Karawi Constructions P/L v Bonefind P/L
[1992] FCA 1057
•6 Nov 1992
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FEDERAL COURT* 072481260 ; # 2/31
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TRADE PRACTICES - whether conduct misleading - repreeentation
as to area of prenieee,
Trade Practices A c t 1974 (Cth) - 8 - 5 2
Parkdale Cuatom Built Furniture P t v Ltd v Puxu Ptv Ltd (1982)
149 CLR 191
ptv L ~ Q v w a e Austrgrlia Ptv Tat4 (1992) 107 ALR 291
mrk~ v Roas Lucas P M T l t Q (1985) 158 CLR 661
The Raints wrv P t v Ltd v pJurmnu (1988) B0 ALR 525
I CONST- PTY. LI- V . BONEFIND PTY. LIMITED &
6 November 1992
SW*
No. NG304 of 1991
Beaumont J.
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B E m E N l - C PTY, LIMllTED
Applicant
AND NEPIND RTY. F i r s t respondent
Second respondent
D JOHN DAVEY
Third respondent
Fourth reapondent
JOHN G. GLASS REAL m Pm. LIMITED
BONEFIND PWm LIMITED
First croas-reupondent
Second crose-rerpondont Third croas-respondent GQ~ANI Beaumont J.
DATE: 6 November 1992 MINUTE OF ORDER
8 * t - ( C&)
9 1
1
SOUTH WW 1 No. G304 of 1991 1 1
BETWEEN I i LrNITgD Applicant
, AND M
GYmA DEVELOPMENTS PTY
LIlITED * Second respondent ALgERT EDWARD JOHN DAVEX Third reapondent dOHN G. PTY. LIMITED Fourth respondent JOHN G. GLASS REAL ESTATE &3!Lxmw
BONEFIND PTY f lIMITED First cross-respondent
Second cross-respondent ALBERT EDWAWI JOHN D A W
Third cross-respondent
Beaumont J .
DATE: 6 November 1992
(On a~~licant'a claim)
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INTRODDCTION
By application filed 18 June 1991, Karawf
Constructions Pty. L i m i t e d ( the applicant ) eought orders
pufeuant to sa.82 and 87 of the m d e Practices 1974 ("the A c t " ) againert four named raepondente.
The substance of the claim is an allegation of
'6
misleading and deceptive conduct in the form of an express misrepresentation, in breach of s .S2 of the Act , occurring in
the course of a purchase by the applicant of a developraent
property at 255 New South Head Road, Edgecliff ("the
prope;rtyU}, ~t a l l t ines t h e applicant acted through its
managing director, Mr. Ken HcDougall, a property developer.
The first respondent, Bonef ind Pty Limited ( formerly
known as Bojac Maieon Constructions P t y Limited) was
establiehed as manager of a joint venture to acquire the
property. The second reepndent , Gymea Developments Pty
Limited (formerly known as Bojac Maieon Consultancy ~ t y Limited) provided management coneultancy and accountancy services. A t a l l material times both the first and aecand
reepcndents acted through t h e i r director, t h e third respondent
W . Albert Davey, who is an accountant involved in the
preparation of feaeibility studies for building projects.
The fourth respondent 1s John G . Glass R e a l Estate
Pty. Ltd. ("Glass Real Estaten), a real estate agency which is
managed by Mr. John Glaea w i t h t h e assistance of hie brother
Mr. Robert G l a e u , and which is involved in selling and letting
development projects and office space in the Edgeclif f region.
By an agency agreement dated 20 February 1990, W r *
Davey engaged the fourth respondent, on behalf of the first
respondent, to market for sale the property, which then
'6
consi~ted of land on which a three stor'ey office building
(with five car parks) waa being constructed,
Blaae Real Eetate intereated H r . McDougall, w i t h
wham it had a history of commercial dealings, in the property. In the pre-sale negotiations, and in particular in the promotional brochure which was compiled by Glass Real Estate
after receiving information from the second respondent and
paesed on to Mr. HcDougall in early April (exhibit A) , certain figurea were given as to the net lettable area of the building. In particular, the figure of 180 square mstree
appeared as the total net lettable area. ~t 1s not seriouoly in conteet that t h i s figure w a s of major importance in determining or estimating the value o f the project, which was designed and intended as a commercial
leaaing proposition.
The applicant alleges it relied on this figure of
180 square metree only to discover, some t h e after the
purchaee, that the building had a net lettable area of only
137.4 square matrea,
In the courae of a hearing which extended over eight
. - daye, and which wae complicated by competing croee-claim as
'%
between the f i r a t , third and fourth respondents, i t was
convenient to make a series of findings ae the matter
progressed ae follows.
1: me Reoresentation
The applicant alleges, in para. 7 of its statement
of claim, that in o r about April 1990 , prior t o and at the
time of making the aale agreement, the first respondent by itsoorvanta and agents represented to the applicant, in order to induce the applicant to enter that agreement, that the
building under construction had a net lettable area of 160
square metres, together with five car spaces. That allegation is made in the same terms against the second, third and fourth respondents (paras. 8 f 9 and 10 of the statement of claim, reepectively). The particulars given of the representation pleaded in paras. 7 - 10 of the statement of claim are that the
representation was in each case express, in writing, and contained in documents encloeed with a letter from the aecond FEDERAL COURT-,
reepondsnt, signed by the th i rd respondent, dated 5 April 1990
and addressed to the fourth respandent. A copy of this
letter, and enclosuleea, was paaeed on to the applicant by
Glaes R e a l Estate a8 part of Exhibit A.
Bxhibit A includee a letter dated 5 April 1990,
written by the second respondent to W . John Glass of Glase
'G
Real Eatate , in which, amongst other things, there is maid to be enclosed a feasibility of the project, Behind that letter
i a a document ("folio 3 " ) i n the fallowing termsr
PROJRCTt coaanercf a l bud l d i n g
3 floors w i t h car parking far 5
PRICE: $1 , l Mil l ion (COMPLgTEI)) .
Exhibit A then includes a number of plans and other financial
details.
A t the rear of the document i a a computer print-out
headed "155 NSH RD-S", dated 4 April 1990 at 9.10 am. This
appears to be the feasibility (and there is other evidence in
exhibit 19 that this was indeed the feasibility) which was
encloued w i t h the letter of S A p r i l 1990. In th ie feanfbility exercise there is the etatement, Wett lettable area 1944 SQET
180 SOM."
On the folldwing page is another document, alao headed
"155 NSH RD-S", dated 4 April 1990 at 9.13 an, containing a L,
different feasibility exerciee, but which i s aluo based on the
figures "Nett lettable area 1944 SQFT 180 SQWh.
There i s no doubt that them feasibility exercises were
produced by Mr Davey and h i s company, There i a no evidence, however, t h a t fo l io 3 in exhibit A was produced by Mr Davey or
his companies or with his exprese authority.
I find, as a matter of prinary fact, that exhibit A
contained the representation to which I have referred,
Flndfna 2 : The m e u u of the reureaentatio~
In my view, exhibit A carried w i t h it the representation
that the building described in the plans in it would have a
net lettable area of 180m2, together with f ive carparking placea, This statement was not a mere matter of opinion,
contrary to what was urged on behalf of the f i x e t , second and
third reepondente.
It is true that reference fa made to the net lettable
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EYT BY:
area in one part of exhibit A in the context of feasibility exercise8 only. It may be argued that, for instance, in
eetfmating renta which could be obtained or estimating a sale price for a bu%lding, an element of opinion will uaually be
presient. But the preeent aontext i e different. The statement
made w i t h respect to net lettable area is to be understood as
a statement made with rtapect to an objsctive fact: something +
which can be measured by an appropriate etandard. In t h i s sanae t h e natter does not rest on mere opinion. Thus, interpreted in the ir ordinary maaaing, the material statements
made in exhibit A constituted a representation that the
building described in the plan8 in exhibit A would have a n e t
lcttable area of 180m2 and five carparking spaces.
3; The falaitv - of the renpaggntatian
On behalf of the applicant, reliance is placed upon the
expert opinion evidence of W P S Graham, ragistered surveyor.
In h i s i n i t i a l report dated 25 Harch 1991, hk Graham stated that he had determined the net le t table area of the property
a. 137.4m2. He said, '[tlhese aeeas were determined by survey to define the bearings and distances of all the internal wallu and the computations of these bearings and distan~es.~ Hr
Graham amplified t h i s report in a further report dated 1 2
December 199 1, giving detailed reasons and calculations to
supgort his conclusion. In particular, Mr Graham indicated
h i s method for determining the net l e t tab le living area of the
FEDERAL COLRT-
building, which ia different fron the Building Ovnere and
Managers Asrociation of AuBtra1i.a L i m i t e d method of
noasurement of ten used by buildera. Mr Graham exgreurred the
opinion that this waa an inappropriate method for determining
the net lettable area of a building.
On behalf of the f irst , second and third reapondents (but 'C
not the fourth respondent) the point i e taken that there is no
evidence that what Mr Graham surveyed i r the property
deecribed in exhibit A,
It is true that the plans contained w i t h i n exhibit A,
being building plants, were subsequently mended. However, the
building plans that were finally approved (axhibit D) indicate that the original plans, dated 1989, were amended on 19 March
1990 s h p l y t o enclose a stair at the lower ground floor.
There ie also unchallenged evidence that the building, as erected, was in accordance with the building plan as amended
and approved by the local council. In hie report, Hr Graham said that "stair wells, lift wells, walls and pillars are excluded from the nett lettable areaw. It follows that the amendment made to the plans i n March 1990 was not material for present purposee. The eecond point taken on behalf of t h e f i r a t , second and
third (but not the fourth) respondents ia that expert evidence to the contrary of Mr GxahamJs was given by Mr B G Carpenter,
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a builder/developer who built t h e aubject premises. Mf
Carpenter warn called on behalf of the firm+, aecond and third
reapondente. He gave evidence in chief that, by reference to
plan8 approved a t the developnrent application mtage (exhibit
21, he made oome calculations o f the net lettable area. Those calaulations were tendared in evidence (exhibit 13) and they
showed a net lettable area of 180m2, comprising a lower ground
*;
floor area of 48n2, a ground floor area of 66m2 and a first
floor area of 6 60' .
In cross-examination, Hr Carpenter conceded that theee
were no more than rough calculations. Since his calculations were made by reference to a development application plan only,
I muet ptefer the opinion of Mr Graharn, who, as a registered
surveyor, went &out h ia task in what appeare to be the usual
professional mnner. Mr Graham was not croes-examined in any
relevant eenae. Mr Graham's report, on its face, appears to
m e to be an acceptable surveying exercise.
For those reasans, 1 prefer the evidence of Mr Graham to
that of Mr Carpenter in aa far as they may appear to conflict.
I add, that in fairness to Mr Carpenter there is not, in my view, any real conflict at all. Mr Carpenter was carrying
out a preliminary eethate of what, in his v i e w , would be the
net lettable area. As Mr Graham pointed out, builders using some methods of calculating net l e t t a b l e area may proceed upon
assumptions which are not accepted by members of the surveying
~ h u s , I have come to the conclusion that the building described in the plans in exhibit A had a net lettable area of 137 .4m2. In ao far as exhibit A should be construed as making
a representation that the net lettable area was 180m2, t h i s
representation was falee.
I
. m .
4: Raliance
m mDougal1 gave the following evidence in chief that he
relied upon the regreeentation as to the net lettable area:
" I f [the lettable area] had been any less than 180m2
net ... it just wouldn't have been feasible to bui ld
the jolly thing*.
He elaborated that evidence, and on t h i s point I accept h i s
testimony.
Under cross-examination Mr Mcbugall went on to say that he gave a folder aimilor t o exhibit A to a financier, CBFC,
for the purpose of obtaining finance for the project. There
ia evidence that the applicant had received verbal approval
for finance before the exchange of contracts, and that written
confirmation of that approval issued after exchange.
A number of matters have been put on behalf of the
reepondents in this connection.
Firat, it is submitted, on behalf of the aecond
respondent, that its role was such that no finding of reliance of any relevant kind rhould be made i n reepeat of any of i t s
conduct. It is true tha t in exhibit A the only matezial that
hp l i ca tee the eecond respondent ie the circu~netance that the
letter dated 5 April 1990 (included in exhibit A) is written
on i t e letterhead. As hae been noted, the feaeibility 'c. exerciaes which appear at the rear of exhibit A did not appear
illmrediately behind that letter. However, the letter said that a feasibility a£ the project wao enclosed, and it appears from
other evidence that the feasibility exercises contaiaed a t t h e
rear of exhibit A (which referred to a net lettable area of
1 8 b 1 ) were in tact enclosed with the letter dated 5 ~pril
1990. Thus the aeeond respondent was very much involved in
making the false representation with respect to net le t table
area. In nty view, the role of each of t h e first, second and
third respondents in t h e making of the representation was
nignificant in i t a own right, and I do not think it i m
appropriate to separate the second respondent in the way
suggested by i t s counsel. Gecondly, it i s eubxuitted that regard should be had to the admitted fai lure by Mr McDougall to check the net lettable area h h e l f . Emphasis is also placed on the fact that the
applicant had t h e benef i t o f lggal advice before entering i n t o
the contract of purchase.
FEDERAL COURT-
For present purpaeea i t may be accepted that the
applicant failed to check or verify t h e accuracy of the misrepresentation. It may a100 be accepted, ae i s common
ground, that Mr McDougall wae an experienced real eatate agent
and property developer. Nonethelese, the evidence haa made it
cleax that the applicant and t h e applicant's lawyers actiag in
the conveyancing transaction did not in fact carry out any
*r
such check.
There may be Ccl8e8 under 0 , 52 of the Act where, in
considering whether, in all t h e circumstances, the conduct of
the respondent was misleading or l i k e l y to mislead, a failure
by the applicant to check or verify a representation m a y
negate reliance. For instance, a coneumer might reasonably be
expected to l o o k at a label on a large item of furniture (see
Parkdale Custan Built Fur~iture Pty Ltd v PUXU Pty Ltd (1982)
149 CLR 191). But that kind of case, which must depend on i t s
own circumstances, is not apposite to the preeent case. Mr
McDougallts evidence wae that he relied upon t h e representation complained of, and took t h e matter no further. It follows, subject to a matter of law to be considered below, that I ~hould Llnd that the applicant, as a matter of fact ,
relied upon the representation.The matter of law which has been raieed is that Special
Condition 26 of the Agreement for Sale (exhibit B) provides
that:
"Notwi thatanding anything herein contained or
implied or any rule o f l a w or equi t y to the contraqy t h e Purchaser hereby agree#, declare8 and
acknowledges that r
( a ) he has not -lied and doer not rely in enter ing i n t o thia egreernent or in the perfomance of
t h i a agreearen t upon a n y warran ty ,
representation or @tatanrent whether oral or In
tmfting made or published by or on behalf of the Venddr except such ao may be expressly
provided herein: . . .
On behalf of the fourth respondent, reliance i s placed
upon another disclaimer provision, which i s found a t the rear
of its brochure, exhibit At
"The information contained herein has been p-repaned
w i t h care by our Campuny or it has been supplied t o
us by apparently relfable sources. I n e i t h e r caee
have no rea~on to doubt its coaapleteneas or
accuracy.
Howeve*, nei ther John G G l a s s Real Gstate P t y Limited, i t s employees OF I t s c l i en t s guarantee the
information nor doe^ it, or is f t intended, t o fom
part of any contract. Accordingly, a l l interested p a r t i e s should make their own enquiries to verify
the information as w e l l as any additional or
supporting infornution supplied and it is the
responsibility of interested parties t o sati~fy thewelves in a l l reapects."
In Lezam ~ t y L t d v Seebridge A u s t r a l i a Pty Ltd ( 1 9 9 2 ) 107 ALR 291 the Full Federal Court explained the ecope, if any,
for the operation of a disclaimer proviaion in the present
kind of context, It i a well established that the iesue of
whether, f o r the purposes of S, 5 2 , conduct is misleading or
l i k e l y to mislead, is a matter to be addrerspiod in all the circumstances of the case (see Puxu above) That being so, it ia no anuwer in law to point to provi~iona such ae Special Condition 26 of the Agreement for Sale or the disclaimer at
the rear of exhib i t A, if , i n the circumstances o f . the
particular caee the evidence shows that, ae a matter of fact,
the applicant relied upon the misrepreaentation alleged.
In my opinion, notwithstanding the preeence of Special
Yr
Condition 26 end the printed diaclaimcr, the applicant actually relied upon the miarepresentation. In those
circumetances, neither the Special Condit ion nox the disclaimer may be relied upon &a an answer to the applicantre
claim.
A further natter was put on behalf of the fourth
respondent which, in eaeence, is t h e wconduit pipe" argument
conaidered in Yorke v Roe8 Laicas Pty Ltd (1985) 158 CLR 661 at
666 (see also The Saints GaJlery P t y Ltd v Pluahaer (1988) 80
ALR 525 a t 530-531). That is, where an agent nakao i t clear,
expressly or by implication, that he ie merely paeaing on information eupplied by the principal, it may be propmr to i n f e r that the agent has not himself engaged in misleading or deceptive conduct. In ~ u r k e , the information in queation
involved the profits earnt by a business. In Plumnrer, the information concerned the hitstory o f a painting. In those caaes, one can appreciate that a member of the public dealing with the agent could well presume that t h o ~ e matters wore not within the agent's knowledge, and all that the agent was doing
was acting aa a messenger carrying infoxmation from the vendor to the prospective purchaser, In that circumstance, it may be wrong to hold that the agent made the representation in its own right and waa engaging in misleading conduct.
In W opinion, thia l i n e of authority is distinguishable
from the present case for two reasons. Firat, the oubject
' Y
matter o f the reprerentation i a the net lettable area of a
building, a matter which, one would expect, would ordinarily be within the province of a real estate agent, A similar v i e w
was taken in Seabridge by Shappard J. at 308. Each case must
of couree depend upon its own circunatancea, but there is some
similarity between the present circumrta~ces and those in
Seabridge,
The aecond reaeon why the conduit pipe argument is not, in my v i e w , available to tho fourth respondent here, i s t h a t
the fourth respondent prepared a etatement of net lettable
area in the form of folio 3 and i n ~ e r t e d it towards the f m n t of exhibit A, thereby g i v h g prominence to t h e information in the layout of exhibit A.
On behalf of the fourth respondent, reliance Fs placed
upon t h e fact that in his evidence in chief, Mr Mcbougall did
not mentioned fo l io 3 as being significant in terns o f i t s
position or otherwise. Even if that be accepted, it renains the case that the fourth respondent ptepared fol io 3 and
inserted it in a prominent place in exhib i t A.
In a related submiseion, counrel for the fourth reapondent pointed t o the following evidence given by Sc
McDougall in cross-examination:
"YOU accepted ae correct the varfous references t o
net lettable ass in exillbit A, didn't p u 7 --- Yee, .%
Ye8 + And yau understood tha t the per8on who was
responsible fur putting that infornation into
exhibf t A waa the vendor, didn't you? --- I
understood t h a t , F a , In giving that evidence, Mr McDaugal1 was necesloarily egeculating on what had transpired between the vendor and the
vendor's agent. Box iaxnediate purposee, the Courtt& enquiry focusses on the conduct of the fourth respondent rather than
Mr HcDougallls conduct. I am of caurae concerned to decide
(an I already have) whethez Mr McDougall actually relied upon the repreaentatione made in e x h i b i t A. But the present
submission made on behalf of the fourth respondent is that if;B
F Q ~ ~ U C ~ should be characterised as no more than that of a
conduit pipe. In that respect, I do not find Mr McDougallfer statement, above, to be of any real significance,
For those reaaona, when the conduct of the fourth
,
respondent in preparing and i s su ing exhibit A to the applicant
FEDERAL COURT-
| SETT BY :PR I NC | I F.Al REG l STRY |
is conriderad, it is to be concluded that the fourth
reepondent itself had a role i n making the mirrepreeentation,
and I so find.
Hence, in my view, it hae been established tha t as
againot each reepondent, the applicant re l i ed upon the
It follow8 from the above findings, of f a c t and of law,
that, i n my opinion, the applicant h a made good t h e burden
cast upon it by 8 , 52 of the Act .
DAMAGES
Having now heard f u l l argument form the parties on the
issue of damages, I adopt the applicant's written submiaaione
(annexure A t o these zeasons) in this regarrd, eubfect t o t h e
need for a recalculation of intereat.
The parties have since agreed and prepared calculations
on this basiu (which ate annexure B to these reasons).
Q u u s
The applicant, having made out its case, i s e n t i t l e d to
judgment in the sum of $496,255.39, plus ite coats of the
application, including reserved costs as against each of the
four respondents.FEDERAL COLTRT*
I hereby certify that the preceding
eeventeen (17) pages are a true copy of
the Reasons for Judgment of . Justice
~eaumant . AsaMIiate a.-- ,,
D a t e d 8 2 0 November 1992 A P P E A R A N C E S
COUNSEL AND SOLICITORS FOR THE APPLICANT:
Mr J. Thornon
Instructed by: B. E. Miller COUNSEL AND SOLICITORS FOR THE lst, 2nd & 3rd RESPONDENTS:
Mr J. Johnson
Instructed by: Sally Naah & CO
COUNSBL AND SOLICITORS FOR THE 4th RESPONDENT: Mr I;. Foster
Instructed by: Hurray, Stewart f Pogarty
DATES OF HEARING: 6 - 8 April, 26 - 28 October, and 2 and 6 November 1992 DATE OF JUDGMENT: 6 November 1992
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ANNEXURE " A Y
=W1 CONSTRUCTIONS PTY LIMITED and BONEPIND PTY LIMITED
APPLICANT ' S SUBMlSSXOH3 ON DAMAGES
The applicant puts its damages claim on two alternate
bases which are sunmarfsecl an p . 5 af EX F. The figures
on p . 5 require revision, having regard to the agreed
d e l e t i o n of a double-counted claim f o r $11,420.00 in
miscellaneous expenditure which i s noted a t TP 95, The
.c
revised figures (which a l s o bring t h e s . 5 1 A interest claims up to date to 28 October, 1992) are attached.
2. As the High C o u r t noted in Gates v , C i t y Mutual L i f e
Assurance Society Ltd. (1966) 160 CLR 1 at 11-14, the
Trade Prsctices A c t does n o t prascribe the measure of
damages recoverable f o r c ~ n t r a v e n t i o n of the provisions of Pts.1V and V . Accordingly, it is f o r the Court to
determipe what i s the appropriate measure of damages
recoverable. The measure of d&nages in tort is apprcpriate by analogy in most, if not a l l , Pt.V cases,
especially those involving misleading or deceptive conduct and the making of f a l s e representations. 3 . T h i s approach has been confirmed in Wardley ~ustrdlia
Limited v. S t a t e of Western Australia (H.C.
A t p.7-B Mason, cJ, Dawson, Gaudron and McEugh, JJFEDERAL C0LRT-t
confirm t h a t economic loss is recoverable under s . 8 2 of
the Trade Practices Act, n o t i n g that -
( a ) ' the measure of damages does not necessarily coincide with that applicable to an action in
deceit or f o r negligent misrepresentation;
(b) the common law measure will in many cases be an appropriate guide, though it will always be necessary to look to the provisions of the Act
w i t h a view to ascertaining any relevant
l eg i s la t ive i n t e n t i o n ;
i
(c) It could be safely assumed on the case there
before the Court that the p l a i n t i f f was entitled to recover:
""A sum representing the prejudice or
disadvantage [ t h e p l a i n t i f f ] has suffered in
, consequence of h i s a l t e r i n g h i s p o s i t i o n under the inducement" of the misleading conduct or "the actual damage directly flowing from " t h a t conduct";
(d) NO occasion arose in the context before the Court to consider whether the condition of
forseeability, applicable to claims f o r
consequential damages in cases of negligent
misrepresentat ion i nduc ing the purchase of
proper ty , would apply f o r consequential d m ~ g e s under s,82(1). 4 . In t h i s case also it is submitted that no general issue
af forseeability arises, since the damages claimed
coincide w i t h the economic outcome of the very venture which the misrepresentation induced the p l a i n t i f f to embark upon,
There are no remote or. unexpected or intervening
circumstances which have added to or contributed to V t h e
danages sought, The applicant did exactly what was in t h e objectively ascertainable contemplation o f the
parties at the time of the misrepresentations and at
the time contracts were exchanged.
5 . Nor are we here concerned w i t h when t h e applicant's
cause of action f irs t accrued, which was t h e issue
primarily addressed in Wardley. The High Court in
Wardlsy, was careful ta distinguish between the process
of ascertaining t h e occasion when "measurable" loss ox
"actionable ac tua l loss (as opposed t a a mere p o t e n t i a l
for 106s)" (to adopt t w o of t h e phrases used at p.15) was suffered, and the quantification of danages process, A t p.13.4-.6 the majority are impliedly c r i t i c a l o f confusing the two issues. See also t h e i r observations at p.10.2-.3 and p.16.4-.S touching upon
the r e l a t i o n s h i p between t h e s e issues .
Measurement of Darnaqes:
6 . The F u l l Court, comprising Fisher, Gummow and Lee, JJ
has provided a useful analysia of the applicable
general principles in Munchies Manugement v. B e l ~ e r i o (1988) 84 ALR 700 at 712-714 noting that s.82 served to ident i fy loss or damage as the gist of the action and to mark ou t t h e measure of damages as t h e amount of; that loss or damago. The saction f'toloscopes" the Common Law concepts of causation, remoteness and measure of damages. The Court cited with' approval (at
712) a passage from a judgment of French, J. as
follows :he primacy of the causation princ ip le in 8.82
would seem t o exclude reliance upon such concepts
as mitigation or contributory negligence, u n l e s s it can be !shown tha t the applicant's own
carelassness or disregard fo r h i s or her interest
is the cause of a l l or some part af the claimed
loss. It may still be in such a case that themisleading or deceptive conduct complained of may be ident i f ied as a s i n e qua non of the loss
claimed. There may come a point , however, where
the applicant's own conduct is so dominant in the causal chain as to constitute a novus actus
another way to say that in such a case a selection interveniens, It is perhaps simply putting it principle of the kind adverted to [in the Elna Australia case (1987) 16 FCR 410 at 410-91 comes into operation to exclude l i a b i l i t y . The criteria
for such selection may impart concepts analogous to remoteness, mitigation or contributory
neglf gence" .
The F u l l Court went on to note that al though the
measure of damages in decei t was o f t e n an appropriate
analogy especially i n s . 5 2 cases, ather analogies may
i
| SE"IBY:PRINCIP.~REGISTRY | ; 1 4 - 4 - 9 4 ; | 1 4 : 4 8 ; | FEDERAL COLRT- | 072481260 ; #26/31 |
be appropriate, depending on the circumstances, including relief resembling t h a t available in equity.
7 . For present purposes, t h e deceit analogy i s probably sufficient , especially having regard to the
observations o f Gibbs, C J i n Gould v. Vaqgelas (1985)
157 CLR 215 a t 212-2 that the rules for recovery for
deceit are no t inflexible and that there i s no reason in princ ip le why the defrauded purchaser should not k
recover damages for a l l t h e loss that flowed directly
from the P r a u d ~ l e n t inducement, subject , poss ib ly , to
fareseeability. Gibbs, CJ tnere stated that of course,
the Court must be satisfied that t h e loss d i d restllt
d irect ly from the f raud and not from soae supervening
cause, such as the folly, error or misfortune of the
purchaser hiinself , and m u s t ensure t h a t no additional
compensation is given f o r losses when those losses, or
the proPability of their occurrence, has already been l taken into account i n determining the value of the
'I
business, See also the t r e n c h a n t criticism by Dixon, J. of an inflexible application of a narrow formula
based on comparing price paid with value a t the time of
acquisition in Potts v. Miller (1940) 64 CLR 282 at
297-299. The approval wi th w h i c h the E i g h Court has
c i t e d Dixon J's restatement of t h e applicable t e s t for
ascertaining damages in Wardley (at pp 12-13 per Mason,
CJ, Dawson, Gaudron, and Mck'ugh JJ; p . 18 p e r Brennan, 5 ; p . 38 per Toohey, J) semblo confirms the and of the
overly rigid approach to damagee quantification in I cases of deceit with which the common Law (but not I equity - see A l a t i v. Kruqcr 94 CLR 216 at 224-5 and I 229-2301 was once encumbered. 8 . In support of its primary claim, the applicant says that the approacb adopted meets all t h e relevaat criteria applicable on the analogy referred to aboxe. In the instant case, the evidence of Mr McDougall,
unchallenged, is t h a t but for the misrepresentation, he
would not have embarked upon this project:
" W e wouldn't even have considered it. " (TP 2 4 . 8 ) .
It is appropriate in such circumstances f o r t h e 1 1 applicant to be compensated on a bas i s which In , l
accordance w i t h t h e u s u a l rule quantifies damages by re f eren~e to the p o s i t i o n which t h e applicant would
I
have been in had the investment not been made. Since
811 losses have now crystallized, and can be accounted for in cash, this can be sat is factori ly done, without any double count ing, by providing, on the one side of the ledger, all cash outgoings incurred p l u s interest on sums expended, and br ing ing to account on the other s ide of the ledger, a l l receipts up ta and including the ul t imate sale of the property a t a loss. T h i s is the approach adopted i n t h e applicant's primary claim. 9. Alternatively, t h e analogy w i t h the measure of damages
i n deceit (if inconsistent w i t h the primary claim)
should not be adopted f o r the purposes of this claim
under a . 8 2 because such an approach f a i l s to compensate
the applicant for its loss according to ordinary
not ions of causation and as required under s.82. The
L n t e ~ s i t i o n of a notional crystallizing event with ref eronco to which damages are quantif i a d , lacks
economic logic and common sense in circumstances where
the thing acquired on the f a i t h of t h e misrepresentation is a projec t which necesszrily contemplates the developrnenz, the holding costs e t c . and the subsequent sale and/or letting of the property
as an investment. Adoption of a discredited "rule"
devised to address simple situations where the relevant
prejudice is confined to the purchase cf goods or of land, 4s i napp rop r i a t e . Wardley confirms that the Court is not confined to assessing damages on a once and f o r
a l l basis at the date of t h e transaction where t h i s is inappropriate. The general observations at p.10.1 are applicable here. That the project was relevantly the
subject matter of the sale is apparent both from the circumstances, and from the interdependence of t h e contract for sale (EX B esp. c l l . 37 and 38) and the
building contract (EX C esp. cll. 34 and 3 5 ) . It 15 the
l o ~ r e a l i z e d on the project which should be the subject of compensation in t h i s case.
10. If the above submissicns do not prevail, then the
applicant's a l t e r n a t i v e claim, quantifying loss by
reference to a direct comparison of the value of the land itself a t t h e date of exchange and i n t e r e s t on funds devoted to the project, should be adopted.
Y
11. In so far as interest is clairnod, in each of the
quantifications, the applicants rely on the princ ip les
developed by the High Court in Hunqerford v . Walker
(1989) 171 CLR 125 esp. at 143-4 and 152, and on a . 51A
of t h e Federal Court A c t ,
| SENTEY:PRIKCIPLREGISTRY | ;14-4-94; 14:50; | FEDERAL COLET- | 072481260 | ; #30/31 |
DAMAGES CT;ATM - 6.11.92
DELETING ITEMS 24 AN1) 39 OF EX F ( $ 1 6 , 7 4 9 ) and CALCULATING INTEREST AS2
~
Coats of acquisi t ion holding costs
miacallaneous expenditure and
building costs as summarised in
Parts A B (adjusted by $16,749) andC of the schedule $902,808.02 L e s s proceeds of eale as shown
| ||||
| ||||
| 2 , | Add damages f o r loss of use of funds |
as calculated in Part D. [adjusted by $169.47
representing in teres t on items 2 4 and 391 $ 7 4 8 1 4 . 2 3 and f u r t h e r adjusted ta delete 2 months
interest in respect of payments prior
to 1.6.1990 ( 6 2 daye @ 14% on $ 5 8 , 4 0 3 . 5 6 ) 1388,88 $ 7 3 4 2 5 . 3 5
and further adjusted to d e l e t e interest
In respect of period 1.7.90-31.8.90 @ 14%
on payments made during that period
(See schedule attaghed) 7 8 4 . 3 7
$72640.98
| 3 . | Add | interest pursuant to a . 5 1 A an |
$370,165.28 and $72640.98, is. $442 ,806 .26 : JSchedule J) from 6 12.1991-28 2 . g 2 - 848 @ 15% l* $15285.91
2 9 . 2 . 9 2 - 31,8.92 - 1846. @ 13% 29018.97
II 31.8.92 - 6.11.92 - 67d . @ 11.253 9144.25
- .----..-. .- ....-.
FEDERAL COURT OF AUSTRALIA
Coram &whk 3 *
File No. /%
t . l r .9 L
Date Exhibit No. 1 - 1
v. M.F.I,No. I(
Ad-0
c ASSOCIATE
| SENTBY:PRINCIPALREGISmY | ;14- 4-94 | ; | 1 4 : 5 0 ; | FEDERAL COURT* | 072481260 ; #31/31 |
SCHEDULE - PAYMNTS DURING PERIOD 1.7.90 T0.31,8.90
| Payment date | Amount | Days allowed | Interest |
0
9
0