum project as a whole was certainly a joint venture within the usual understanding of that term, the sale and purchase of the Robinson properties was a distinct transaction which did not attract fiduciary obligations. Vendors and purchasers of land are entitled to, and usually do, act entirely in their own interests. In the present case neither party was under a disability. Each had access to commercial and professional advice (citations omitted) (emphasis added).
191 For similar reasons, I consider that the sale in this case was a “distinct transaction” in that the parties were acting in their capacity as vendor and purchaser, and not as principal and agent.
192 Counsel for the plaintiff submitted that Kestrel should be distinguished on a number of bases, namely that:
a. Kestrel involved large commercial entities;
b. Kestrel involved a joint venture; and
c. that the parties in Kestrel had access to commercial and professional advice.
193 However, these distinctions do not assist the plaintiff.
194 I am not able to be satisfied that the question of fiduciary duty turns on the size of the entities. The nature of the transaction was also that of a vendor/purchaser wherein - as Heerey J states - parties are entitled to act entirely in their own interests. Moreover, as described already, Ms Gomez certainly had retained lawyers and accountants in the past and was well able to do so had she so wished.
195 In all the circumstances, I am unable to be satisfied that Ms Mastrogiannis ever undertook or agreed to act on behalf of the interests of Ms Gomez in selling her own property. The transaction was completely inconsistent with any such undertaking.
196 I am not satisfied that any fiduciary duty existed under general law.
197 Given the absence of any fiduciary relationship under statute and under general law, it follows that the claim based on an alleged breach of such duty fails.
Section 27 Sale of Land Act
198 The plaintiff claims that the first defendant breached section 27 of the SLA by failing to give all the particulars required by section 27(3)(a) and Schedule 1 of the Act.[24]
[24] ASOC dated 29 May 2013 [49].
199 Section 27 deals with the release of deposit monies and makes provision for the purchaser to empower a conveyancer to release those deposit monies.
200 Section 27(3)(a) provides:
An authorization in writing shall not be effective unless and until the vendor has given the purchaser a notice in writing setting out–
(a) if there is a mortgage over the land which is the subject of the transaction, the particulars specified in Schedule 1 …
201 Schedule 1(a), (d), (g) and (h) provides:
Particulars to be Supplied When Land Sold Subject to a Mortgage.
(a) The amount secured by the mortgage is
…
(d) Subject to compliance with the terms and conditions of the mortgage the amount secured by the mortgage is to be repaid by the day of 20 .;
…
(g) At the date of giving these particulars, the amount required to discharge the mortgage is;
(h) The mortgagee's name and address are as follows:
Name:
Address:
202 The plaintiff claims that the first defendant did not comply with section 27(3) of the Act in that all the information required by schedule 1 (a), (d), (g) and (h) were not provided.[25]
[25] Plaintiff’s Outline of Submissions dated 16 September 2013 [44].
203 It is specifically alleged that section 27(3) was breached by:[26]
[26] Plaintiff’s Outline of Submissions dated 16 September 2013 [44]; and ASOC dated 29 May 2013 [49].
a. a failure to particularise of the amount secured by the mortgage (only an estimate of $564,000 was given);
b. a failure to provide a section 27 letter from the ANZ bank (which would presumably detail when the amount was to be repaid and the address of the bank); and
c. a failure to particularise the amount required to discharge the mortgage.
204 Further, that the non-compliance suggested that the information provided should be viewed as “false” such that the plaintiff could elect to rescind the contract under section 27(8).
Resolution
205 The approximate amount secured appears to be $564,000 on the basis of the ANZ loan documents provided,[27] and the plaintiff did not suggest otherwise.
[27] ANZ loan documentation, Exhibit 14.
206 However, it does appear that there were failures to comply with section 27(3) in the omission to provide specific details of the actual amount secured; the amount required to discharge and the due date for repayment (as well as the address of the bank).
207 Nevertheless, this does not resolve the issue as to the application of section 27(8) which applies in narrowly confined circumstances. Thus this provision states:
Where a vendor knowingly or recklessly supplies false information to the purchaser regarding any particulars required to be given under subsection (3)—
(a) he shall be guilty of an offence against this Act and liable to a penalty of not more than 50 penalty units; and
(b) the purchaser shall be entitled to rescind the contract for the sale of the land and recover the deposit moneys (emphasis added).
208 Section 27(8) therefore requires the supply of “false” information.
209 The plaintiff submitted that the plurality of the word “particulars” in section 27(3) suggested that a partial supply of information would be covered (as “false”). It further relied upon a decision of Hollingworth J in McEwan v Theologedis & Anor,[28] and also a decision of Murphy v Farmer.[29]
[28] [2004] VSC 244.
[29][1988] 165 CLR 19.
210 In Murphy v Farmer, Brennan and Toohey JJ said: [30]
It may be accepted that “false” is not a precise adjective. Nevertheless, it is significant that the Shorter Oxford Dictionary, 3rd ed. (1974), vol. 1, p 722 gives as the word’s primary meaning: ”1. Erroneous. 2. Not according to rule, principle, or law; wrong ME 3. Incorrect; unfair ME 4. Defective 1523.
[30][1988] 165 CLR 19, 22.
211 However the decision in Murphy does not assist the plaintiff since there was no dispute in that case that the answer was “wrong” rather than incomplete.[31] Moreover, the decision was made in the context of Customs legislation where it was important to “vindicate the rights of the Crown”.[32]
[31]Murphy v Farmer [1988] 165 CLR 19, 22.
[32]Murphy v Farmer [1988] 165 CLR 19, 22.
212 The decision of McEwan also did not assist the plaintiff as it was not concerned with section 27(8) but rather with whether a purchaser’s notice was valid under section 27(6).
213 There may be circumstances in which the partial supply of information could be misleading. However, I do not accept that the word “false” in section 27(8) applies to a mere omission, as is the case here.
214 Firstly, the natural meaning of the word “false” is appropriate, which covers information that is actually erroneous, wrong or incorrect as referred to in Murphy.
215 Secondly, the fact that the provision incorporates a criminal penalty suggests that care should be taken in unduly extending the operation of section 27(8).
216 Thirdly, the context in which the provision appears weighs against the plaintiff’s construction. Thus, in a case of inadequate particulars/omission, section 27(6) already provides for the remedy, given the purchaser is given an opportunity to give notice in writing of such fact. Section 27(8) is plainly then intended to operate in different, narrower circumstances where false information is provided in which case the vendor is guilty of an offence and the purchaser is entitled to rescind. The provision is therefore concerned with circumstances different to, and extending beyond, an omission.
217 I am not satisfied that section 27(8) applies in this case where there has been a mere omission to provide particulars rather than the supply of incorrect, misleading or wrong information.
218 The plaintiff has not established a right to rescind under section 27(8).
Summary
219 The plaintiff has not established that any of the alleged representations were made, nor that they would give rise to the causes of action alleged if they were.
220 The plaintiff has also not established the existence of a fiduciary duty which would give rise to any breach.
221 Finally, the plaintiff has not established that section 27(8) of the SLA applies such as to give rise to a right of rescission.
222 It follows that the plaintiff’s claims must be dismissed and it remains to consider the counterclaim.
Counterclaim/liability of second defendant to counterclaim
223 The first defendant counterclaimed against the plaintiff for its breach in failing to complete the purchase of the property.
224 The amount sought was calculated as the loss on the sale at $165,000 ($980,000 - $815,000) less the deposit retained ($98,000) at $67,000.
225 The first defendant further claimed the amount of $78,750 being the loss of the deposit on the Malvern property.
226 These amounts were sought against both the plaintiff (as first defendant to the counterclaim) and also Ms Gomez (as second defendant to the counterclaim) given she was a signatory to an indemnity pursuant to clause 19 of the contract of sale.
227 Two issues arose. Firstly, whether the quantum of the loss was sustainable, and, secondly, whether the second defendant to counterclaim was also (personally) liable.
Quantum
228 In terms of quantum the plaintiff submitted, firstly, that no damages were sustainable at all because of a failure to elect. Alternatively, that the lost deposit on Malvern was not recoverable.
Alleged failure to elect
229 Although not pleaded, the plaintiff submitted that because there was a failure to elect under clause 28.4(c) of the contract, the first defendant’s damages were restricted to the forfeited deposit.[33]
[33]Plaintiff’s Outline of Submissions dated 16 September 2013 [61].
230 Clause 28.4(c) is as follows:
Clause 28 Default not remedied
…
28.4 If the contract ends by a default notice given by the vendor:
…
(c) in addition to any other remedy, the vendor may within one year of the contract ending either:
(i) retain the property and sue for damages for breach of contract; or
(ii) resell the property in any manner and recover any deficiency in the price on the resale and any resulting expenses by way of liquidated damages…
231 The plaintiff submitted that the particulars at paragraph 74 of the Further Amended Defence and Counterclaim included a claim based on retaining the property (in which case the lost Malvern deposit was claimed) and for reselling the property. In such circumstances there was a failure to elect pursuant to clause 28 such that no damages at all were sustainable.
232 However, regardless of the particulars, the first defendant had clearly elected to resell the property pursuant to clause 28.4(c)(ii).
233 I therefore do not accept that there has been a failure to elect under clause 28.4(c).
Loss of deposit on Malvern
234 The first defendant submitted that the lost deposit on the Malvern property was recoverable under the principles in Hadley v Baxendale.[34] Firstly, because it was reasonably foreseeable that after selling the property in which the first defendant had lived since 1987, she would want to put “a roof over her head”. Secondly, because there was evidence that Ms Gomez knew that she was likely to be selling.
[34](1854) 9 Exch 341.
235 The rule in Hadley v Baxendale is as follows:[35]
Where two parties have made a contract which one of them has broken, the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, ie, according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it.
[35] Hadley v Baxendale (1854) 9 Exch 341, 355; Outline of Submissions of the Defendant dated 16 September 2013 [15].
236 Firstly, I do not consider that the loss of the deposit on Malvern arose naturally according to the usual course of things within the first limb of Hadley v Baxendale. Thus, although I accept that the loss on any resale would be recoverable, I do not consider that the special damage suffered on the Malvern sale arose according to the usual course of things.
237 In terms of the second limb, Counsel for the first defendant referred to the following extract from the evidence of Ms Gomez:
You must have known that she had to find another place to live come 2 August, come settlement date?---She did, however, ask me to ‑ ‑ ‑
I'd ask you to answer the question before you go on and talk about something else entirely?---Yes, I knew that she was living at that place, yes.
And you also knew she would have to find another place to live upon settlement, which was booked in for 2 August?
---That's not entirely true though because there is more to it than that.
No, I'm saying that ‑ ‑ ‑?---No, that's why I said there is more to it than just me knowing that. No, she actually asked me if she could actually rent the place and stay on if she didn't find a place.
When do you say she said this?---Right from the beginning actually and I agreed to it because I was not in any hurry to do this reno job anyway.
When is "right from the beginning"?---Right from the beginning, like, when we have ‑ now and then, whenever we have conversations ‑ after signing the contract, she would ask me ‑ rather, before signing the contract even, she would ask me if she doesn't find a place, whether she could rent the place and stay on until she found something and I was happy with that. I wasn't too fussed.
So is it your evidence she said this after entering into the contract on 2 February?---Even before entering into the contract, she asked me whether she could stay on and I was happy with that.
238 However, I do not consider that this passage shows that the special damage suffered on the Malvern sale would reasonably be supposed to have been in the contemplation of the parties at the time they made the contract. Instead, the evidence is equivocal as to the intentions of Ms Mastrogiannis.
239 The quantum on the counterclaim should therefore be contained at $67,000 which does not include the lost deposit on Malvern.
Personal liability
240 The first defendant claims that, by reason of being the signatory for the plaintiff (which is a proprietary limited company), Ms Gomez became personally liable for the due performance of the purchaser’s obligations under the contract as if the signatory were the purchaser by reason of clause 19.[36]
[36]Further Amended Defence and Counter Claim dated 10 September 2013 [72]; Outline of Submissions of the Defendant dated 16 September 2013 [14].
241 Clause 19 reads as follows:
19. Liability of signatory
Any signatory for a proprietary limited company purchaser is personally liable for the due performance of the purchaser’s obligations as if the signatory were the purchaser.
242 Ms Gomez submitted that there were 3 main obstacles to the first defendant’s construction of clause 19:
a. a lack of privity;
b. an absence of consideration;
c. a failure to serve the notice of default as prescribed by clause 27 of the contract.
Privity
243 Ms Gomez emphasized that she was not privy to the contract and submitted that the surrounding circumstances suggested there was no assent to be personally bound.[37]
[37] Citing Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd & Ors (1989) 21 NSWLR 160.
244 In particular Ms Gomez highlighted:
· That the contract was filled out by Ms Mastrogiannis;
· That the vendor did not require a guarantee notwithstanding provision was made for such possibility in clause 20.
245 I do not consider the fact that the contract was filled out by Ms Mastrogiannis to be of any assistance to Ms Gomez. She accepted that she “went through it” (albeit “briefly”). Further, although the earlier version of the contract provided to her on 14 January contained a similar provision, she raised no issue with it.
246 In relation to the second matter, it is true that clause 20 made provision for the vendor “to require one or more directors of the purchaser to guarantee the purchaser's performance of this contract if the purchaser is a proprietary limited company.” Further, that this was not specifically sought in the present case.
247 However, the guarantee clause was a distinct clause making provision for other non-signatory directors. It says nothing about whether Ms Gomez gave her assent in being a signatory director.
248 In Follacchio v Harvard Securities (Aust) Pty Ltd,[38] Finkelstein J was concerned with a General Sale Authority which contained a clause in substantially identical terms to clauses 19, with a Mr Follacchio, a proprietary company director, signing the authority.
[38] [2002] FCA 1067.
249 Mr Follacchio submitted, similar to Ms Gomez, that he had only executed the authority in a qualified way (where he signed “for the Vendor”) and did not intend to assume any personal liability.
250 In considering the issue Finkelstein J adopted the analysis contained in Clark Equipment by Giles J that the issue turned on whether there was an intention that the signatory be personally bound as determined by the construction of the document as a whole in the light of surrounding circumstances.[39]
[39]Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd & Ors (1989) 21 NSWLR 160 [174].
251 His Honour found that, once regard was given to the terms of the relevant clause, it was clear that on those cases where the vendor was a proprietary company, the qualification to the signature (that it only intended to apply “on behalf of the vendor”) was not intended to have effect. Instead, it clearly evinced an intention for the director of a proprietary company to be bound.[40]
[40]Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067 [8].
252 Ms Gomez submitted that the Follachio decision contained no suggestion of a guarantee clause and prior historical dealings.
253 However, clause 5 itself in Follacchio (similar to clause 20 in this case) made specific provision for the procuring of a guarantee by all the vendor’s directors, including non-signatory directors.
254 I also do not regard the “historical dealings” as assisting Ms Gomez in terms of the construction of the contract of sale and clause 19 in particular.
255 The issue of privity is otherwise not an issue as explained by Finkelstein J. Thus, he finds that the better view is that clause 5 imposes a secondary and not a primary obligation on the signatory and does not read the provision as substituting the signatory as the contracting party. In reality it is instead intended to create a guarantee.[41]
[41]Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067 [12].
256 This reasoning is directly applicable to the present case and overcomes any issues as to “privity”. In my view, similar to the case of Follacchio, the signature of Ms Gomez for the purchaser proprietary company clearly evinced an intention for Ms Gomez to be bound personally given the inclusion of clause 19.
Consideration
257 As stated by Finkelstein J in Follacchio, it is not necessary for the consideration to appear on the face of the instrument.[42]
[42]Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067 [13].
258 Rather, I accept the submission of the first defendant that the consideration is the transfer of the property for the purchase price.
Default Notice
259 Ms Gomez next submitted that clause 27 provided that a party is not entitled to exercise any rights until “the other party” is served and fails to comply with, a written default notice. In the absence of such service on Ms Gomez in her personal capacity, it followed that the first defendant could not claim damages against her.
260 However, as stated already, the correct characterisation, consistent with Follacchio,[43] is that the signatory is not actually substituted as a contracting party at all but is rather a guarantor with a secondary obligation.
[43]Follacchio v Harvard Securities (Aust) Pty Ltd [2002] FCA 1067 [12].
261 In such circumstances clause 27 does not apply as it only operates in relation to “the other party”.
262 It is also unnecessary in such circumstances to determine whether there was service in any event, given a notice of default was in fact served on Ms Gomez as the sole director of the plaintiff.
263 Clause 27 therefore does not assist Ms Gomez.
264 I am not satisfied that any of Ms Gomez’s submissions are sustained. Instead, I am satisfied that she has a personal liability for the first defendant’s damages pursuant to clause 19 of the contract.
Conclusion
265 The plaintiff’s claim is dismissed.
266 The first defendant is entitled to judgment against both J Renee Nominees Pty Ltd and Ms Gomez in the amount of $67,000.
267 I will hear from the parties on the question of costs.
| SCHEDULE | |
| J Renee Nominees Pty Ltd (ACN 108 366 810) | Plaintiff |
| and | |
| Anna Mastrogiannis | First Defendant |
| and | |
| Discount Legal Conveyancing Pty Ltd (ACN 108 366 810) | Second Defendant |
| and | |
| Anna Mastrogiannis | Plaintiff by Counterclaim |
| and | |
| J Renee Nominees Pty Ltd (ACN 108 366 810) | First Defendant by Counterclaim |
| and | |
| Kalaiselvi Gomez | Second Defendant by Counterclaim |
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