Karawi Constructions P/L v Bonefind P/L

[1992] FCA 1056

I!'

LIMITED DISTRIBUTION

11

l,

$1

JUDGMENT NO. J.O%d, J Lqs !!

RDS	' j l	l'	i/
l

-
CES - whether conduct misleading - representation

ae t o area of premieee,

,I

cea Act 1974 (Cth) - S 52

m V (1990) 94 ALR 791

No. BIG304 of 1991

Beaumont J .

6 November 1992

FEDERAL COURT-

IN	FBRgw-CQUBT OF AUSTRIU;IA	)
1

snu-m-	I	NO.	~ 3 0 4	of 1991
1 1

Appliaant

AND N~FIND PTY. LIMITBP

First respondent

Second respondent

ALBERT EDW&EtD J -

Third reapondent

J . -	-
PTY. LIMITED
Fourth respondent

HN G. REAL ESTATE

First croas-respondent

DEV

LrHITeD

Second croea-reapondent

J -

Third crosa-re~pondent

mBlw Beaumont 5 .

PATE ! 6 November 1992

MINUTE OF ORDERS

-

=wJa 1

(m =roes

3TBY:PRIhCIPALREGISTRY ;14-4-94 ; 14:ll ; FEDERAL COL'RT-, 072481260;# 4/14

1. & the f i t a t , aeoand and third

respondente, and each of them, are liable to indemnify the fourth respondent against such sum as it i e obliged to and doee in fact pay to the applicant in these proceedings pursuant to the

judgment entered and orders made in favour of the

applicant this day (which sum shall hereinafter be

called "the indemnity sum").

2. - p the fir~t, second and thixd re~pondonta,

and each of them, pay the fourth respondent an amount equivalent to the indemnity sum forthwith

after payment themof by the fourth teapoadent to

the applicant. g.

3 . intezest shall run upon the amaunt ,:I;

ordered to be paid pursuant to paragraph 2 hereof

i ' ,

from the date of the payment of the indemnity eunh

! I

until the date of payment to the fourth reapondent

!

of t h e sum ordered to be paid pursuant to paragraph

2 hereof at the rate or rates prescribed by the

1, /

Rules of the Court from t i m e to tine for the p~yment

of interest on judgment debts .

I( :, 1 l

;	1
I	I
i	, ( I

4 .      _ORDERS the f irst , second and third respondents

pay the costs of the fourth reepondent of and

incidental to the Cxoes-Claim brought by the fourth I

1

reapondent against them.	11
I !l

Note:	Settlement and entry of orders is dealt w i t h in
Order 36 of the Federal Court Rules.

SEVTBY:PR'INCI.PA~REGISTRY ;14-4-94; 14:ll ; FEDERAL COURT* 072481260 ; # 5/14

FEDgRAL CC)URT OF	)
1

DISTRICT REGISTW ) NO. G304 of 1991

1

GENERAL DIVISION i

BETWEEN:  I CONSTRUCTIONS Pm*

LLMzuR

Applicant

AWD m

Piret respondent

Becand reepondent	!.
Third respondent
Fourth respondent

REAL ESTATE

P m .

Croes-claimant

h

First cross-respondent

Second crams-reapondent

ALBBRT EDWARD JOHN DAVEY

Third croes-respondent

lxE&!a Beaumont J.

M x 6 November 1992

m6016 FOR JUDGMENT

S E N T B Y : P P I N C , I P ~ R E G I S T R Y ;14- 4-94 ; 14:12 ; FEDERAL COLRT- 072181260; # 6/14

'i,

e	4
'h

The croas-claimant alleges that the croaa-respondent

engaged i n misleading conduct contrary to 8 52 of the Trade

practice &g 1974 (Cth) (the "mn). The conduct complained

of i a maid to take the form o f an express mistepreaentation

pleaded i n the cross-claim as follows:-

"8.	A t a meeting which oacuxred on or about 16th	$
February 1990 the Third Croee Respondent
repreeented t o the Cross Claimant that t h e net
lettable area of t h e building p r o ~ ~ s e d to be
erected at 155 New South Head Road, Edgecliff,
was 180 aquare metres comprising Lower Ground Floor of 4 8 square metres and Ground and Firet
Floor of 66 aquare metres each.
The meeting took place between the Third Croes
Respondent and Robert Glass, who was then an
employee of the Cross Claimant, at: the Crose

Claimant'r off ice .

9 .     In about April 1990 the Cross Clahant reaeived

from the Second Cross Claimant a proposal for
passing on to the Applicant,

PARTICULARS

The groposal comprised a letter dated 5 April

Respondent ( "the Proposalw) . The letter was	1990 and enclosures from the Second Cross
signed by the Third Crose Respondent as director.

10.      The Proposal included an expreeB representation

that the net l e t tab le area of the building propoeed to. be erected at 155 New South Head
Road, Edgecliff, wae 180 square metres
comprising Lower Ground Floor of 49 aquare

metres and Ground Floor and First Floor of 66

square metres each.

11.  In about 11 April 1990 the Cross Claimant paesed on to the Applicant certain material comprising t h e Proposal and other documents.

SEW6BY:PRINCIPilLREGISTRY : 1 4 - 4 - 9 4 ; 1 4 ~ 1 2 ; FEDERAL COURT* 072481260 ; # 7/ 14

;it

5 ii, $11

The said material, comprising the Propasal,	!,
plans and a statement of diaclairuer, was handed
to Kenneth Richard HcDougall on behalf of the	!l$
Applicant in &out April 1990."	l!'
The case tor the croas-claimant i 8 that in reliance

on the representation it incurred a liability to t h e applicant	I
by reaaon of the findings and orders made in these proceedings. On behalf of the arose-reapondenta it de contended, inter a l ia , that there was no such reliance by the cross-claimant.
-
I have already found that, as between the applicant and respondents, the respondents made certain representations
to the applicant in the form of statements in the presentation
brochure (Exhibit A ) . There i s a conflict in the evidence
given by the witnesses cal led by the parties to the crosa-
claim as to what happened in the discuseions between them
will be neceseary first to refer to these versione before leading up ta the issue of Exhibit A to the applicant. It	making findings of fact.

(1) The evidence of 'IrLr R - o

Hr Glass aaid that on three occasions Davey

represented to him that the net l e t t a b l e area wad I B Q equare

metres. The ffrst occasion W&$ 8. meeting in the middle of February 1990 when MT: Davey met Nr R Glass in Kr R Glassr

off ice. They had not met previously. On this occasion, Mr R

SEVTBY:PRINC' AL'REGISTRY ; l i - 4 - 9 4 ; 14:12 ; FEDERAL COURT- 072481260 ; # 8/14 , I

Glaae says, RC Davey atated t h a t the net lettable area wae 100

square metres in total. Thi8 figure wan noted by Mr R Glaas

in a w r k i n g document which became Exhibit 15. That d o c m n t

contalns a deal of Infamation, including statements that can

readily be interpreted to the effect that the lower ground

floor had an area o f 48 square metrea, the ground floor 66

aquare metres and the first floor 66 square metrea, giving a

.c

total area of 180 square metres of 1938 aquare f e e t .

Also i n the document are the words "rental estimate"

and "sellingM. Beside each of these is an asterisk which i s

consfetent with the goasibillty that Mr R Glass was to do some

work in these areas. However, there is nothing in the

document which suggests that Mr R Glass was to check the net

lettable area ae Mt ~ a v e ~ alleges. In his evidence )Ir R Glass

denied that there was any discussion at the time that he

should do so. Mr R Glass says that t h e second meting took

place about 20 February when M r Davey signed the agency

agreement (Exhibi t 4 ) . Mr R Glass says that on this occasion

there was a discussion about a possible sale price and the

amount of rental t h a t could be obtained per square metre. Mr R G l a s s says that at t h i s meeting he discussed w i t h Mr Davey

figures along the l i n e s of those noted in a working document

he had prepared (Exhibit 3) calculating an estimated selling

price of $1 million. In this document there is a reference to

180 square metres.

-

5ENTBY:PRINCIPFU.REGlSTRY ; 1 4 - 4 - 9 4 : 1 4 : 1 3 ; FEDERAL COURT* 072481260; # 9/14

The third occasion upon which a rtatenrent or

reprerrentation regarding net lettable area waa made by Hr

Davey to l& R Glass, warr in the letter dated 5 April 1990

(Exhibit 1 9 ) which became part of Exhibit A , .Inarofar as tha

evidence of m R Glues i e corroborated by the working papers

and the letter to which I have referzed, I accept it as
reliable.

-c

However, other aepecto of h i s evidence indicate that

hia independent recollection of t h e diecuseians was not good.

Fox instance, Mr R Glass waa aeked in croea-examination

whether he would deacribe a meeting h e l d w i t h Mr Davey and h i s

brother , Mr John Class, as "hurriedw. Hr R Glaszr ' responae

was, "1 can't remember."

Hr R Glass said that at one o f the meetings h had
with lk Davey his firm 'may have asked for a set of plans to

page on to Mr Mcbougall". f4r Glaae agreed that a t sane stage

he received some plans, but not a full set, from Mr Davey. Be

could not remember precisely when this happened. In cross-

examination Hr R Glass gave evidence to the effect that the

information from Mr Davey as to the net lottable area was

oso~ntial from Mr R Glaes ' po int of view. I accept thie. He

Bays that he did not ask Mr Davey where Mr Davey derived h is

figures and, in effect, relied on Mr Davey's information.

C

SEYTBY:PRINCI.P,ILREGlSTRY ;14-4-94; 14:13; FEDERV. COURT* 072481260 ;#10/14

( 2 ) m ev-of Glaas

The evidence of Wr John Glaas waa that his contact

with Mr Davey was only brief . He was aware that his brother,

Hr R G l a n s , war having discussions with Wr Davey. m J Glaee

eaya that h i s first eignificant contact w i t h Kr Davey was not

until 2 April 1990. L33C J Glaea says that when he received t h e

letter dated 5 April 1990, he did not study the feasibility

ro

exercises or any of the other documents encloaed in the

letter. Overall, h i s vereion is that the natter, ao far as

the croae-claimant was concerned, was essentially left in the hands of m R Glaes. Mr J Glass denied being present when Mr R Glaas gave any undertaking to Mr Davey to check the areas

from t h e plane or otherwise.

( 3 ) The evidence aiven bv Mr Davey

Mr Davey gave a different version o f events, He

said that he telephoned Hr J Glass in late January or early February and visited h18 office a day ar so later. Upon meeting with Mr J Glass, Mr Davey was i n v i t e d to discuss the

matter w i t h Hr R Glaes. &carding t o Kr Davey, he eaid to

them both, feel we should be able t o get between 300 a

equare metre and probably 400 a square metren. Mr R Glaaa replied, "That aeems in the ball park. How about bringing t h e plans in to u a so we can check the areaa and give you our

thoughts."

EYT BY:PRINCIP.V. REGISTRY ;14- 4-94 ; 14:13 ; FEDERAL COLRT-,

As has been noted, Hr R Glaaa denier that this

matter wae raised by him, 8f.r Davey also said that he visited

the Glass* off ice again, later in February, in order to aign

the listing authority . On t h i s occasion he said he was

accompanied by Mr Max Muhs, the general manager of a property group connected with Mr DaVeyrO company. m Muhs was not

called, and no explanation for the failure to ca l l him was

h

offered. According to Mr Davey, at this meeting Kr R Glaoe

came in to the off ice and Mr J Glaes asked h i s brother whether

he had been ovex the plans and whether he agreed w i t h Mr

Davey's eetimate of the lettable area. According to Hr Davey, Mr R Glaaa aaid, nl've been though the planer, it looks okayu. Mr R Glaes deniea this.

-

(1) The urixuarv fects

Each of the witneseee called on t h e croae-claim has

an interest i n i ts outcome. Moreover, none of these witnesses

ha8 a clear, independent recollection of the precise sequenca

of the matefial evente,

However, the documentation (Exhibits A, 3 and 15)

supports the cross-claimant	* s contention that Mr Davey
represented to Mr R Glass on t h r e ~	occasions that the building
would have a total ne t l e t table area of 180 equare metres.	I
so f ind as a matter of primary fact.

SEYTBY:PRIRCIPL.REGISTRY ;14-4-91; 14:14; FEDERAL COURT+

A t this level, however, it is d i f f i c u l t to aay what

glee paared between the parties. 1 am not ~atisfied on the

balance of probabilitfee that any other particular natter8

were discu~aed at t h e meeting0 which took place, save that

potential prices were considered by the parties to the cro68-

claim by reference to a net lettable area of 180 square
metres. In the absence of any reference to the matter in l& R

U

Glaeot w t k i n g papers (Exhibits 3 and 15) , I am not satisfied that Mr R Glaes undertook to check the net lettable area by

reference to t h e plane or otherwise.

( 2 ) The secondary _facts.

I am prepared to in fer that Meaere Glass relied on

Mr Davey's statement es to the net lettable area. Th i s

inference i a supported by the absence of any evidence that the cross-claimant undertook any process of verification of Mr Daveyrs assertion in t h i s regard. That much is common ground.

That the area was important to the cross-claimant is pla in

enough.

In theee circumstances 1 make the inference that the

cross-claimant, in fact, relied upon the statement made by Mr

Davey as to t h e net le t table area,

( 3 ) far the wmees of a 52

H i l l J. in Y Blunts (1990) 94 ALR 791 at 742-

4 , discusses the authorities in t h i s area, and in particular

those cases where i t is claimed that an applicant ( 9 . the

croes-claiaant here) haa acted unreaeonably and failed t o protect i ts own interests adequately. But whatever the position in other factual contexts, the present question fa l la

to be determined by reference to its own circumatancea. The

relevant queetion t o be addressed here 16 whether the crose-
claimant has oetablished that it relied on the reprementation

L,

nade by Mr Davey, on behalf of the cross-respondents, to Mr R

Glass on behalf of the cross-claimant.	I so find.
l2QBzwm

Having found a representation which, in accordance

with my earlier finding, was false, and having now found

reliance by the cross-clahant, it must follow that the craes-

claim is established.

The partiea are to prepare short minutes of order for consideration in t h i s regard,

eight ( 8 ) page8 axe a true copy of the	I certify that this and the preceding
reasons for judgment herein of the
Honourable Mr Justice B, A. Beaumont.

.L &r2. - ...-- -

Aaaociate :

Date 8 20 November 1992

COUNSEL AND SOLICITORS FOR CROSS-CU4XMANT:

Mr L. Foster

~natructed by: Murray, Stewart & Fogarty

COUNSEL AND SOLICITORS FOR CROSS-RESPONDENTSB

Mr J. Johnean

Instructed by:  Sally Naeh 6 CO

DATES OF HEARING:	6 - 8 April 26 - 28 October and 2 and 6
Novenrber 1992
DATE OP JUDGMENT8	6 November 19 92