Jones v Acfold Investments Pty ltd

[1983] FCA 344

Re: SAMUEL BARRY JONES AND PATRICIA JONES
And: ACFOLD INVESTMENTS PTY. LIMITED AND R.B. FOSTER PTY. LIMITED
Nos. G102 and G103 of 1982
Trade practices
8 ACLR 488

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Lockhart J.

CATCHWORDS

TRADE PRACTICES - Consumer protection - Misleading and deceptive conduct - "Off-the-plan" purchase of two units in multi-storey building on Sunshine Coast - Whether representations made to applicants by developer and sales agent as to external finish of building - Whether representations made to purchasers by sales agent as to continued presence of caravan park in proximity to the building - Whether any representation made was misleading or deceptive - Whether representations relied on by the applicants - Whether innocent misrepresentations made to purchasers - If so whether they induced purchasers to enter into contracts of purchase - Whether entitled to rescind their contracts - Construction of contract - Whether contracts of purchase are illegal and void by virtue of interest provisions in Companies Act 1961 (Qld).

Trade Practices Act, s. 52

Companies Act 1961 (Qld), s. 76

HEARING

SYDNEY

#DATE 18:11:1983

ORDER

That matters QG102 and QG103 of 1982 be adjourned to a date to be fixed.

JUDGE1

These two cases arise out of the boom in the real estate market on the Sunshine Coast, Queensland during much of 1981 and its decline in late 1981 and 1982. One case is brought by Samuel Barry Jones and the other by Patricia Jones, his wife, each against Acfold Investments Pty. Limited and R.B. Foster Pty. Limited. The two proceedings were consolidated and ordered to be heard together as they involve the same issues. By consent of the parties the only issue heard by the Court at this stage was liability. Damages will be assessed later if the issue of liability is resolved against the respondents.

The applicants allege that the first respondent by its agent the second respondent - a real estate sales company - made certain representations to the first applicant, Mr Jones, in March 1981 in the course of negotiations for the sale by the first respondent to the applicants of home units "off the plan" in a multi storey building known as Langley Park near the beach at Maroochydore. The alleged representations, as pleaded, were:-

(a) That the exterior of the building would be of a "luxury finish of exposed aggregate";

(b) That a caravan park erected between the building and the beach would be removed by the time the building was completed; and

(c) That the Maroochy Shire Council had decided to remove the caravan park.

In 1981 each of the applicants agreed to purchase a strata title unit in the building from the first respondent. The amended statement of claim alleges that the representations were untrue in that:-

(a) The external finish of the building was not and was not intended to be in accordance with the representation, but was in fact merely of painted precast concrete;

(b) Alternatively, the first respondent did not at any relevant time have the capacity to construct the building with an exterior of exposed aggregate;

(c) The caravan park has not been removed; and

(d) The Maroochy Shire Council had not decided to remove the caravan park.

In these circumstances the respondents are alleged to have engaged in misleading or deceptive conduct in contravention of s. 52 of the Trade Practices Act 1974 ("the Act").

The applicants allege also that the first respondent engaged in misleading or deceptive conduct in contravention of s. 52 by failing to tell the applicants that it had decided in August 1981 to alter the exterior finish of the building from exposed aggregate to a painted finish on precast concrete. Later that year the first respondent tendered to the applicants for signature by them forms of agreement for purchase of two of the units which provided that the proposed building would have an exterior finish of exposed aggregate, but without disclosing to the applicants its earlier decision.

The applicants seek damages pursuant to s. 82 of the Act and orders pursuant to s. 87.

The applicants allege, as an associated matter to the federal claim under s. 52, that the above representations induced them to enter into their respective agreements for purchase of the two units and that in the circumstances they were entitled to rescind the agreements.

The applicants allege, also as an associated matter, that the agreements are illegal and void in that, by executing the agreements which contained provisions for the letting of the units to tenants by a third party pursuant to a Management and Agency agreement referred to in the agreements for sale, the first respondent issued to each of the applicants an "interest" within the meaning of that word as defined by s. 76 of the Companies Act 1961 (Queensland) and that the first respondent could not validly issue "interests" as it is not a public company.

The applicants allege, again as an associated matter, that the agreements provided in the Schedule of Finishes included in the agreements that the exterior of the building would be of exposed aggregate, that it was not in fact of exposed aggregate, but was painted precast concrete, and so was not subsantially in accordance with the Schedule of Finishes.

The applicants allege that they duly rescinded the agreements and suffered damages which they seek to recover from the first respondent.

The respondents deny making the alleged representations and that they contravened s. 52. The second respondent admits, however, that on or about 30 March 1981 one of its servants told Mr Jones that the caravan park would be removed at some time in the future, but it asserts that he did not state when it would be removed.

The first respondent cross claims against the applicants alleging that they refused to settle the agreements for sale of the units, that the first respondent duly rescinded the agreements, forfeited the deposits and suffered damages which it seeks to recover from the applicants. Alternatively, it seeks to recover liquidated damages pursuant to clauses in the agreements. The applicants challenge the first respondents cross-claim on the ground that it was not able and willing to complete the agreements on the date fixed for completion.

This briefly summarises the cases of the parties. I turn to the evidence. The principal evidence on behalf of the applicants was that of Mr Jones himself. The second respondent called a Mr Hawthorne who gave evidence that he was the real estate agent to whom Mr Jones spoke in late March 1981. Expert witnesses were called by the applicants and the first respondent on various issues.

Mr Jones lives in Newcastle, New South Wales, and is a member of the Legislative Assembly of New South Wales. He is and has been since 1965 the member for the State seat of Waratah. He gave evidence that in early 1981 his health was poor and that he was thinking of retiring from Parliament. He said that, with a view to securing his future, he decided to look at real estate on the Sunshine Coast after being told by a friend, a Mr Jerry Ngansky, about the real estate boom on the Sunshine Coast and the possibility of making quick capital gains from the purchase and sale of home units there. He travelled to Maroochydore on a date which he said was 28 March 1981 and was met by a salesman employed by the real estate agents responsible for the sale of units in Langley Park (the second respondent). He could not identify the salesman by name. Mr Jones gave evidence in considerable detail about the events of the day and conversations between himself and the salesman. I do not propose to set them out in detail. It is sufficient if I refer to the critical points. He said that the salesman drove him round various parts of the Sunshine Coast and, during the course of the morning, they inspected the site on which Langley Park was to be built. Excavation work was then being done. Mr Jones noticed a caravan park between the site and the beach in which there were tents and a brick amenities block. He swore:

"I indicated to the salesman that as far as the caravan park was concerned I was a bit concerned about it - or I was very concerned about it because of the fact that I had been on a select committee that inquired into caravan parks and mobile homes and during that investigation we saw and heard so many submissions that made me concerned to the point that I believe that it is most important that if you are going to invest money that you want to get the best return you possibly can from your investment . . . . He said to me as far as the caravan park was concerned there were no worries about that that the, 'Councils already made a decision to have it closed down.' I said, 'Well, if that is the case then the development there should be very good.'"

The subject of the caravan park was raised again by Mr Jones with the salesman during that conversation. Mr Jones again told him of his experience with caravan parks and that he found they led to a reduction in the value of property. The salesman replied that there was no problem because the Council had decided to close it within twelve months, about the same time as the building would be finished.

Also during the conversation, which took place on or about the site of Langley Park, the salesman showed Mr Jones a brochure of the proposed development which depicted, amongst other things, the exterior or facade of the building. Mr Jones said to the salesman:-

"---Well, I indicated to him that as far as the building was concerned, that I was concerned with what procedures were going to be taken with regard to the exterior. He indicated that it was going to be exposed aggregate and with that I indicated the colours of the building. I suggested that because of my previous experience as a country representative for Golden Fleece blue was their colour and blue was the colour of my favourite football team in Newcastle. I liked blue but it faded badly and I said, "How are you going to get blue aggregate?" and he indicated to me that there were no problems with that. They had already fixed that up and they saw no - he saw no problems with the colour.

You told the court that he indicated to you the finish was going to be exposed aggregate?---Yes.

As best you can recollect it, can you say his precise words, how he described the finish?---He just said to me the finish of the building would be exposed aggregate and I could not understand where they were going to get blue stone from, but they said they had no problems with that; they would be able to put that on there without any problems.

What further discussion occurred?---I told him I was concerned at the point as far as the maintenance was concerned, and if I was going to become a fig - that is fixed income group - I would have to be watching other little problems as far as costs were concerned and maintenance would be one of the major ones. What discussions did you have with the agent as to maintenance and your concerns and experiences?---He said there were no problems as far as maintenance was concerned. The upkeep of the aggregate would more or less keep maintenance to a minimum, but another area I was concerned about was the reinforcement. In Royal Newcastle Hospital, the buildings there have not been properly treated."

Mr Jones gave evidence that the salesman said at least once during the conversation that the proposed units were going to be "first class", a "high quality development".

Mr Jones said that the salesman told him that one unit was available for sale on the 4th floor of Langley Park for $125,000. The units were being sold at that stage "off the plan" which seems to have been common practice at that time on the Sunshine Coast. Mr Jones said that the salesman told him that no contracts would be available for about three months due to delays by the printer and the lawyers. He said that the contracts would specify the materials and finishes to be used in construction. Other matters were discussed. Mr Jones said that, after inspecting the site, the salesman drove him to other parts of the Sunshine Coast. He summed up the discussions between himself and the agent in these words:-

"He had been giving me a strong sales talk up until this".

The salesman then took Mr Jones to lunch. Mr Jones said that they lunched at the Caloundra Yacht Club. During lunch they discussed the Langley Park development and again Mr Jones expressed his concern about the caravan park to the salesman. Mr Jones swore:

"I informed him that I thought - I informed him the prospects looked very good. I was concerned with a number of areas, in particular the caravan park. I asked him could we go and see the Council.

Yes?---And discuss the matter of the caravan park to confirm or otherwise that the caravan park was going to be closed, and he said, "Oh, there are no worries about that at all. They made the decision on that a few months ago. It is going to be closed, and as I said before, it should be closed and the area tidied up by the time the building is finished in 12 months time."

Did you say anything further to him in relation to the caravan park?---I said I was very concerned about caravan parks being in and around anywhere where I would be wanting to invest my money. I said the reasons for that I acquired when I was on this select committee. I saw, and evidence was taken by that committee when I was present, of neighbours to caravan parks where there are itinerant caravaners. That robberies took place and it was hard to follow who were the people that were causing it, but the inference was there it was coming from the itinerant caravaners.

And did the agent say anything when you told him this?---He said, "I told you before there is going to be no caravan park there at all. It is going to be park land", and I still went on with the point of saying, "I still have these other fears I would like to air", and I continued to say there is a problem as far as maintenance of the building, that some of the caravaners and their children, they could put graffiti on the walls of the building. There could be a problem with security and the maintenance of the building, and all of this was motivated in my mind at the time. And that is because of your investigation?---Yes."

During lunch they discussed various possibilities relating to the purchase by Mr Jones of a unit or more than one unit including buying and selling the unit or units after 12 months. The problems of tax becoming payable if the sale was made before the end of 12 months were mentioned. Other options were discussed. Mr Jones said that after lunch the salesman drove him back to Brisbane Airport from where he flew to Newcastle.

Mr Jones did nothing about the Langley Park purchase for some time because the contracts were not ready and he had an operation in hospital during April. The "agent's office" then got in touch with Mr Jones and told him that there was a second unit available, one on the 3rd floor of Langley Park for $119,500. After discussing the matter with his wife and perhaps other members of his family a decision was made that both units should be bought. Mr Jones got in touch with the agent, a Mr Londy, who was a director of the second respondent, and told him that he was interested in the second unit. A deposit was paid. He thought this occurred in or about May 1981. Contracts were sent to him for the purchase of both Unit 4 on level 3 and Unit 6 on level 4. It was the Mr Jones' intention to purchase one of the units in his name and the other unit in the name of his son, the reason for this being, as he swore:-

"At the time there was legislation went through the State House calling on members of Parliament to declare their pecuniary interest and it meant the disclosure of the member of Parliament and his spouse, and I felt that it would look - it would not look in the best interests of having two units, one in my own name, and one in my wife's name."

Later in his evidence he swore:-

"You were resorting to a subterfuge, were you not, to evade the law by putting the unit in your son's name to evade what you feared what may become the law? - I would say so to that extent. The only point we were looking at was once I retired and finalisation of the purchase took place then we would have it in both names - one in each. Was your son to be a trustee for you of the unit or was he to buy it himself? - No, he was going to - I was going to put it in his name.

He was your nominee? - That is right."

It appears that the legislation relating to disclosure of pecuniary interests did not become law so Mr Jones decided to put one unit in his own name and the other in the name of his wife, not his son. He signed the contract for the purchase of Unit 4 on level 3 and his wife signed the contract for the purchase of Unit 6 on level 4. Mr Jones conducted all the negotiations for the purchase of the units with the agent. His wife played no role in them at all. I am satisfied that Mr Jones made all the material decisions relating to the purchases.

Mrs Jones went with Mr Jones to Maroochydore during the school holidays in August 1981 to look at the units. Work was proceeding then and the building had reached about the first floor level. Mr Jones said that everything appeared to be progressing satisfactorily although he noticed that the caravan park was still there.

The next event was that he received a letter informing him that he should finalise all arrangements relating to the purchase. He says that he received this in March 1982. He was surprised because of the speed with which the building must have been completed, so he went to Maroochydore to see what the position was. He said that to his amazement he noticed that the building was almost finished, and that there was no exposed aggregate on the exterior but a surface with paint on it, a type of "bone" colour. He was not very happy about that and then he saw that the caravan park was still there and that "really upset me".

Mr Jones then drove to the Council Chambers and was told there that the Council had not resolved to close the caravan park and that it would remain there. He said

"That pricked my whole balloon as far as the thought of the investment - the fact that what I had previously been thinking with regard to the investment put me in the case where I just did not want to go ahead with it. So I then got in touch with my solicitors. . ."

It is not disputed that the Maroochy Shire Council has not resolved to close the caravan park.

On 28 May 1982 Mr Jones' solicitors wrote to the solicitors for the first respondent. The letter is of some importance. So far as material it asserted that the written agreements for sale in respect of the two units did not give rise to binding agreements and, should that assertion be wrong, then

"Our clients and each of them hereby give notice that they elect to rescind each contract on the ground inter alia that the building of which the subject units forms part has not been constructed in accordance with the representations made to our clients in that regard which induced them to enter upon the agreement to purchase the units. By way of example the building does not accord with the Schedule of Finishes contained in the agreement for sale."

They asked for the deposit to be returned.

Mr Jones gave evidence that the representation as to the exterior of the building being of exposed aggregate was a relevant consideration and that if he had been aware that the finish was to be painted "it would have given me a decision to look at it again because of that problem of maintenance." He said that the caravan park was an important consideration to him and that he "would never have started in the first place" if he had known that the caravan park was to stay there.

Mr Jones said that when he was told by the agent at lunch in March 1981 that the Council had resolved to remove the caravan park he wanted to have it confirmed in his mind, and he still had some hesitation about accepting what he had been told notwithstanding that the salesman had reassured him on this question once if not twice before lunch. He said that his concern about having a caravan park near the units was because of the possibilities of robberies taking place from people staying in the caravan park and the fact that its presence would diminish the return from the units as an investment.

He said that he spoke to the Regional Director of Taxation in Newcastle, after March 1981 and before he signed the contract, and that he was told that even though more than twelve months may elapse between the purchase and sale of real estate there could still be income tax problems.

Bruce William Hawthorne was called by the second respondents. He is a real estate agent and a director of the second respondent. He was a director in March 1981. He said that he was asked by Mr Londy, who, as I said earlier, was a director of the second respondent, and a person who appears to exercise considerable authority within the second respondent, to look after a client who was going to Queensland to see real estate. He said that he met Mr Jones on 30 March 1981 at Maroochydore. Mr Jones placed the meeting with the salesman as being on 28 March, but I think it more likely that it was the 30 March because that was the date shown on Mr Jones' air ticket as the date on which he travelled from Newcastle to Brisbane via Sydney and return from Brisbane to Newcastle.

Mr Hawthorne's recollection of events on 30 March is not particularly clear. He said that in the first four months of 1981 he showed a lot of people, about 20 or 30, round the Sunshine Coast. He said that he told Mr Jones that the caravan park would be removed in the future and that he volunteered this statement to Mr Jones. He said that he believed it to be true and that he told the same thing to the other people whom he showed round the Sunshine Coast. The source of his belief was conversations with other real estate agents and Mr Londy. He did not check with the Maroochy Shire Council himself as he was not particularly perturbed about the presence of the caravan park. It was just an added bonus if it was not there. He said that the presence of the caravan park did not appear to weigh heavily in Mr Jones' mind and that Mr Jones did not talk much about it. He denied that Mr Jones told him he was concerned about the presence of the caravan park because of his experience as a member of a Parliamentary Committee into caravan parks. He said that he took Mr Jones to lunch at the Maloolabah Yacht Club, not the Caloundra Yacht Club (if there is one there). He did not attempt to dissuade Mr Jones from going to the Council to make his own enquiries about the caravan park. He did not say anything about the caravan park being removed within the period of 12 months or by about the time of completion or by any other time. He said that his only knowledge about Langley Park itself came from the brochure which he had with him when talking to Mr Jones on 30 March. He had not heard the term "exposed aggregate" until several months ago and that he did not know what it meant in March 1981. He said that he probably did discuss with Mr Jones matters relating to the resale of units, gains and capital profits, but he has no specific recollection of discussing these matters. He had himself purchased a couple of units in a high rise development near Langley Park known as Beach Front Towers.

The brochure which Mr Hawthorne showed Mr Jones and later gave to him contains on its back page some marks in pencil which, according to Mr Jones, were placed there by the salesman to indicate, amongst other things, the presence of the caravan park. Mr Hawthorne said that he had no recollection of making those marks on the brochure, but that he may have put them there when saying to Mr Jones that the building was virtually a water frontage because there was no development in front of it. Considerable reliance was placed by the applicants in argument on the presence of the pencilled marks on the brochure, but I do not think they are of any real significance. They could have been placed there by Mr Hawthorne for a number of reasons, one consistent with the evidence of Mr Jones and another consistent with the admission in the second respondent's defence namely, that its agent in fact told Mr Jones that the caravan park would be removed in the future. Obviously the caravan park was discussed by both Mr Jones and Mr Hawthorne, so it is quite likely that Mr Hawthorne placed the marks in pencil near the position of the caravan park to indicate its presence.

Mr Hawthorne said that the removal of the caravan park was not a "selling point" from his point of view. It was one of the many things happening in the area. He did not tell people that it was to revert to open space. He told Mr Jones that it was going to be removed and then improved and that something would happen. He told him that the caravan park was going, "finito".

The second respondent was not a licensed real estate agent in Queensland during March 1981, nor was Mr Hawthorne. He held a licence in New South Wales. He was a "non voting" and "non financial" director of the second respondent.

There is some measure of agreement between Mr Jones and Mr Hawthorne as to what was said on 30 March 1981, but on certain critical matters they are in sharp conflict.

Having observed both Mr Jones and Mr Hawthorne in the witness box and bearing in mind the objective facts and probabilities to which I will refer in a moment, where the evidence of Mr Jones and Mr Hawthorne conflicts, I prefer the evidence of Mr Hawthorne, notwithstanding that he was unclear about certain aspects of the discussions on 30 March. In my view Mr Jones reconstructed the critical parts of his evidence favourable to his case.

There was a faint suggestion at one stage in the case by counsel for Mr Jones that it was not Mr Hawthorne who spoke to him, but some other salesman. This was due to the fact that Mr Jones identified the salesman as being tall, in his late 40's and with hair that was "fair to blond". Mr Hawthorne was of medium height, 34 years of age and dark hair. The suggestion was not pursued and Mr Jones was not called in reply to deny that it was Mr Hawthorne to whom he spoke in late March 1981. I am satisfied that it was Mr Hawthorne to whom Mr Jones spoke when visiting the Sunshine Coast in late March 1981.

I find that Mr Jones was told by Mr Hawthorne that the caravan park would be removed at some time in the future, but that the time was not specified by Mr Hawthorne. I do not accept the evidence of Mr Jones that the salesman told him that the caravan park would be removed within about 12 months, about the same time as Langley Park would be finished. Nor do I accept the evidence of Mr Jones that the salesman told him that the Council had decided to remove the caravan park, although it is a fair inference for Mr Jones to draw from the statement which Mr Hawthorne admits he made that the Council had decided to remove the caravan park. Mr Jones may have assumed that the Council had made this decision based on what the salesman told him when reflecting on the evidence that he proposed to give in this case, and he may have attributed to the statement of the salesman the fact of the Council's decision.

Nor do I accept the evidence of Mr Jones that the salesman told him in effect that he did not have to worry about confirming with the Council the proposed closure of the caravan park because the Council made the relevant decision to close it only a few months earlier, that it was going to be closed and the area tidied up by the time the building was finished in about 12 months time. In my opinion Mr Jones is the type of man who, even if he had been given these assurances by a real estate salesman on the Sunshine Coast in March 1981, would more likely than not have himself checked their accuracy with the Council. This is especially so because of his own experience as a member of a Select Committee of the Legislative Assembly of New South Wales in relation to caravan parks and the fact that, according to him, he attributed importance to the fact that the Council proposed to close the caravan park within about 12 months of March or April 1981. Yet he made no enquiries of the Council, whether directly or indirectly, until his visit to Maroochydore in March 1982. I am satisfied that by that time he had decided to get out of his contractual obligations because of the sharp decline in the property market on the Sunshine Coast.

I do not accept the evidence of Mr Jones that the salesman told him that the exterior of Langley Park was to be exposed aggregate. I accept the evidence of Mr Hawthorne when he said that he did not know what the finish of the exterior of the building would be and that all he knew in March 1981 was what was contained in the brochure itself which made no reference to the finish save that the design, finish and fittings in the apartments would be of the highest standard and that the apartments would be "luxury apartments".

1981 witnessed a boom in the real estate market on the Sunshine Coast, but by the end of the year the position had changed dramatically. Sales fell and a severe decline occurred which has since continued. Mr Jones agreed to purchase a unit in a high rise development of residential units because he thought that, by signing the contract and paying the deposit, the boom would continue and he would be able to sell the unit, hopefully before the date for completion arrived or not long thereafter. He probably hoped that contemporaneous settlements could be arranged, thus requiring no bridging finance. He hoped that his gains would be tax free and thus swell the funds available for himself and his wife when he retired from politics. When the decline in the real estate market set in Mr Jones decided to get out of the agreements. His solicitors wrote in July 1982 giving as the specific reason for rescinding the contracts the fact that the building has not been constructed in accordance with the representations made to the applicants. An example was given in respect of the Schedules of Finishes contained in the agreements. No reference was made in the letter to the representation as to the caravan park.

I am satisfied that Mr Jones, upon reading the agreements and the provision in the Schedules of Finishes that the exterior was to be of exposed aggregate, either convinced himself that the salesman had said this or deliberately concocted that part of his evidence. I do not find it necessary to decide which of the two is the fact. Mr Jones said that if it were not for the representation as to the exterior being of exposed aggregate he would have had to reconsider his decision to buy. I reject this. Likewise I reject his evidence about what he said to the salesman in relation to the colour blue during the conversation on 30 March. Mr Jones was originally introduced to the Sunshine Coast area because his friend Mr Ngansky told him that capital gains were to be made there and that Langley Park would be the last of the high rise developments at Maroochydore. If Mr Jones genuinely wanted to purchase the units as an investment for his retirement I would have expected him to make enquiries himself from the agent or others about the likely returns from the investment: rentals, letting periods, vacany factor and outgoings. Yet no enquiries about these matters were made by him at all, whether from the agent or anybody else. He said in effect that he had some knowledge of these matters from other areas than the Sunshine Coast, but I do not accept this as an explanation for the absence of enquiry by him of such matters.

When Mr Jones realised in March 1982 that the Council had not made a decision to remove the caravan park he did not get in touch with the salesman or try and ascertain his whereabouts and confront him with what he had said some twelve months earlier. He said that he did not do this in effect because, as lies had already been told to him by the salesman, he saw no point in taking the matter further and being told more lies. I do not accept that explanation. The true reason is that Mr Jones placed no reliance upon the salesman's statement about the caravan park when deciding to enter into the contract. When he decided to buy the units it was a highly volatile seller's market on the Sunshine Coast. Mr Jones wanted to speculate and make as handsome a profit as he could as quickly as possible with minimum tax liabilities. Unfortunately for him, and indeed his wife, the market tumbled dramatically before he could realise his wishes. I am satisfied that Mr Jones and his wife would have bought the units whether Mr Hawthorne's statements about the caravan park were made or not. I do not accept Mr Jones' explanation that he proposed to retire and use the units either as an investment or have one as an investment and the other as a home in which his wife and he would live.

I have not drawn any distinctions in respect of any of the issues in the case between Mr Jones and his wife. I have done this because it is clear that Mr Jones was the only person who negotiated with the second respondent for the purchase of the units in question and that he was primarily, if not solely, responsible for all relevant decisions relating to the purchase of the units. His wife gave no evidence. Nor was any such distinction drawn by the parties themselves in evidence or argument.

Mr Jones said that he spoke to various people including his bank manager about obtaining moneys to settle the transactions. No firm arrangements were made by him in this respect. His evidence was vague and imprecise. No corroborative evidence was called from the bank manager or from the Speaker or Clerk of the Legislative Assembly to whom he said he spoke about his plans for retirement. I should add that he has not yet retired from Parliament, although he has not gained preselection for the next State elections. He gave other evidence which does him little credit. In particular, I have in mind the evidence to which I have already referred which shows plainly that he intended to put one of the units into the name of his son as a nominee for himself. This was a form of subterfuge to circumvent the legislation which he thought would pass through the New South Wales Parliament requiring members to disclose the pecuniary interests of themselves and their spouses. This evidence does not set the stage favourably for him on any issue of credit.

I find therefore that Mr Jones did not rely on the statements made by Mr Hawthorne to him about the caravan park. I find that no statement was made by Mr Hawthorne to Mr Jones that the finish of the building would be exposed aggregate. Indeed, even if such statement had been made I am satisfied that he would not have relied upon it. In the light of these findings I turn to the questions of law which arise in the case.

Only two representations remain on which reliance could be placed by the applicants as constituting misleading or deceptive conduct under s. 52: first, that the caravan park would be removed at some unspecified time in the future and second, that the exterior finish of the building would be exposed aggregate.

First, the representation about the caravan park. The statement by Mr Hawthorne that the caravan park would be removed in the future was, in my opinion, misleading or deceptive or likely to mislead or deceive within the meaning of s. 52. I reject the submission on behalf of the respondents that it was mere puffing. There was therefore a contravention of s. 52 by the first and second respondents.

The applicants' case was pleaded and conducted on the basis that, by reason of the misleading or deceptive conduct, they entered into the agreements for sale and suffered loss or damage. For a person to establish a claim for loss or damage pursuant to s. 82 there must be some nexus between the misleading or deceptive conduct and the loss or damage. As the applicants placed no reliance on Mr Hawthorne's statements about the caravan park they were not induced thereby to enter into the agreements for purchase of the two units. They would have agreed to buy the units whether the statements were made or not. It follows that the requisite nexus between the offending conduct and the alleged loss or damage has not been established. The applicants' claim for damages under s. 82 and for orders under s. 87 must therefore fail in relation to this representation.

The second representation is that the exterior finish would be of exposed aggregate. In view of my finding that Mr Hawthorne did not tell Mr Jones that the exterior finish of the building would be exposed aggregate, the only basis on which the applicants could successfully establish a case for damages under s. 82 is from facts not in issue. On about 6 August 1981 the first respondent decided to alter the exterior finish of Langley Park from exposed aggregate to a finish known as "GranoTrowl" with a "GranoImpact" coating. The first respondent did not inform the applicants of this decision. After the decision was made the first respondent tendered to the applicants for signature the forms of agreement which provided in the Schedule of Finishes that the proposed building would have an exterior finish of exposed aggregate. It was conceded by the first respondent, subject to one matter, that by tendering the proposed agreement in this form, the first respondent represented to the applicants that it was its then intention to so construct the building and that the representation was false and constituted misleading or deceptive conduct within the meaning of s. 52. The qualification to which the concession was subject was that the representation must be understood in the light of the form of the agreements as a whole, in particular clause 8 which reads as follows:-

"8. - TITLE

(a) the title to the land described in the First Schedule is subject to the provisions of the Real Property Acts.

(b) The said Unit is sold and the Purchaser shall take title thereto subject to the provisions of the Act and the Regulations thereunder in general and in particular to the following matters consequent upon registration of the relevant Building Units Plan:

(i) the unit entitlement and all matters contained in or endorsed upon or annexed to the relevant Building Units Plan;

(ii) the easements for support, shelter and services expressed or implied in favour of or against the proprietor of a unit and all ancillary rights thereto by virtue of the Act;

(iii) the By-Laws of the Body Corporate in force upon registration of the relevant Building Units Plan and as added to, varied, repealed or amended subsequent thereto;

(iv) all notifications, easements and restrictions (other than any mortgage) now noted on the Certificate of Title to the land and/or the Certificate of Title to the said Unit when it issues in accordance with Section 8(5) of the Act;

(v) any transfer, lease, easement or other right over the common property or any part thereof given to the Council, the South East Queensland Electricity Board, Telecom or other statutory authority.

(c) The Purchaser shall be entitled to premises with measurements and to a standard and specifications substantially in accordance with those set out in the specifications and plans hereinbefore referred to and the Schedule of Finishes hereto annexed."

Clause 30 of the agreement is an interpretation clause and it provides by paragraph (f) that the headings contained in the agreement are for reference purposes only, do not form part of the agreement and are to be disregarded in its interpretation.

It was submitted by the first respondent that the finish in fact applied to the exterior of the building, namely GranoTrowl with a GranoImpact covering, was substantially in accordance with the Schedule of Finishes which specified exposed aggregate as the exterior finish.

Exposed aggregate is a finish in which the outer layer of the aggregate in the concrete is exposed to view by chemical or physical means. This finish may vary considerably from building to building including variations in size and shape of the particles of aggregate exposed to view, their colour and texture.

GranoTrowl is a finish supplied over precast concrete panels. It is a form of render or mortar with an acrylic base, the acrylic acting as a finish for the particles of aggregate. GranoTrowl also varies in colour and texture from building to building. The colour is impregnated at the time of manufacture. GranoTrowl may be covered with GranoImpact for better protection against the weather. GranoImpact is an acrylic paint. GranoTrowl is used more extensively than exposed aggregate as an exterior finish for high rise residential buildings on the Sunshine Coast and the Gold Coast. Both GranoTrowl and exposed aggregate require long term maintenance. I am satisfied on the evidence that the exterior finish of Langley Park namely, GranoTrowl and GranoImpact, is at least as suitable a finish as exposed aggregate would have been and probably more suitable because of the greater protection it affords the building, including its structural steel components, from the elements, such as salt laden air.

The decision to change from exposed aggregate to GranoTrowl and GranoImpact was made about 6 August 1981 because the precast concrete supplier engaged by the builder of Langley Park wished to use a different method of constructing the concrete panels than that required by the contract drawings and specifications. The consulting engineers and the builder did not approve of the change. In the result it was decided to alter the exterior finish from exposed aggregate to GranoTrowl with GranoImpact. This resulted in more, not less, expense to the first respondent.

The two agreements for sale of the units in question are, so far as material, in the same terms. They are agreements for the sale "off the plan" by the first respondent of strata units in a multi storey building to be constructed. Common sense requires that agreements such as this be construed sensibly and in a practical manner. Obviously, as work proceeds on a multi storey residential building, problems will arise and changes to the plans, specifications and schedule of finishes will inevitably occur.

The schedule of finishes as described in the two agreements requires that the exterior of the building be of exposed aggregate, but it says nothing about its colour, size of the aggregate particles or texture.

In my opinion, an exterior surface on Langley Park, a multi storey residential building near the beach at Maroochydore, of GranoTrowl with GranoImpact is substantially in accordance with the Schedule of Finishes within the meaning of clause 8(c) of the agreements. Accordingly the representation in question did not constitute misleading or deceptive conduct or conduct likely to mislead or deceive within the meaning of s. 52.

If I had reached the opposite conclusion with respect to clause 8(c) the question would then arise whether the applicants relied on the representations. For the reasons given earlier I am satisfied that the applicants would have signed the agreements even if they had known before they did so that the exterior finish was to be GranoTrowl with GranoImpact and not exposed aggregate. They were not influenced in their decision to agree to buy the units by the statement in the Schedule of Finishes that the exterior would be exposed aggregate. Their claim for damages under s. 82 and other relief under s. 87 must necessarily fail.

The applicants submitted, as part of their case under the general law, not s. 52, that each of the representations by Mr Hawthorne was an innocent misrepresentation which induced the applicants to enter into the agreements for the purchase and justified them in rescinding the agreements. I have found already that the only representation relating to the caravan park made by Mr Hawthorne was that it would be removed at some time in the future and that it did not induce the applicants to enter into the agreements. I need not repeat what I said earlier. No statements were made by Mr Hawthorne about the exterior of the building being exposed aggregate. Hence this branch of the applicants' case fails.

The applicants also asserted, as part of their case under the general law, that they were entitled to rescind the agreements by reason of the representation contained in the form of the agreements tendered to them that the exterior of the building would be exposed aggregate. As I have already found that this representation did not induce the applicants to enter into the agreements this argument also fails.

The first respondent submitted that, even if the Court found that any of the representations alleged to have been made were in fact made, clause 25 of the agreements operated to prevent the applicants relying on them as a ground for rescission. Clause 25 provides:-

"25. - ENTIRE AGREEMENT

The Purchaser acknowledges that the Purchaser has not relied upon any representation made by the Vendor, the agents of the Vendor or any other person or corporation in entering into this contract other than as set out specifically herein and that the conditions herein contained constitute the entire agreement between the Vendor and the Purchaser notwithstanding any negotiations or discussions prior to the execution hereof and each party expressly acknowledges that it has not been induced to enter into this Agreement by any representation verbal or otherwise made by or on behalf of any other party which is not set out in the body of this Agreement or the Schedules hereto."

In view of my earlier findings it is not necessary to consider this submission.

The applicants submitted that, as the exterior of the building was GranoTrowl with GranoImpact and not exposed aggregate, the first respondent breached the agreements and therefore entitled the applicants to rescind the agreements. In view of my earlier findings that the exterior finish of GranoTrowl with GranoImpact was substantially in accordance with the finish set out in the Schedule of Finishes mentioned in the agreements (clause 8(c)), it follows that the first respondent did not breach the agreements.

The next question which arises in the case concerns the Companies Act 1961 (Queensland). The applicants allege that the agreements are illegal and void, in that by executing the agreements, the first respondent issued to the applicant as a member of the public an "interest" within the meaning of that word as defined by s. 76 of the Companies Act. It was said that the agreements purported to confer upon the applicants rights or options to participate, in common with the proprietors of other lots in the registered building plan, in the enterprise of obtaining profits by way of rent from the leasing of the lots to tenants from time to time by a third party under and pursuant to the Management and Agency Agreement referred to in the agreements.

Section 76 defines the term "interest" so far as relevant as:

"Interest" means any right to participate, or interest, whether enforceable or not and whether actual prospective or contingent -

(a) In any profits, assets or realisation of any financial or business undertaking or scheme whether in the State or elsewhere;

(b) In any common enterprise whether in the State or elsewhere in which the holder of the right or interest is led to expect profits, rent or interest from the efforts of the promoter of the enterprise or a third party; or

(c) In any investment contract, whether or not the right or interest is evidenced by a formal document and whether or not the right or interest relates to a physical asset, but does not include . . . . . "

There are then specified certain exclusions which are not relevant for present purposes.

"Investment contract" is defined by s. 76 as meaning "any contract, scheme or arrangement which in substance and irrespective of the form thereof involves the investment of money in or under such circumstances that the investor acquires or may acquire an interest in or right in respect of property whether in the State or elsewhere which under or in accordance with the terms of investment will, or may at the option of the investor, be used or employed in common with any other interest in or right in respect of property whether in the State or elsewhere acquired in or under like circumstances."

Section 81 in effect prohibits any person except a company from issuing or offering to the public "any interest" for purchase. Section 76 defines "company" as meaning a public company and thus the first respondent is included in the prohibition in s. 81.

The question is whether the subject matter of the agreements constitutes an "interest" within the meaning of s. 76. The applicants conceded that so far as the agreements provide merely for the sale of the home units and the undivided share in the common property the first respondent could not be said to be inviting the public to purchase interests within the meaning of s. 76. The argument relied heavily on clause 17 of the agreements and the fourth and fifth schedules thereto.

Clause 17 provides:-

"17. - MANAGEMENT AND AGENCY AGREEMENT

(a) The Purchaser agrees that on registration of the Building Units Plan the Vendor as sole proprietor may procure that the Body Corporate will enter into a Management Agreement and/or any Agency Agreement with such person, including the Vendor, as the Vendor may nominate in the form of Agreement respectively set out in the Fourth and Fifth Schedules hereto, for the purpose of better seeing to the proper functioning, operation and management of the said building and/or for the purpose of letting any part of the building and/or for the purpose of ensuring the smooth and proper functioning of the duties and powers of the Council of the Body Corporate.

(b) The Vendor shall be entitled to grant or procure that the Body Corporate shall be entitled to grant leases, licences or easements over common property for the provision of such services as will be of benefit to the Body Corporate or to members or future members of the Body Corporate or adjoining owners including any licence or licences to be granted pursuant to the terms of any Management Agreement and/or Agency Agreement provided for and referred to in paragraph (a) of this clause. This provision shall constitute notice to the Purchaser as a person having an interest within the meaning of Sections 22(6) and 23(4) of the Act, and consent and approval by such purchaser to any such proposed lease, licence or easement."

The fourth schedule to the agreement sets out the terms of a proposed Management Agreement between the body corporate and a prospective manager. It is unnecessary to refer to the provisions of the schedule in detail. They may be summarised as provisions whereby the body corporate may appoint a manager to manage, administer and caretake the common property to keep it in good and serviceable repair and maintain it. The manager is to be responsible, amongst other things, for supervising the body corporate's employees in gardening, cleaning and maintaining the building and for its repair. The manager may pledge the body corporate's credit to obtain materials in the performance of his duties.

The fifth schedule sets out the terms of a proposed Agency Agreement between the body corporate and an agent which it may appoint. It is not necessary to set out in full the provisions of the fifth schedule, so I shall summarise them. The body corporate may appoint the agent to carry on in the building the business of letting units together with all associated services commonly rendered in connection therewith in the Maroochydore and nearby areas other than the provision of food and beverages (clause 1(a)). The agent is to provide this letting service for such of the owners of units in the building as may require it (clause 1(b)); to maintain and staff, either in the agent's own premises or in the common area in a location to be agreed upon, a reception desk to provide the proposed letting service (clause 1(c)); to supervise the standard of tenants of all such lettings (clause 1(d)); and to erect or procure the erection of signs in or about the building to promote and foster the letting business (clause 1(f)). The body corporate covenants with the agent that it will not lease or grant any licence in respect of any part of the common property of the building to any one other than the agent for the purpose of the business of letting units in the building; and that it will not grant to anyone other than the agent any right to provide certain services without the written consent of the agent (clause 2A). Those services include the hiring of goods such as television sets, pots, mattresses, cutlery, furniture and so on. The agreement is to remain in force for three years from its date unless sooner terminated in accordance with certain special provisions (clause 11).

It was submitted by the applicants that the offers to sell on the terms set out in the agreements were offers to the public of rights to participate or interests in the profits, assets or realisation of a financial or business undertaking or scheme (para. (a) of the definition of "interest" in s. 76). Alternatively, it was submitted that those offers were to the public of rights to participate or interests in a common enterprise in which the applicants were led to expect profits or rent from the efforts of the first respondent as vendor, the body corporate or the proposed manager of the building or the proposed agent for letting units in the building (para. (b) of the definition). It was submitted, in the alternative, that those offers were offers to the public of rights to participate or of interests in an "investment contract".

Section 76 of the Companies Act (Queensland) and its equivalent in other States has been considered by the Courts in various cases. In Australian Softwood Forests Pty. Limited v. Attorney-General for N.S.W. (1981) 36 A.L.R. 257 Mason J., with whose reasons for judgment Gibbs C.J. and Stephen J. agreed, referred to the generality and width of the definition of "interest" in the section. His Honour said (at pp. 262 and 263):-

"There are real difficulties in the suggestion that the court can read down the very comprehensive definition of 'interest' by reference to the supposedly unintended consequences of a literal reading on everyday commercial transactions. The definition is so general and all-embracing that it is impossible to say that it necessarily excludes particular transactions which appear to be covered by the general words. The hazards of adopting such a course are not dispelled by the absence of a supporting context. It would be different if we could glean from the legislative provisions an overall purpose which, being limited in scope, justified a reading down of the definition. Unfortunately in this case the search for a legislative purpose takes us back to the very words of the definition for the intended scope of the operative provisions depends so heavily on the comprehensive language of that definition. As Young CJ observed in A Home Away Pty. Ltd v. Commissioner for Corporate Affairs (1980) 5 ACLR 299 at 302; (1980) CLC 34,444 at 34,446, in discussing the meaning of 'interest' as defined in s 76(1): 'If it were said that we should give effect to the purpose Parliament wished to achieve, we must first ascertain the purpose and that can only be ascertained from the language used."

In Munna Beach Apartments Pty. Limited v. Kennedy (1983) Qd. R. 151, McPherson J. held that the sale by a vendor which is not a company as defined in sub-s. 76(1) of the Companies Act (Queensland) of a proposed building lot to be registered under the Building Units and Group Titles Act 1980 (Queensland) together with the appurtenant interest in common property pursuant to that Act is not the issue or offer of an interest in an investment contract as defined in sub-s. 76(1) and is not prohibited or rendered illegal by sub-s. 80(1). Counsel for the defendant purchasers relied in that case only on para. (c) of the definition of "interest" which brings within the definition an "investment contract".

In Applewood Pty. Limited v. Dadinbridge Pty. Limited (1983) 1 Qd. R. 412 Connolly J. held that the ownership of a home unit and a share in common property did not answer the description of a financial or business undertaking or scheme within the meaning of para. (a) of the definition of "interest" in s. 76. His Honour also held that neither paras. (b) nor (c) of the definition applied.

The Full Bench of the Supreme Court of Queensland endorsed this opinion of Connolly J. in Brisbane Unit Development Corporation Pty. Limited v. Deming No. 456 Pty. Limited, judgment delivered 24 March 1983. In delivering the judgment of the Court Connolly J. said (at p. 15):-

"Giving the phrase ('a financial or business undertaking or scheme') the wide import which is called for there is, in my opinion, nothing about the ownership of a unit and a share in common property which answers the description financial or business undertaking or scheme. True it is that the unit holders through their elected body corporate must take appropriate steps for the management and maintenance of the building but this does not amount to the conduct of a financial or business undertaking or scheme. Paragraph (b) can have no application. The only common enterprise in which the unit holders will be involved is the running of the building and there is no suggestion in this case of any expectation of profits, rent or interest from the efforts of the promoter or a third party. Nor do I think that it is right to say that any unit holder will acquire a right to participate or an interest in an investment contract . . . In my view the payment of the purchase price for real estate is not aptly described as the investment of money in circumstances in which the investor acquires an interest in property."

I respectfully agree with the views expressed in those three judgments of the Supreme Court of Queensland.

It follows that the applicants cannot successfully assert that the two agreements in the present case, or the offers to sell, fall within s. 76 in so far as the agreements are for the sale of home units coupled with interest as tenants in common in the common property. It is the provisions relating to the Maintenance Agreement and the Agency Agreement on which primary reliance was placed by the applicants and to which I now turn. The provisions of the agreement relating to the Management Agreement and the Agency Agreement are in one sense independent of each other and of the principal provisions for the sale and purchase of the home unit and share in the common property in that clause 17 (which brings the fourth and fifth schedules into play) merely confers a power upon the first respondent as vendor to procure the Body Corporate to enter into either or both of the agreement, and the power cannot be exercised until the Building Units Plan has been registered. I do not construe clause 17 as doing more than conferring a power upon the first respondent.

Clause 17 and the fourth and fifth schedules are, however, part of the agreement for sale; they are ancillary to the principal subject matter of the agreement, namely the sale of the unit and an interest in common property; and they must be read in the context of the agreement as a whole. What the applicants acquired were home units together with interests as tenants in common in the common property. The services which may be provided under the Management and Agency Agreements only become relevant if the applicants take title to their units and if the Body Corporate appoints a managing agent or a letting agent. If the first respondent exercises the power conferred by clause 17 and procures the Body Corporate to enter into either or both of the agreements then the applicants may enjoy the benefits which they offer.

With these general observations in mind I turn first to para. (a) of the definition of "interest" in s. 76. The words "financial or business undertaking or scheme" are of the widest import. Mason J. considered the elements of such a scheme in the Australian Softwood Forests Pty. Limited Case at pp. 261 and 262. I need not repeat what his Honour said.

In my opinion, para. (a) does not apply to the agreements in question or the offers constituted by tendering them for signature. The applicants were by those agreements simply acquiring or agreeing to acquire estates in fee simple in the two units together with appurtenant rights as tenants in common in the common property and the possibility that, upon registration of the Building Units Plan, the first respondents may procure the Body Corporate to enter into either the Management Agreement or the Agency Agreement or both. The Management Agreement, if entered into by the Body Corporate with some manager, will provide for the management, caretaking, administration, maintenance and use of the common property. If the Agency Agreement is entered into by the Body Corporate with a letting agent it will provide a facility for the owners of units in the building, enabling them to use the services of the agent to let their units. They are not obliged to engage the agent. They may not let the units at all. If they do, they may or may not engage the services of a letting agent and, if they do, it may not be the agent appointed by the Body Corporate. If the agent is appointed by the Body Corporate and is engaged by the applicants then the terms of the agency, including the agent's commission, will be negotiated by the applicants with the agent. The essential terms of the Agency Agreement relate to the obligation of the agent to provide its letting services to such of the owners of units in the building as require them together with associated services, for example, the provision of bedding, cutlery and furniture. The agent appointed by the Body Corporate would have the sole right to use the common property to conduct that business, for example, from a reception desk in the common areas. But there is no restriction upon the right of a unit owner to engage the services of any agent he wishes. The ownership of a unit and a share in common property together with the possibility of associated services for management and maintenance of the building and the letting of units do not answer the description of the phrase "financial or business undertaking or scheme", notwithstanding its wide import.

In my opinion there is no relevant "common enterprise" within the meaning of para. (b) of the definition of "interest". There is no contractual relationship between the owners of units inter se, no sharing of rents or profits. If the applicants let their units, the rental received by them will not be shared by anybody else, nor will they be entitled to receive a share of any other owner's rental. The applicants are not led to expect profits, rent or interest from the efforts of the first respondent as promoter or anybody else. All the Body Corporate will do, if it enters into the Agency Agreement, is to establish a facility for the appointed agent to carry on its business of letting units and providing associated services to owners of units who wish to engage the agent's services. That is not leading the applicants to expect financial gain from the efforts of the first respondent or a third party.

Nor is it correct to say that the applicants will acquire rights to participate or interests in "investment contracts" and thus fall within para. (c). Much of what I said earlier with respect to paras. (a) and (b) applies to para. (c), so I need not repeat what I said. I would add only that the letting of the units in the building by the applicants through the agent approved by the Body Corporate, assuming these events occur, is not the use or employment of the applicants' rights in common with the rights of other unit owners. Each owner has the right to let his unit if he chooses. If he does so choose he may or may not use the services of an agent and not necessarily the agent appointed by the Body Corporate. The owner's rights are not properly described as being used or employed in common with the rights of their fellow unit owners.

The argument based on s. 76 of the Companies Act fails. I need not therefore consider two further arguments relating to s. 76 advanced by the first respondent, namely that, if the relevant transactions did involve the offer of an "interest" as defined by s. 76, the agreements are not thereby rendered unenforceable; and that the provisions of the Building Units and Group Titles Act 1980 prevail over the provisions of s. 81 of the Companies Act (now s. 171 of the Companies (Queensland) Code).

In the result the applicants have failed on the issue of liability. The question of loss or damage suffered by the applicants does not therefore arise. There remains the first respondent's cross claim for damages.

The first respondent cross claims against the applicants alleging that it duly rescinded the agreements following the failure of the applicants to settle them, forfeited the deposits and suffered loss or damage which it seeks to recover. The applicants assert in answer to the cross claim that the first respondent was not able and willing to complete the purchase on 21 July 1982. In support of this assertion the applicants relied on clauses 4 and 16 of the third schedule to the agreements which sets out proposed alterations to by-laws contained in the third schedule to the Building Units and Group Titles Act 1980.

Clauses 4 and 16 of the agreements provide:-

"4. - CAR SPACE

(a) The Vendor will ensure that prior to settlement the By-Laws of the body Corporate brought into existence upon the registration of the building Units Plan will be amended so as to grant to the proprietor for the time being of the said unit the exclusive use for car parking of that part of the common property outlined on the plans of car spaces annexed hereto without payment of any fee.

(b) Notwithstanding the provisions of paragraph (a) of this clause the Vendor may elect to include the car space as part of the said unit in the relevant Building Units Plan and if the Vendor so elects then the terms of the paragraph (a) of this clause shall not apply and the By-Laws set out in the Third Schedule hereto if altered pursuant to clause 16 hereof shall be varied accordingly.

16. - BY-LAWS

The Purchaser agrees that on registration of the Building Units Plan the Vendor as sole proprietor may do such acts and things as may be necessary to cause the By-Laws set forth in the Third Schedule to the Act to be amended in accordance with the amendments set out in the Third Schedule hereto and any variations thereof as the Vendor may in its absolute discretion deem desirable PROVIDED HOWEVER that the Vendor shall make no such further amendment as shall materially prejudice the interests of the Purchaser."

The proposed by-law 38 set out in the third schedule to the agreements provides:-

"38. -

The proprietor for the time being of each unit in the building shall be entitled to the exclusive use for himself and his licensees of the car space or spaces the identifying number or numbers of which shall be notified in writing by ACFOLD INVESTMENTS PTY. LTD. to the Council of the Body Corporate within twelve (12) months after the date of registration of the Building Units Plan provided that in respect of those car spaces allocated pursuant to this By-Law, the Council is hereby authorised to vary the allocations so made and to transpose car spaces from one unit to another unit at any time and from time to time on the written request of the proprietors of the units involved. A sketch plan is set out hereunder for the purpose of clearly identifying the said car spaces. The identifying number as set out in such sketch plan shall be used by ACFOLD INVESTMENTS PTY. LTD., for the purposes of its notification to the said Council of the Body Corporate. (For the purposes of this Agreement, the sketch plan referred to in By-Law 38 above is not in the Third Schedule reproduced, but shall be in the form of the plan of car spaces hereinafter appearing). (NOTE: The words in parenthesis in By-Law 38 will not form part of the said By-Law).

The relevant Building Units Plan No. 4890 was registered on 28 April 1982. By-laws, conforming with the third schedule to the agreements, were lodged with the Registrar of Titles and later registered. The By-laws as registered state that they were adopted by a special resolution passed, in the case of by-law 38, by resolution without dissent. Registered by-law 38 is in identical terms with that set out in the third schedule to the agreements.

By notice dated 30 April 1982 the first respondent gave notice pursuant to by-law 38 that car parking spaces for each of the lots in the Building Units Plan shall be allotted in accordance with the plan annexed to the notice.

It was submitted by the applicants that the first respondent could not comply with the contractual requirement (clause 4(a)), namely, that it give each of the applicants the "exclusive use" of the relevant car space, since a right to "exclusive use" of the space was not created in accordance with the requirements of s. 30 of the Building Units and Group Titles Act 1980, in particular sub-s. (7) thereof which provides:

"(7) Without limiting the generality of any other provision of this section, a body corporate may, with the consent in writing of the proprietor of a lot, pursuant to a resolution without dissent make a by-law in respect of that lot conferring on that proprietor the exclusive use and enjoyment of, or special privileges in respect of, the common property or any part thereof upon such terms and conditions (including the proper maintaining and keeping in a state of good and serviceable repair of the common property or that part of the common property, as the case may be, and the payment of money by that proprietor to the body corporate) as may be specified in the by-law and may, in like manner, make a by-law amending, adding to or repealing any by-law made under this subsection."

In my opinion by-law 38 is a valid exercise of the power conferred upon a body corporate by sub-s. 30(7) to confer on proprietors of lots "the exclusive use and enjoyment" of part of the common property, namely the car space. I reject the argument that the sub-section requires the allocation of a particular and identified car space to be made by the by-law itself. I adopt the following passage from the judgment of G.N. Williams J. in Dainford Limited v. Smith 20 October 1983 (unreported) where his Honour considered a similar submission in respect of a substantially identical by-law relating to car spaces:

"In my opinion, section 30(7) does not require the by-law itself to identify the part of the common property in question. It is sufficient if the by-law provides a means of identification, and the consequence of an allocation thereunder is that a right to exclusive use as recognised by the section is created. The by-law adopted in this case is a commercially realistic way of creating the rights referred to."

A subsidiary argument was put by the applicants to the effect that clause 16 empowered the first respondent to cause by-laws to be registered which could contain such variations to those set out in the third schedule to the agreements as the first respondent in its absolute discretion deemed desirable. This was said to conflict with clause 4(a) so that the applicants could not have been assured that they would obtain the right to the "exclusive use" of car spaces. The contractual provisions about car space must be read sensibly. Clause 16 confers a general power on the first respondent to vary the by-laws in the third schedule to the agreement provided that no such variation would materially prejudice the applicants' interests as purchasers. Clause 4 is directed to a specific subject matter, namely, conferring upon the applicants the exclusive use of a car space. The clause 16 power could not in my view be exercised contrary to the requirements of and the rights conferred by clause 4.

It was not disputed by the applicants that, if they failed on the issue of liability in their own case and failed on their argument about the car spaces, the first respondent should succeed on its cross claim, although the quantum of loss or damage would have to be determined by a separate hearing. The first respondent, it will be remembered, rescinded the agreements and forfeited the deposits upon the failure of the applicants to complete their purchases.

I will not make orders at this stage dismissing the claims by the applicants; but I will adjourn the matter to a date to be fixed. The future course of the matters may then be discussed and appropriate orders made. The order of the Court is that the matters be adjourned to a date to be fixed.