Kelly v Wilson

[2012] WASC 146

KELLY -v- WILSON [2012] WASC 146

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2012] WASC 146
Case No:	CIV:2681/2010	Heard:	28­30 MARCH 2012
Coram:	BEECH J	Delivered:	2/05/12
No of pages:	38	Judgment Part:	1 of 1
Result:	Judgment for plaintiff Counterclaim dismissed
Category:	B
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Parties:	RODNEY JOHN KELLY KAREN LEANNE WILSON HAIDON BRUCE RENDELL
Catchwords:	Contract Sale of land Whether misleading or deceptive conduct occurred Turns on own facts
Legislation:	Fair Trading Act 1987 (WA), s 10
Case References:	Bitannia Pty Ltd v Parkline Construction Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9 Browne v Dunn (1893) 6 R 67 (HL) Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 Franich v Swannell (1993) 10 WAR 459 O'Brien v Smolonogov (1983) 53 ALR 107 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Shone v Davies [2012] WASCA 83 The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION : KELLY -v- WILSON [2012] WASC 146 CORAM : BEECH J HEARD : 28­30 MARCH 2012 DELIVERED : 2 MAY 2012 FILE NO/S : CIV 2681 of 2010 BETWEEN : RODNEY JOHN KELLY

Plaintiff

AND

KAREN LEANNE WILSON
First Defendant

HAIDON BRUCE RENDELL
Second Defendant

Catchwords:

Contract - Sale of land - Whether misleading or deceptive conduct occurred - Turns on own facts

Legislation:

Fair Trading Act 1987 (WA), s 10

Result:

Judgment for plaintiff

Counterclaim dismissed

(Page 2)

Category: B

Representation:

Counsel:

Plaintiff : Mr C M Slater
First Defendant : Mr A J Camp
Second Defendant : Mr A J Camp

Solicitors:

Plaintiff : Maxim Litigation Consultants
First Defendant : Butcher Paull & Calder
Second Defendant : Butcher Paull & Calder

Case(s) referred to in judgment(s):

Bitannia Pty Ltd v Parkline Construction Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9
Browne v Dunn (1893) 6 R 67 (HL)
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304
Franich v Swannell (1993) 10 WAR 459
O'Brien v Smolonogov (1983) 53 ALR 107
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191
Shone v Davies [2012] WASCA 83
The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239


(Page 3)

BEECH J:

Introduction

1 In this action the seller sues to recover the unpaid balance of the purchase price for the purchase of land by the defendants. The defendants defend the claim on the basis that the seller engaged in misleading or deceptive conduct, in substance by giving them selected pages of a valuation and saying words that created a misleading impression about the valuation.

2 For the reasons explained below, I am not satisfied that the alleged misleading conduct occurred. Consequently the seller succeeds in the action.

Uncontroversial facts

3 In early 2009, the plaintiff, Mr Rodney Kelly (the Seller), owned a property in Fisher Road, Keysbrook. It had a number of buildings on it, including a main residence that was about 100 years old, and several small chalets or cottages. The land was lot 250 on deposited plan 257518 and the whole of the land on certificate of title volume 2116 folio 499 (the Property). The Property has an area of 27.59 hectares.

4 Mr Kelly also owned an adjoining lot (the Neighbouring Property) that shared an unfenced boundary with the Property, immediately to its south. The Neighbouring Property was a vacant unimproved block, apart from some fencing, with an area of 14.21 hectares.

5 The following matters are common ground.

(1) On or about 28 February 2009, Mr Kelly as seller and the defendants as buyers signed a contract for the sale of the Property for a purchase price of $2.73 million, payable in two instalments.

(2) This first contract was conditional. It did not proceed to settlement. There was no dispute about that. In other words, neither party sought to enforce this first contract.

(3) By a written contract for the sale of land dated 7 April 2009 (the Contract), the Seller agreed to sell the Property to the defendants, Ms Wilson and Mr Rendell (the Buyers), for the sum of $2.73 million.

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(4) There were terms of the Contract that:

(a) the Buyers would pay the Seller the sum of $1.23 million at settlement, with the remaining $1.5 million to be paid by the Buyers to the Seller no later than 12 months from the settlement date;

(b) the Buyers would provide a second mortgage over the Property in favour of the Seller as security for the sum of $1.5 million (the Loan Amount);

(c) interest was not payable on the Loan Amount during the 12 months following settlement, but in the event that it was not repaid within 12 months, interest would be payable; and

(d) a mortgage document would be prepared by the Seller prior to settlement.


(5) On or about 5 June 2009, the Seller and Buyers made an agreement in writing (exhibit 17A) (the Loan Agreement). By this agreement, the Buyers acknowledged that they were indebted to the Seller for the Loan Amount, and agreed to repay it no later than 12 months from the settlement date. The default interest rate was specified as 8.81% per annum.

(6) On or about 4 or 5 June 2009, the Buyers executed a second mortgage (the Mortgage) of the Property, securing repayment of the sum of $1.5 million under the Loan Agreement (exhibit 17B).

(7) On or about 15 June 2009, the Contract settled and the Buyers became registered proprietors of the Property. The Buyers financed the payment of $1.23 million at settlement by a loan from Westpac. Westpac has a registered first mortgage over the Property.

(8) Consequently, the Loan Amount was payable by no later than 15 June 2010.

(9) The Buyers have not paid the Loan Amount.

(10) The Seller issued a notice of demand in June 2010, and a default notice in July 2010.

(Page 5)

(11) In October 2010, the Seller commenced these proceedings against the Buyers.

(12) Westpac has taken steps to exercise its power of sale as first mortgagee. In October 2011, Westpac commenced proceedings in this court against the Buyers. By consent, on 29 March 2012 the Supreme Court entered judgment for the possession of the Property in favour of Westpac.

6 In substance, these admitted matters mean that, subject to the issues raised by the Buyers' defence and counterclaim, the Seller is entitled to judgment in the sum of $1.5 million plus interest.

7 I turn to the Buyers' defence and counterclaim.

The Buyers' defence and counterclaim: the issues

8 The Buyers plead that:

(a) the parties entered into the first contract on about 26 February 2009. It was subject to a due diligence condition, under which the Buyers intended to obtain a valuation to confirm the value of $3.3 million which the Seller had 'repeatedly' advised to Ms Wilson;

(b) prior to the Contract (of 7 April 2009) being entered into, the Seller provided to Ms Wilson a copy of four pages of a valuation by which he represented to the Buyers that there was a sworn valuation of the Property for $3.3 million as at 7 January 2009;

(c) at the same time, the Seller told Ms Wilson that what she was handed was a summary of the sworn valuation, and did not say anything to signify that the valuation related to both the Property and the Neighbouring Property;

(d) the conduct summarised in pars (b) and (c) was defined as the valuation representation;

(e) the context of this representation was detailed in particulars dated 1 March 2012. Their substance mirrored the substance of the evidence of Ms Wilson, which I summarise later in these reasons;

(f) the valuation representation was false, in that the valuation related to both properties, not solely the Property;

(Page 6)

(g) they entered into the Contract, Loan Agreement and the Mortgage in reliance on that representation;

(h) had they not been misled, they would not have settled on the Contract or entered into the Mortgage or borrowed from Westpac in order to fund the purchase;

(i) as a result, they have incurred or be likely to incur loss and damage;

(j) in reliance on the misleading conduct and under the Contract, the Buyers borrowed $1.38 million from Westpac and paid $1.23 million to the Seller, engaged planners to pursue an application to develop the Property and effected repairs and restoration works; and

(k) Westpac has commenced an action for possession as mortgagee, and the Property is for sale.

9 Up to the time of trial, the Buyers claimed declarations that the Contract, Loan Agreement and Mortgage are void and unenforceable, and damages. They quantified their damages as follows:

(a) costs associated with the Contract and Mortgage, including stamp duty of $146,000 and $130,000 paid as part of the purchase price for upfront interest on the vendor finance and as agent's commission;

(b) legal expenses relating to these transactions of $6,451;

(c) restoration and repairs to the Property of $118,459;

(d) consultant planners' fees of $60,456;

(e) planning application fees of $4,000;

(f) interest and charges paid to Westpac of $155,000; and

(g) the amount of any shortfall on the sale of the Property.

10 The claim to avoid the Contract, the Loan Agreement and the Mortgage, and the claim for some of the heads of damage were abandoned shortly after I reserved my decision. I will say more about this later in these reasons.

(Page 7)

11 The Seller denies making the representations. Further, he says that even if the representation as pleaded was made, it was clear that the pages provided were incomplete and could not be relied upon. Further, he denies that the Buyers relied in any way on the pleaded representation, saying that they conducted their own enquiries and took their own advice. He also says that by documents signed with Westpac, the Buyers stated that the value of the Property was $2.3 million.

12 It can be seen from this review of the pleadings that the Buyers raise a single defence to the Seller's claim, being a defence of misleading and deceptive conduct by the Seller providing four pages of the January 2009 valuation, and making a statement about what those pages were.

13 An allegation of misleading conduct need not involve pleading and proving a representation. The conduct with which the Fair Trading Act 1987 (WA) is concerned is not confined to representations. Misleading conduct can be constituted by a course of conduct that tends to lead a relevant person or class of persons into error; see, for example, Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 [102].

14 In this case, the Buyers' case is one of conduct by representation. It is the conduct in handing over part only of the McGees valuation, and what the Seller said at that time, which constitutes the conduct of which the Buyers complain.

15 That conduct is to be considered in its context: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 199; Campbell v Backoffice [102]. The Buyers spelled out the context for the representation in their particulars of 1 March 2012. But it is the pleaded representation that is their case. It is essential to their defence that they prove the conduct said to constitute the valuation representation.

16 Consequently, the crucial factual issue is what was done and said by and on behalf of the Seller in relation to the January 2009 valuation. Did Mr Kelly (or his associate, Mr Stevens) hand to Ms Wilson only selected pages of the valuation? Did Mr Kelly say that, for reasons of confidentiality, not all of it could be provided? Or was the whole of the valuation given to Ms Wilson?

Factual findings: surrounding circumstances

17 It is convenient to set out findings about the surrounding circumstances before setting out and explaining my findings on the

(Page 8)

critical factual issue. Most of the findings in this section reflect what is in the documentary evidence, or in unchallenged evidence of minor witnesses, and are uncontroversial.

18 In or about late 2007, Mr Kelly and a close friend, Mr Stevens, were living at the Property. Mr Kelly decided to buy a property at Henley Brook (the Henley Brook property). He entered into a contract for the purchase of the Henley Brook property in about December 2007. The purchase price was funded by bridging finance from the Bank of Queensland.

19 At around the same time, Mr Kelly entered into a contract to sell the Property and Neighbouring Property. That contract fell through.

20 In about mid-2008, Mr Kelly appointed Mr William Porteous's company as agent to sell the Property and the Neighbouring Property. An employee of Mr Porteous's company, Mr Michael Guelfi, was appointed as selling agent.

21 In late 2008, the Property was advertised for $3.25 million (see exhibit 1 and annexure KW 1 to exhibit A1).

22 In about mid-December 2008, the Bank of Queensland requested McGees Property to value the Property and the Neighbouring Property.

23 On 7 January 2009, Mr Jonathan Fyson, a valuer from McGees Property, inspected the Property and the Neighbouring Property. During the course of that inspection, he met Ms Wilson.

24 By letter of 16 January 2009, Mr Fyson, and his principal, Mr Richmond, provided a valuation report to the Bank of Queensland. The valuation report (the McGees valuation) was 52 pages, including annexures. The McGees valuation described the property to be valued as 31 Fisher Road, Keysbrook. It said that it comprised two lots, namely, the Property and the Neighbouring Property. The report explained the dimensions and typography of each of the two lots (pages 7 - 8). It described the various improvements (pages 11 - 13), including external improvements. The valuation referred to an earlier contract to sell both properties for $3.7 million, and to an offer of $4 million from the same purchaser.

25 The valuation stated that the Property was for sale, asking $4.35 million combined, or $3.25 million for the Property and $1.1 million the Neighbouring Property. The valuation stated that the

(Page 9)

valuer had been told by the Seller that the asking price was deliberately high to provide adequate scope for negotiation (page 16).

26 The valuation report expressed the opinion that there was an underlying land value of $70,000 per hectare, referring to sales evidence summarised in a seven page schedule. That produced a land value of about $2.9 million. A figure reflecting the depreciated replacement cost of the improvements was added, producing a total value of $3.3 million.

27 On 10 February 2009, the Haidaren Family Trust made an offer to purchase the Property for $2.6 million (annexure KW 2 to exhibit A1). The Haidaren Family Trust was controlled by the Buyers. The offer was subject to the purchaser conducting a satisfactory due diligence within 10 working days. It provided for payment of the purchase price in two instalments: $1.8 million at settlement and $800,000 by 25 March 2010. That offer was not accepted.

28 The Haidaren Family Trust also offered an option to purchase the Neighbouring Property for $1 million, with settlement on 25 March 2010. That offer was not accepted.

29 In late February 2009, Ms Wilson spoke to Mr Michael Fitch at the Bank of Queensland. She made inquiries about the prospects of obtaining finance from the Bank of Queensland for a loan relating to the Property. Following her conversation, on 25 February 2009, Mr Fitch sent an email to Ms Wilson (annexure KW 3 to exhibit A1). The email set out estimated maximum loan amounts which the bank would consider, based on the information it held and the application for finance it had received. It stated an amount of $1.5 million for stand-alone security over the Property, with further amounts if other additional security was offered. The email stated that personal tax returns would be required, and valuations of the Keysbrook property and possibly other properties.

30 Later that day, Ms Wilson attached some tax returns to an email to Mr Fitch (exhibit 3). Her email also set out some information about the development of units at Rockingham by Warrigal Pty Ltd, a company associated with the Buyers. It stated that a silent business partner paid the holding costs, and that Ms Wilson did all the ground work, such as 'dealing with contractors, builders, designers, etc'. She said that when the units were sold, she would draw an income, which she had indicated as a 'conservative' figure of $125,000.

31 On 26 February 2009, the Haidaren Family Trust made another offer to purchase the Property (exhibit 4). The offer was for $2.73 million, of

(Page 10)

which $1.38 million would be paid at settlement and $1.35 million would be paid 12 months after settlement. The offer was subject to finance by the Bank of Queensland in the sum of $1.5 million. The offer was also subject to the purchaser conducting a satisfactory due diligence within 20 working days.

32 On 28 February 2009, Mr Kelly accepted the offer.

33 Ms Wilson telephoned Mr Fitch on 3 March 2009 and asked him for a copy of the valuation report that Bank of Queensland had on file. In response, Mr Fitch said that he could not provide a copy to her but could only send a copy to Mr Kelly, who in turn could hand her a copy if he wished.

34 On 3 March 2009, Mr Fitch sent an email to Mr Stevens. Mr Fitch requested that Mr Stevens pass on the email to Mr Kelly. In the email, Mr Fitch explained that he was assisting the Haidaren Family Trust with a loan proposal. The email stated that Ms Wilson had advised Mr Fitch that Mr Kelly had given consent for her to see a copy of the valuation report requested by the Bank of Queensland from McGees Property. The email attached the valuation report. The email said that if Mr Kelly had consented to her having it, could he either email Ms Wilson a copy, or print it off and provide it to her.

35 Mr Fitch forwarded a copy of that email to Ms Wilson on the same day, without its attachment.

36 Earlier that day, Mr Fitch had sent an email to Ms Wilson saying that he would send a soft copy of the valuation report to Mr Kelly shortly and that she could receive a copy of it only if Mr Kelly agreed to forward the email to her, or chose to print it off and send a copy (annexure KW 4 to exhibit A1).

37 As Mr Stevens later advised Mr Fitch that he could not open the attachment to the email, Mr Fitch subsequently mailed a hard copy of the valuation to Mr Kelly.

38 On 4 March 2009, the Buyers signed an application for finance from Westpac (exhibit 14). I will say more about this application later in these reasons.

39 By letter of 13 March 2009, Mr Fitch on behalf of the Bank of Queensland advised the Buyers that their application for a loan of

(Page 11)

$1.5 million to assist in the purchase of the Property had been declined (annexure KW 6 to exhibit A1).

40 Although the evidence is not clear, it would seem that the handover to the Buyers of the McGees valuation, or portions of it, was in about mid-March 2009.

41 By email of 23 March 2009, an officer of Bankwest advised Ms Wilson that the bank had completed a preliminary debt serving analysis and the proposal did not meet the bank's minimum servicing requirements. Accordingly, the email stated, Bankwest would be unable to assist.

42 That email was forwarded by Ms Wilson to Mr Porteous on 7 April 2009 (exhibit 6).

43 On 1 April 2009, building consultants engaged by the Buyers wrote to the shire seeking a response from the council for a proposed holiday village at 31 Fisher Road. The letter stated that the proposal included 14 new holiday accommodation units and a new owners' residence with a camping or caravan site to accommodate 12 - 15 visitors (exhibit 7).

44 On 7 April 2009, the Seller and the Buyers signed the Contract (the Contract is part of document 1 in annexure B of exhibit 18B). By the finance clause, the Contract was subject to Westpac providing finance in the amount of 60% of the purchase price. Finance approval was required by 17 April 2009.

45 Special condition 2 provided that the Contract was subject to the Seller providing a second mortgage in the amount of $1.5 million for 12 months from the settlement date, interest-free so long as it was paid within 12 months. Special condition 3 provided that the Buyers would pay $1.23 million at settlement and the balance of $1.5 million by 12 months from settlement.

46 On 15 April 2009, a licensed valuer, Mr James Wong, inspected the Property for the purposes of providing a valuation to Westpac. The valuation report is part of document 1 of annexure B to exhibit 18B. It is not dated. It was evidently prepared by no later than 1 May 2009, since it was part of a bundle of documents sent by facsimile on that day. It was also part of a bundle of documents sent by facsimile on 5 May 2009 from a Melbourne number. I infer that documents were sent by facsimile between officers of Westpac in Perth and Melbourne, most likely for the

(Page 12)

Melbourne office to make a decision on the Buyers' application for finance.

47 Mr Wong's valuation valued the Property at $2.3 million.

48 By facsimile dated 24 April 2009, Mr Muggeridge, the business banking manager at Westpac, informed the Seller's agent that it was unable to assess the Buyers' application for finance within the deadline (exhibit 8). The letter stated that the request for finance could not be processed through the bank's normal consumer channel '[d]ue to the non-standard nature of the property, and the information contained within the valuation [Westpac] had carried out'. I infer from this that Westpac had Mr Wong's valuation by 24 April 2009.

49 Also among the documents sent by facsimile on 1 May 2009, and sent by facsimile from Melbourne on 5 May 2009, was the Buyers' loan application which they had signed on 4 March 2009 (exhibit 14). It had various entries filled in by Ms Wilson and others filled in by the Westpac bank officer, Ms Wendy Ashton. On page 6 of the document, the market value was stated as $2.3 million. That figure was filled in by Ms Ashton. I infer that it was filled in after the valuation was known, to reflect the value revealed by the valuation obtained by Westpac. I do not accept the suggestion of counsel for the Seller that Ms Wilson filled in the figure by deriving it from the value of $3.3 million for both properties.

50 The conclusion of the credit memo evidently prepared in the Melbourne office of Westpac between 1 and 5 May 2009 was to support a loan of $1.38 million, with a first mortgage over the Property.

51 Shortly thereafter, Mr Muggeridge advised the Buyers that finance had been unconditionally approved for the purchase of the Property (exhibit 9).

52 It is apparent from Westpac's chronology of actions (document 5 of annexure B to exhibit 18B) that Westpac created a new loan application and new file on or about 6 May. A new personal finance application was typed (exhibit 11A), together with the loan offer document (exhibit 11B) and the mortgage instrument (exhibit 10). By the personal finance application, the Buyers applied for a loan of $1.38 million. The fourth page of the application stated that the estimated market value of the Property was $2.3 million. The Buyers signed the application on its eighth page.

(Page 13)

53 As I have said, on or about 5 June 2009, the Seller and the Buyers signed the Loan Agreement, and the Buyers executed the Mortgage of the Property securing repayment by them to the Seller of the sum of $1.5 million, and any interest, under the Loan Agreement.

54 Through the second half of 2009, and in 2010, the Buyers continued to attempt to progress their proposals for changes in the use of the Property, through their building consultants, RCI.

55 In about March 2010, the Buyers, through Ms Wilson, sought a valuation of the Property. That came about because of the Buyers' obligation to pay the outstanding $1.5 million to the Seller. Ms Wilson took steps to obtain bank finance in respect of a loan to pay that sum.

56 Mr Carlshausen was a mortgage broker. His witness statement was tendered by consent. He said, and I accept, that:

(a) he was contacted in mid-March 2010 by Ms Wilson. Ms Wilson discussed with him a possible borrowing by the Buyers of $1.5 million to repay vendor finance on the Property. It was due for repayment in mid-June;

(b) he advised that an independent valuation would be required;

(c) Ms Wilson said she would arrange for a valuation;

(d) after some delay, Ms Wilson said to him that the valuer had messed it up and had undervalued the Property;

(e) in October or November 2010 she rang him and said she would need to borrow money;

(f) they again discussed the need for a valuation, in the course of which Ms Wilson raised the idea of using the original valuer used by the Bank of Queensland when she first purchased the Property;

(g) she said she would ring him; and

(h) thereafter, she did not contact Mr Carlshausen again.

57 A valuer, Mr Nevermann, inspected the Property on 23 March 2010. After some delay, he advised that his view of the value of the Property was $1.8 million. Ms Wilson was not happy with that. After what she described in her statement as a heated argument, he provided a written report valuing the land at $2 million (annexure KW 8 to exhibit A1).

(Page 14)

58 The report was received as evidence that in or about May 2010 she learned of Mr Nevermann's valuation; it was not received as evidence of the value of the Property.

59 On 1 April 2010, evidently in the course of discussions about value, Ms Wilson sent by facsimile to Mr Nevermann, two pages which came from the comparable sales analysis in the annexure to the McGees valuation (exhibit 13). I will say more about this later in these reasons.

60 On or about 1 June 2010, Ms Wilson visited the Seller at his home at Henley Brook. Following the visit, Ms Wilson sent an email to the Seller. I will say more about this later in these reasons.

61 Settlement having occurred on 15 June 2009, the outstanding Loan Amount was payable no later than 15 June 2010.

62 By letter of 9 June 2010, solicitors for the Seller gave notice to the Buyers that they were required to repay the principal sum of $1.5 million by no later than 15 June 2010. The letter gave notice that if that sum was not repaid, the Buyers would be in default and that the Seller may exercise his powers under the Mortgage.

63 By letter of 22 July 2010, the Seller's solicitor sent a default notice under the Transfer of Land Act 1893 (WA) to the Buyers, giving notice that the Seller would commence proceedings to exercise his rights under the Mortgage if the default was not remedied within 31 days.

64 Mr Fyson's evidence was that sometime in 2010 Ms Wilson telephoned him. He did not make a note of the telephone call and does not recall when it was. He does not recall the specific details of the conversation, but said it included his method of valuation and his costs for providing another valuation. In explaining his method of valuation, involving a per hectare rate, he said that rate was applied to the land he valued, namely both properties (ts 329). He gave no evidence about anything said by Ms Wilson during their conversation.

65 This evidence was not challenged, and I accept it.

66 Next, I will summarise the evidence of the key witnesses relevant to the critical factual issue, before stating and explaining my findings on that issue.

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The witnesses' evidence

Ms Wilson

67 The first defendant, Ms Wilson, gave evidence to the following effect:

(a) in January 2009 she attended at the Property in response to an advertisement that the Property was for sale;

(b) she was introduced to Mr Kelly by the real estate agent who then left. Mr Kelly showed her around the Property;

(c) Mr Kelly said that he had recently bought a smaller property at Henley Brook;

(d) Mr Kelly said that the Property was worth more than the $3.25 million he was asking, and the Neighbouring Property was worth more than the $1.3 million asking price.

(e) Ms Wilson returned to the Property on 7 January 2009. Mr Kelly introduced her to Mr Jonathan Fyson who, Mr Kelly said, was conducting a valuation for the Bank of Queensland;

(f) at an early stage she told Mr Kelly that they were probably only interested in the Property (thus not also the Neighbouring Property);

(g) she had a number of meetings and visits with Mr Kelly;

(h) at a meeting before 10 February 2009 with the Seller's agent, Mr Guelfi, Mr Guelfi raised the suggestion of vendor finance;

(i) after the offer of 10 February 2009 (annexure KW 2 to exhibit A1), Mr Kelly told Ms Wilson that the Bank of Queensland had already done a sworn valuation of the Property, valuing the Property higher than the asking price. He said he was selling at a bargain because he needed the money for his Henley Brook property;

(j) Ms Wilson then had discussions with Mr Michael Fitch of the Bank of Queensland;

(k) Mr Fitch wrote to Ms Wilson by email of 25 February 2009 setting out indicative possible figures for loans and securities (annexure KW 3 to exhibit A1);

(Page 16)

(l) on 26 February 2009, the Buyers made the offer to purchase the Property for $2.73 million, accepted on 28 February 2009;

(m) Ms Wilson then took steps to obtain a valuation. Her preferred valuer said he was going to Bali;

(n) she informed Mr Kelly that there would be some delay with the valuer. He said that the Bank of Queensland had been satisfied with the value and the Buyers were getting it well below market value;

(o) it then occurred to her to ask the Bank of Queensland for the valuation. She rang and asked Mr Fitch. He said that he could only send it to the client. Mr Fitch sent an email to Ms Wilson on 3 March 2009 saying that he was sending a soft copy of the valuation report to Mr Kelly;

(p) Mr Kelly said he was having trouble opening the email. After further requests, Mr Kelly said that he would run it past his accountant before he could show the valuation to them;

(q) in mid-March 2009, Mr Kelly said she could pick up the valuation. She went to the Property. Mr Kelly and Mr Stevens were there. One of them handed to her a manila folder. The manila folder contained four pages, pages 11, 12, 13 and 19 of the McGees valuation, together with a cover letter. Mr Kelly said words to the effect 'here are the summary pages of the valuation and an earlier site plan of the previous owners';

(r) Mr Kelly said words to the effect that 'you may have to go to another bank' and that he was having trouble with the Bank of Queensland. He also said words to the effect that he could not give the whole document for reasons of confidentiality;

(s) nothing in the pages she was given alerted her to the fact that the valuation was not only for the Property but also the Neighbouring Property. She saw the valuation figure of $3.3 million. That did not surprise her because Mr Kelly had said that the valuation figure was more than his asking price. Consequently, she 'did not really read' the other three pages. She handed page 19 to her husband;

(t) she signed the Contract in the belief that the McGees valuation was a sworn valuation of $3.3 million for the Property;

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(u) she had hoped to pay back some of the vendor finance from profits she hoped to make out of a unit development in Rockingham;

(v) they applied for development approval through planners, Greg Rowe & Associates;

(w) in March 2010 she made enquiries about bank finance in order to repay the vendor finance due on 15 June 2010;

(x) in May 2010 she received a valuation by email for $1.8 million. The valuer later increased his valuation figure to $2 million;

(y) she visited Mr Kelly on 1 June 2010. Following this she sent an email on 3 June 2010;

(z) after this, she sent him information referring him to possible finance brokers;

(aa) while in discussions with her then broker, Mr Carlshausen, it occurred to her to go back to the original valuer;

(bb) she contacted Mr Fyson. In the course of her discussions with him in about October 2010, he referred to 'both properties' and she discovered that the valuation of January 2009 related to both properties. She was 'shocked', but did not say anything to him about it;

(cc) she did not contact Mr Carlshausen about refinancing the Loan Agreement, or otherwise go back to him;

(dd) she saw the full McGees valuation only after disclosure of documents in this case; and

(ee) if she had seen the full document, she would not have proceeded with the purchase.

Mr Rendell

68 The second defendant, Mr Rendell, says as follows:

(a) he left most of the negotiations to his wife;

(b) in mid-February 2009, he said to Ms Wilson that they needed to get an independent sworn valuation;

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(c) Ms Wilson said that Mr Kelly had told her the Bank of Queensland had valued the Property above his asking price of $3.25 million;

(d) a little later, Ms Wilson told him that she was going to ask Richard Heigan to do a sworn valuation;

(e) when that was not possible, she said she would ask the Bank of Queensland for a copy of the bank's sworn valuation;

(f) later she said the bank would not give it to her, but would send it to Mr Kelly;

(g) one afternoon she returned home with the contents of a manila file. She looked at the contents and then handed them to him, saying words to the effect that 'this was a summary of the bank valuation that she had just picked up from Mr Kelly';

(h) the folder included 'a few pages' that were a portion of the valuation. Mr Rendell 'scan read' the pages. Ms Wilson said something along the lines that 'Mr Kelly's accountant wouldn't allow the disclosure of the whole document for reasons of confidentiality';

(i) he then told Ms Wilson they could go ahead with the purchase; and

(j) towards the end of 2010, Ms Wilson said she had spoken to the valuer who had done the Bank of Queensland valuation, and had just found out that that valuation was a valuation of both the Property and the Neighbouring Property.

69 Mr Rendell's evidence was admitted on the agreed basis that his evidence of things Ms Wilson said to him was evidence that those things were said, but not evidence of the truth of the things said.

70 The Seller relied on his evidence, and the evidence of Mr Matthew Stevens, who lived with him at the Property, and then at the Henley Brook property.

Mr Kelly

71 The Seller, Mr Kelly, says, in summary:

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(a) he purchased the Property in November 1994. He also purchased the Neighbouring Property at the same time;

(b) in 2007, for various reasons including ill-health, he decided to sell the Property and the Neighbouring Property;

(c) in late 2007 or 2008 he purchased a property at Henley Brook, with bridging finance from the Bank of Queensland;

(d) he entered a contract to sell the Property and the Neighbouring Property for a price he cannot recall, but believes was $3.7 million;

(e) the sale of the Property and the Neighbouring Property fell through;

(f) by late 2008 - 2009, he was under some pressure to sell the Property or the Neighbouring Property, or both, to service the loan from the Bank of Queensland. However, he was not 'overly anxious' about selling;

(g) he appointed Mike Guelfi, who worked for Willie Porteous, as his agent;

(h) he was introduced to Ms Wilson;

(i) in the course of her visits, she said that she and her husband were experienced property developers who built six townhouses or units in Rockingham. They would soon be completed and available for sale and when they had been sold she would be 'cashed up';

(j) Mr Kelly agreed to offer vendor finance to give the Buyers time to sell their Rockingham properties or their Wellard home;

(k) he cannot recall much detail about the negotiations;

(l) an offer was accepted in April 2009;

(m) Mr Kelly appointed solicitors to prepare formal vendor finance agreements;

(n) the Buyers suggested numerous changes to the drafts that the lawyers prepared;

(o) Mr Kelly does not recall seeing or being aware of the McGees valuation in early 2009, although it may have been shown to him

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or discussed with him. He says that '[c]ertainly I did not personally provide the McGees valuation to Ms Wilson or Mr Rendell, or otherwise discuss with them what I considered the value of the Property to be' (exhibit 15, par 66). He told Ms Wilson to discuss price with Mr Guelfi;

(p) Mr Kelly had a meeting with Ms Ashton, an officer of Westpac. At the meeting he asked Ms Ashton whether the Buyers would be in a position to pay the Loan Amount in twelve months. Ms Ashton said that would not be a problem, given that they own the units in Rockingham and other assets;

(q) following that, Mr Kelly took a further bridging loan with Westpac for his Henley Brook property. It was a term of that loan that it was to be repaid within twelve months; that is, by about June 2010;

(r) at a meeting in June 2010, Ms Wilson said that they may need more time and that they were making enquiries for finance. Mr Kelly said that he had separate obligations to Westpac and needed the moneys to be repaid;

(s) emails sent to Mr Kelly were received by Mr Kelly's friend and housemate, Matthew Stevens. Mr Stevens received an email which he said meant in effect that the Buyers were not in a position to pay the Loan Amount;

(t) Mr Kelly then instructed lawyers; and

(u) it was not until after the proceedings were commenced, and after the defendants filed affidavits in response to the summary judgment application, that Mr Kelly became aware that the Buyers raised any issue in relation to the value of the Property.

Mr Stevens

72 Matthew Stevens says, in summary, as follows:

(a) Mr Kelly attempted to sell the Property and Neighbouring Property in 2008;

(b) before the first attempt to sell fell through, Mr Kelly bought the Henley Brook property;

(c) Mr Guelfi introduced Ms Wilson to Mr Kelly and Mr Stevens;

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(d) late in February 2009, Ms Wilson and Mr Rendell made an offer of $2.73 million, which Mr Kelly signed;

(e) that offer contained a due diligence clause;

(f) under the due diligence clause, a man named Phillip Rawlinson came and inspected the Property to produce a report. Other people also attended as part of that process;

(g) in his presence, Ms Wilson told Mr Kelly that she had met with Michael Fitch of Bank of Queensland and was shocked that he had told her, in effect, not to buy the Property, but to wait three months and pick it up on 'a fire sale'. She also said that he had a valuation in his possession and had told her what the valuation was;

(h) after that, Mr Stevens telephoned Mr Fitch and said that Mr Kelly was unimpressed, to which Mr Fitch said that he could release information because he was Branch Manager;

(i) in a later telephone conversation, Mr Fitch asked Mr Stevens to obtain Mr Kelly's consent to release the McGees valuation that Bank of Queensland had obtained;

(j) Mr Stevens received an email from Mr Fitch attaching the valuation report, but Mr Stevens could not open the attachment;

(k) some days after that, the valuation arrived in the mail. On their way somewhere, Mr Stevens met Ms Wilson and Mr Rendell and handed the envelope with the valuation to her;

(l) further detail on this topic is set out in Mr Steven's supplementary witness statement of 14 March 2012 (exhibit 16B). In this he says that he sent the valuation to Mr Kelly's accountant, Mr Maslin, who may have printed it and put it in the post to him;

(m) Mr Stevens discussed the valuation with Mr Maslin and discussed releasing it to Ms Wilson;

(n) he recalls collecting the envelope from the post office containing the McGees valuation. Almost immediately, he called Ms Wilson to arrange collection. She said she would come then;

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(o) he and Mr Kelly were about to go out. They were outside when Ms Wilson arrived. Mr Stevens took the valuation, in its envelope, from the car;

(p) Mr Stevens gave her the envelope. She looked in it and said she had 'a little work to do that weekend';

(q) there was somebody in the car with Ms Wilson, but he cannot recall who it was;

(r) shortly after this meeting, the Buyers made another offer for $2.73 million, with vendor finance at $1.5 million. This was accepted by Mr Kelly on 7 April 2009;

(s) he recalls a conversation before settlement when Ms Wilson mentioned that the value of the property she was purchasing was $2.3 million. That had come from Westpac. She said to him in substance that she was happy with that and that the Westpac and McGees valuations were in substance very similar; and

(t) Mr Kelly instructed lawyers to prepare the documents. Ms Wilson presented draft documents. She said that she did not need to appoint her own lawyers as she was experienced in these types of matters.

73 I turn now to make findings in relation to the critical factual issues.

Was part only of the McGees valuation given to Ms Wilson?

74 As would be apparent from what I have written, there is a stark clash in the evidence about what was given to Ms Wilson. To my mind, the choice between the competing versions of events is not straightforward. There is something of substance to be said on each side. Moreover, there are, on my assessment, matters giving rise to some doubt about the reliability of the evidence of each of the four main witnesses.

The rule in Browne v Dunn

75 The resolution of that conflict is not made any easier by the absence of cross-examination on a number of apparently salient points. In closing submissions, each counsel emphasised particular matters that had not been put to his party's witnesses, or evidence that had not been challenged. On both sides, there was some force in these submissions. I give a number of examples of matters not put in cross-examination in this section of my reasons.

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76 The response to a perceived failure to comply with the rule in Browne v Dunn (1893) 6 R 67 (HL) must be tailored to the circumstances of the case. I adopt the principles set out by Owen J in The Bell Group Ltd (in liq) v Westpac Banking Corporation [No 9] [2008] WASC 239 [1023] - [1041]. In this case, attention must be given to the questions asked and not asked of each witness, on both sides. Absence of cross-examination on a particular point may permit the court more easily to accept evidence, but it does not compel acceptance. In the end, the court must draw its conclusions on the whole of the evidence.

The Buyers' submissions

77 Counsel for the Buyers submits that, for a number of reasons, their version of events about the handing over of the McGees valuation should be preferred.

78 I have, of course, considered all of counsel's submissions, but will refer specifically to some major ones.

79 First, the Buyers submit that:

(a) their offers of 10 February 2009 and 28 February 2009 each included a due diligence condition;

(b) their unchallenged evidence was that the purpose of those due diligence clauses was, among other things, to enable them to satisfy themselves about the value of the Property; and

(c) in those circumstances, if the Buyers had received the whole of the McGees valuation, stating that the Property and the Neighbouring Property were, together, worth $3.3 million, it would not have made sense for them to go ahead with the acquisition of the Property for $2.73 million.

80 In my view there is some force in this submission, although there are some possible alternative inferences. It may be that the Buyers did not read the valuation carefully enough to see that it related to both properties. Alternatively, they may have decided to go ahead on the basis that their plans for the Property would add value to it. These matters were not explored in cross-examination.

81 Secondly, counsel submits that there is unchallenged evidence that, before late February 2009:

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(a) the Seller said that the Property was worth more than the listing price of $3.25 million; and

(b) the Seller told Ms Wilson that Mr Fyson's valuation was higher than the asking price.

82 It is true that Ms Wilson was not cross-examined in relation to her evidence in her statement to this effect. However, her evidence was contradicted by the Seller, Mr Kelly, who said he did not discuss value or price with Mr Wilson: exhibit 15, par 66. Mr Kelly was not cross-examined on his evidence in this respect; Ms Wilson's evidence was not put to him.

83 The fact that Ms Wilson asked Mr Fitch for the valuation may invite attention to how Ms Wilson knew about the existence of the valuation in the Bank of Queensland's possession. In her statement, she says that the Seller had told her about it. However, when she was asked in cross-examination whether Mr Fitch had told her that there was a valuation she did not say anything to that effect. Rather, she said that 'I knew there was already a valuation because I met the valuer at the [Property] previously in the January' (ts 173). I prefer that evidence to what was said in her prepared statement.

84 I think this conflict of evidence between Ms Wilson and Mr Kelly falls to be determined with the conflict about the handing over of the McGees valuation, not separately or as an earlier step prior to determining the critical factual issue.

85 Thirdly, the Buyers point to aspects of the evidence of the Seller and Mr Stevens on matters of detail relating to the handover of the McGees valuation. Mr Stevens said that the valuation was stapled in four or five places (ts 356), but the documents do not support that: see exhibit 13 and annexure KW 5 to exhibit A1. The evidence of Mr Stevens and Mr Kelly about where the valuation was handed over was inconsistent. The effect of Mr Kelly's evidence-in-chief was that he was 'certain' that he did not personally provide the McGees valuation to the Buyers. In cross-examination, he strongly asserted that the valuation was given to Ms Wilson by Mr Stevens, while Mr Kelly and Mr Stevens were standing in the driveway of the Property near the hall (ts 345). In Mr Stevens' first statement he said that it occurred at the gate (exhibit 16A, par 87). In his second statement he said that it was in the driveway (exhibit 16B, pars 12 - 16). Further, given the distance from the house to the gate and

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the hall, and given Mr Kelly's poor health, it may be thought unlikely that the handover occurred where described by Mr Kelly or Mr Stevens.

86 I accept that there is considerable force in these submissions. Further, there is room for doubt about Mr Kelly's claim to crystal clear recollection of the handover (ts 341 - 342, 345) in the context of his evidence that he has very little recollection of much else about the events in 2009.

87 Rejection of the reliability of the evidence of Mr Kelly and Mr Stevens in these respects does not, in itself, compel acceptance of Ms Wilson's evidence that part only of the McGees valuation was handed to her.

88 Fourthly, counsel for the Buyers points to the evidence of both the Seller and Mr Stevens that the valuation was sent to the Seller's accountant, and to the Seller's evidence that he told Ms Wilson he could not hand over the document until he had spoken to his accountant. Counsel submits that that evidence supports Ms Wilson's version of events. In my view, this evidence is consistent with both the competing versions and does not assist, in any material way, in choosing between them. In particular, the finding that the Seller sent the valuation to his accountant does not inform whether the Seller said words to the effect that he could not provide the whole document for reasons of confidentiality, or whether the whole document was handed over.

89 Fifthly, counsel for the Buyers submits that the Seller had a motive to attempt to deceive the Buyers, because the financial pressure he was under meant that he needed to sell the Property. I accept that the pressure from the Bank of Queensland gave Mr Kelly a firm incentive to sell the Property. However, it is quite another step to conclude that, for that reason, the Seller deliberatively removed pages from the McGees valuation, and said something false about the reason for that, intending to deceive the Buyers about what property was the subject of the valuation. No allegation of that kind was squarely put to Mr Kelly. Counsel for the Buyers submits (ts 394) that he put to Mr Kelly that he had knowingly provided a portion of the document which he knew did not reflect the whole. However, consideration of the transcript of the cross-examination reveals that no proposition to that effect was put. Counsel put that Mr Kelly had given only a portion of the valuation, and that he had said that he could not give all of it because of reasons of confidentiality. (Mr Kelly denied both these propositions: ts 345, 347.) Counsel put to

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Mr Kelly that he had known that it was a valuation for both properties, to which Mr Kelly responded that he could not remember (ts 347).

90 The failure to squarely put the allegation of intentional deception is by no means of itself fatal to the acceptance of the Buyers' case. The Buyers opened on the basis that the deception was intentional (ts 112). Moreover, the nature of the defence case is such that, if events occurred as alleged by the Buyers, the natural inference is that it was a deliberate deception, not the result of inadvertence.

91 In determining the question of whether all or only part of the McGees valuation was handed over, it might be thought relevant to enquire whether it would have made sense, from the Seller's perspective, to hand over the whole of the valuation, in circumstances where he was asking $3.25 million, and had conditionally contracted to sell for $2.73 million. It could be argued, that in circumstances where Mr Kelly needed to sell, it would not have made sense to hand over the McGees valuation, because it stated a value of $3.3 million for both properties.

92 No questions were asked of Mr Kelly on this topic. If he had been unaware of the contents of the valuation, there would be nothing contrary to common sense in his conduct. Further, an explanation for the conduct is provided in the evidence of Mr Stevens: exhibit 16A, pars 81 - 85. In substance, in that evidence Mr Stevens said that it was apparent from what Ms Wilson said to him that she already knew, from Mr Fitch, the contents of the McGees valuation. That proposition was not put to Ms Wilson, or to Mr Fitch. Moreover, Mr Fitch's evidence, unchallenged in cross-examination, was that he did not discuss the contents of the valuation with Ms Wilson. Nevertheless, that evidence of Mr Stevens was not challenged in cross-examination. In those circumstances, it seems to me difficult to use this line of reasoning as a ground in favour of acceptance of the Buyers' version of events.

Findings

93 The onus is on the Buyers to prove the conduct which they allege occurred. I find that the Buyers have not discharged their onus. I am not persuaded that what was handed to Ms Wilson (whether by Mr Stevens or Mr Kelly) was part only of the McGees valuation. Nor am I persuaded that, at the time of handing over, the Seller said words to the effect that this was a summary of the valuation and that he could not give the whole of the document to her for reasons of confidentiality. My reasons are set out below.

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94 From the Buyers' perspective, the primary protagonist and primary witness was Ms Wilson.

95 First, Ms Wilson's evidence about what was handed to her, and the circumstances in which that occurred, was inconsistent in material respects with other evidence she gave.

96 As I have said, in her witness statement, Ms Wilson said that she received four pages of the McGees valuation, being pages 11, 12, 13 and 19, together with a cover letter (exhibit A1, par 55 and annexure KW 5).

97 In April 2011, Ms Wilson swore an affidavit in opposition to an application by the Seller for summary judgment. Ms Wilson's affidavit was evidently a lengthy one, raising many matters apart from the McGees valuation. The McGees valuation was dealt with in pars 91, 92 and 110 of the affidavit. Those paragraphs were in these terms:

91. On or about March I made a request to the Bank of Queensland to see the valuation of the property and Annexed KW4 is a copy of the emails sent in respect to this.

92. On or about April 2009, I do recall receiving the page 19 of the valuation, but I am unsure whether the Plaintiff or his Partner delivered it to me. Annexed hereto and marked 'KW-5' is a copy of the extract of the valuation which states that the Property is valued at 3.3 million.

…

110. On about November 2010, I obtained a full copy in respect of the Extract of the Valuation and upon review it became apparent to me that the page 19 extract of the valuation provided to me on or about March or April was not only in respect of [the Property] but also included [the Neighbouring Property].

(ts 260 - 262)

98 In this affidavit, Ms Wilson referred to receiving 'the page 19' of the valuation. She said she was unsure whether Mr Kelly or Mr Stevens delivered 'it' to her. Her affidavit annexed page 19 only of the McGees valuation. Further, she said nothing in her affidavit about anything said by Mr Kelly at the time of handing over any part of the McGees valuation.

99 In cross-examination, Ms Wilson said that in preparing the affidavit she gave her then solicitor all four pages, and that he had evidently thought that only one page was needed (ts 260 - 263). To my mind, it is inherently unlikely that a legal practitioner would have drafted pars 92

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and 110 in the terms they were drafted, and selected the annexure to par 92, had he been given four pages of the McGees valuation with instructions that those four pages had been provided to Ms Wilson. In the absence of any evidence from the solicitor, I do not accept that evidence of Ms Wilson.

100 Ms Wilson also said in cross-examination that her affidavit was prepared in haste. To my mind that does not satisfactorily explain the conflict between the language of pars 92 and 110, and the selection of a single page as an annexure to the affidavit, on the one hand, and her evidence before me on the other.

101 In the course of cross-examination, Ms Wilson's attention was drawn to the two pages which are exhibit 13. She accepted, as was clear beyond debate, that she had sent those two pages from her facsimile machine in March 2010. That was more than six months before, on her evidence, she had obtained a full copy of the McGees valuation. The two pages which she sent to Mr Nevermann were two of several pages of sales evidence analysis annexed to and part of the McGees valuation. When these pages were drawn to her attention, she said that they were obviously part of what was given to her by Mr Kelly (ts 257). When it was put to her that she had not mentioned those pages in her statement, she said that they must have been taken out of the manila folder for the purpose of faxing them (ts 258). She said she could not say where the pages are now (ts 259). Ms Wilson did not give any particular explanation for how the pages that she sent by facsimile had been lost.

102 Secondly, in my view both Ms Wilson and Mr Rendell gave conflicting and unsatisfactory evidence on the question of the extent to which they read, carefully or otherwise, the pages of the McGees valuation which, on their evidence, were provided to Ms Wilson.

103 In their witness statements, both of the Buyers said in clear terms that apart from page 19, they did not read the pages of the valuation with any care. Ms Wilson's statement says she 'didn't really read' the other three pages: exhibit A1, par 58. Further, she says she gave only page 19 to her husband, and he did not ask for the other pages. Mr Rendell's statement says that he 'scan-read' the pages from the folder: exhibit B, par 18.

104 In cross-examination, Ms Wilson did not accept that she read the pages she received carefully, rather she said she 'flicked through' those pages (ts 199 - 200). She said that all she was really interested in was the

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valuation figure on the last page. On a number of occasions during cross-examination she said, in emphatic terms, that she did not look closely at the pages, or study the pages (ts 205 - 206, 214, 216, 246).

105 In cross-examination, Mr Rendell said that Ms Wilson came home with the envelope, with the valuation containing the cover letter, quoting information about sales evidence and other information including the 'actual valuation' (ts 300). A little later in his evidence, he again said that he recalled seeing sales evidence (ts 301). By the time he gave evidence, Mr Rendell had seen and heard the evidence of Ms Wilson, in cross-examination the previous day, about the two pages of sales evidence. Sales evidence had not been mentioned in his statement as among the pages that he had 'scan-read'. In my view, Mr Rendell's oral evidence referred to above was an embellishment. I do not accept that evidence.

106 There is, I think, an apparent reason why the Buyers were at pains to emphasise that they did not read carefully the pages they say they received. The great bulk of the contents of those pages relate to the improvements on the Property. However, one of them relates, plainly in my view, to improvements on the Neighbouring Property. External improvements were listed on page 13 of the McGees valuation. The third dot point was in these terms:

Front cleared, fenced and pastured paddocks to Fisher Road and rear cleared, fenced and pastured paddocks to Dirk Road.

107 In my view, the 'rear cleared, fenced and pastured paddocks to Dirk Road' was an unambiguous reference to the paddocks on the Neighbouring Property, which abuts Dirk Road (see exhibit 5). However, both of the Buyers gave evidence, in cross-examination, that sought to suggest a different interpretation, so it could be read as applying only to the Property, and not the Neighbouring Property. I found their evidence in that regard unconvincing. Moreover, Ms Wilson positively asserted that she had formed a different interpretation of this part of page 13. Her evidence about when she formed any such understanding was inconsistent and, to my mind, entirely unconvincing. Her evidence in this regard detracted from her credibility.

108 When this passage on page 13 of the McGees valuation was put to Ms Wilson, she was asked if she understood that it was describing the pastured paddocks to Dirk Road. She said, 'at the time when [she] looked through this valuation, no' (ts 208). Her evidence was that she understood it as a reference to Dirk Brook, rather than Dirk Road (ts 208 - 209).

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(Dirk Brook runs roughly along the boundary between the Property and the Neighbouring Property. A small part of the Property is south of Dirk Brook.) She said she did not notice that reference at the time she was given the pages (ts 209 - 210), and when she did read it, she understood it as a reference to Dirk Brook (ts 210). See also ts 212.

109 In re-examination, Ms Wilson gave the following evidence:

When you saw those documents, did you see the word 'Dirk' on those pages at the time that you took them home?---At the time I took them home, I can't recall seeing the word 'Dirk,' no.

…

Can you recall - are you able to say when you recall that it was that you first saw the word 'Dirk'?---No, I don't recall. I must have had at some stage noticed it because I considered it to be the Dirk Brook.

When you say 'at some stage', when?---I can't recall. It would have been early when we received ---

Early?---Early when we received the valuation.

Right, and at the point when you saw the word or when you say 'early', I will have to ask you to be more specific. You've got the manila envelope at home?---Yes.

You say you don't recall seeing it then. When did you next have cause to look at those pages?---The next time we would have had cause to look at those pages would have been when we were - after I had spoken to Mr Fyson when we started this case.

Right. Are you able to say if you recall seeing that word on that occasion?---Yes, I noticed then; yes.

Did you see the words 'Dirk Road'?---Yes.

Did you read them as Dirk Road or did you read them as anything else?---I read them as Dirk Road.

Then?---Yes.

Given your evidence to say you read them as Dirk Brook, when did you do that?---When we first got the valuation I looked at it as Dirk Brook but actually it occurred to me that it was actually Dirk Road when we started the proceedings (ts 275 - 277).

110 This evidence of Ms Wilson is internally inconsistent.

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111 I formed the impression that Ms Wilson wished to propound an alternative plank to her case, and reconstructed to that end. She said she did not read, at any relevant time, the passage in question, but if or when she did, she read it in a way consistent with the valuation referring only to the Property.

112 Mr Rendell said that he would have read the reference to Dirk Road as a reference to the dirt road which ran near Dirk Brook. He said that 'even had I read this at that time, that was probably the way I would have interpreted it' (ts 304).

113 Thirdly, consideration of the conduct of the Buyers, particularly Ms Wilson, after settlement seems to me to tend against acceptance of their version of events.

114 On 3 June 2010, Ms Wilson wrote an email to the Seller. In the email she said the purpose of the visit on 1 June 2010 was to inform Mr Kelly of the likely delay in settling the debt due on 15 June, and to request more time to repay the Loan Amount. In the course of the email, Ms Wilson said that the Buyers were seeking to refinance the Loan Amount and the valuer had taken over nine weeks to deliver a signed report and also had 'in [their] opinion greatly undervalued the [P]roperty by more than $700,000'. It is notable that the extent of the undervalue appears to have been derived from the difference between Mr Nevermann's value of $2 million and the purchase price of $2.73 million, rather than what Ms Wilson says she understood as the McGees valuation of the Property at $3.3 million. That is so, notwithstanding that Ms Wilson says in her statement that when she rang Mr Nevermann to complain, she referred to the $3.3 million valuation. I do not accept that evidence.

115 On Ms Wilson's evidence, the first time the Buyers found out that the McGees valuation related to both properties, and not solely the Property, was in November 2010 in the course of a conversation with Mr Fyson. On her evidence, she did not say anything to Mr Fyson about that. That may seem surprising but, in itself, it is not of significant moment. More telling, in my view, is that Ms Wilson did not immediately complain to or otherwise communicate with the Seller or his solicitors. By the time she said she found out about what she termed Mr Kelly's 'deception', a default notice had issued in July 2010 and the Seller's solicitor had written offering a further two weeks forbearance from commencing an action, on conditions (exhibit A1, par 91). The Buyers did not articulate to the Seller

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any complaint about the McGees valuation until it was mentioned in Ms Wilson's affidavit in April 2011.

116 In combination, the matters I have set out above, together with my general observations about Ms Wilson's credibility, referred to below, lead to the conclusion that I am not satisfied that she was given part only of the McGees valuation. That conclusion is reinforced by an additional matter. For the reasons set out below, I find that Ms Wilson knew, by the time of settlement of the sale of the Property, that Westpac had a valuation of the Property of $2.3 million.

117 Counsel for the Seller points to the first loan application in support of the conclusion that the Buyers knew of Westpac's valuation of $2.3 million. However, I am not satisfied that the figure of $2.3 million was completed in that document at the time it was signed by the Buyers. I find, on the probabilities, that that figure was inserted in late April, following receipt by Westpac of the valuation of $2.3 million.

118 However it is noteworthy that on the first application, the figure of $1.638 million was recorded in brackets on the first page. Immediately below that, the entry for 'total amount of loan' was $1.38 million. The Contract was conditional on finance approval for a loan of 60% from Westpac. Sixty percent of $2.73 million is $1.638 million, the figure stated in brackets on the first page of the loan application (exhibit 14).

119 The effect of Ms Wilson's evidence was that she and Mr Rendell were applying for an amount of whatever the bank would provide. I think it more likely that the Buyers sought $1.638 million, in accordance with the Contract's finance clause. In any event, in my view, it is inherently unlikely that the bank would have failed to communicate with the Buyers, at all, about the amount of the loan. I think the likelihood is that Ms Ashton discussed with Ms Wilson the figure of $1.638 million, but informed the Buyers, at some stage in May 2009, that the bank was willing to lend no more than $1.38 million.

120 That leaves the question of whether the bank informed Ms Wilson that it had received a valuation of the Property in the sum of $2.3 million. That would have explained the amount in respect of which the bank was willing to lend, since $1.38 million is 60% of $2.3 million. I accept that it is entirely plausible that a bank might state the amount it is willing to lend without explaining the reasons. That is in effect what Ms Wilson says occurred. However, taking into account the whole of the evidence, including the unchallenged evidence of Mr Stevens about a conversation

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he had with Ms Wilson, I find that Ms Wilson knew that Westpac had valued the land at $2.3 million. Mr Stevens gave evidence in his statement (exhibit 16B, par 16) that he had a conversation with Ms Wilson before settlement in which she said, in substance, that the value of the Property was $2.3 million and that that was the view taken by Westpac which was substantially similar to the view in the McGees valuation. His evidence in that respect was not challenged or contradicted, although it was not put to Ms Wilson.

121 In deciding to go ahead with the purchase, notwithstanding Westpac's view of the value of the Property, the Buyers may have considered that valuations of banks are inherently conservative, and that the Property was being valued based on its then current state. The Buyers had plans which, likely, they would have expected would add value to the Property. I do not overlook that these matters were not put to the Buyers in cross-examination.

122 Finally, in the course of her evidence in cross-examination, I formed the distinct impression that Ms Wilson was not simply answering the questions asked of her. Rather, she went to lengths to explain and justify her position and, at times, when she saw an opportunity to add to the existing evidence to support her case, she would do so, regardless of whether the question called for that. Moreover, there were substantial elements of reconstruction in parts of her evidence.

123 Her evidence about the third dot point of the McGees valuation, and how closely and when she read the valuation, seems to me illustrative of these general tendencies: see [103] - [109].

124 Another example arose when Ms Wilson was cross-examined about the figure of $2.3 million on the loan application form dated 4 March 2009. She rejected the suggestion that that figure stated the market value of the Property, saying that it represented the amount they were applying for (ts 223). That is inconsistent with her other evidence to the effect that the Buyers applied for whatever the bank would provide and also with the figure of $1.638 million on the first page of the loan application. In my view, there is and was no foundation for Ms Wilson's evidence that the figure of $2.3 million represented the amount of the loan applied for. Her evidence to that effect seemed to me to be an attempt to bolster her case or avoid an apparent difficulty for her case.

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125 Other examples can be seen in Ms Wilson's regular efforts to downplay what she saw in relation to the Neighbouring Property on her visits, and in her evidence at ts 168 and ts 211.

126 For these reasons, I am not satisfied that the Seller or Mr Stevens handed Ms Wilson part only of the McGees valuation. Nor am I satisfied that the Seller said, at the time of handing over the McGees valuation, words to the effect that it was a summary of the valuation or that he could not hand over all of it because of reasons of confidentiality.

127 Those conclusions are fatal to the Buyers' defence and counterclaim.

128 For the sake of completeness, I will state my conclusions about the counterclaim on the hypothesis that I am wrong in the findings I have just made.

Assuming the valuation representation is established, would the counterclaim succeed?

Conduct in trade or commerce?

129 A finding of misleading or deceptive conduct does not assist the Buyers unless they establish that the conduct was in trade or commerce.

130 The sale by a private owner of his or her residence is not, generally, conduct in trade or commerce: Franich v Swannell (1993) 10 WAR 459, 481; O'Brien v Smolonogov (1983) 53 ALR 107; Shone v Davies [2012] WASCA 83 [110].

131 The question is whether there are elements in the transaction and the activities and character of the parties that import a trading or commercial character to the negotiation for the sale of the Property.

132 On balance, taking into account the following matters, I am satisfied that the Seller's conduct in relation to the sale of the Property was conduct in trade or commerce:

(a) the transaction was not a conventional sale and purchase by exchange; it involved vendor finance for more than half of the purchase price;

(b) the Property did not simply comprise a home. It had six chalets that had been rented out by the Seller;

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(c) both the Seller and the Buyers employed a caretaker of the Property; and

(d) the parties discussed the prospect of developing the Property in the period before entering into the Contract.

Reliance

133 The next element for the counterclaim is that the Buyers establish that they acted in reliance on the Seller's misleading conduct. It is difficult to make findings about reliance on the hypothetical basis that I found in favour of the Buyers on the misleading conduct question. The findings I have made create, at the least, a substantial obstacle to any finding of reliance. In particular, my finding that the Buyers knew that Westpac had a valuation of the Property for $2.3 million would not sit well with a finding that the Buyers relied on the misleading conduct alleged.

134 Assuming the hurdle of reliance were overcome, the question would be what, if any, relief the Buyers were entitled to.

Relief

135 The precise relief claimed by the Buyers was something of a moveable feast. Up to trial, the Buyers have always sought, as part of the relief claimed, an order under s 77 of the Fair Trading Act avoiding the Contract, the Loan Agreement and the Mortgage. At one time, they sought also to have the purchase price reduced as an alternative to having the Contract set aside. This was abandoned before trial.

136 The Buyers also seek damages. Although it was not entirely clear from the pleading, in closing submissions, counsel for the Buyers made clear that the claim for damages was advanced on each of two alternative scenarios; first, as an adjunct to relief setting aside the transactions; alternatively, secondly as primary relief in the event that the transactions were not set aside.

137 In the lead up to trial, the Buyers amended their counterclaim to add a claim for an order, ancillary to setting aside the transactions, that the Buyers pay to the Seller, after deduction of the amount of any assessed damages, the balance of proceeds of sale received by the Buyers from the sale by Westpac, as mortgagee.

138 However, in the days after the trial was completed and the decision had been reserved, the court was notified by letter from counsel for the

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Buyers that the Buyers abandoned their claim for an order setting aside the transactions, and the related claim for an order requiring them to pay to the Seller the proceeds of any mortgagee sale.

139 The Buyers contended, through their counsel, that, after that abandonment, their case was twofold. First, they raised what was described as the 'defence of deliberate deception' which was said to prevent the Seller's claim for payment and reliance on the Contract, Loan Agreement and Mortgage induced by that deception. Secondly, there was the claim for damages.

140 It is difficult to understand what is intended by the so called defence of deliberate deception. Section 10 of the Fair Trading Act creates a norm of conduct. It does not create rights in other parties. A right to relief in another party is founded on s 74, s 77 or s 79 of the Fair Trading Act.

141 Misleading conduct in contravention of s 10 of the Fair Trading Act may give rise to a claim for an injunction or found an equitable set-off (see Bitannia Pty Ltd v Parkline Construction Pty Ltd [2006] NSWCA 238; (2006) 67 NSWLR 9 [88] - [102]). But the Buyers make no claim of either of these characters.

142 After abandonment of pars 19(a) and 19(b) of the counterclaim, the only relief claimed is damages. On the face of it, the Buyers do not otherwise invoke s 77.

143 It may be that the Buyers are claiming an order refusing to enforce some or all of the provisions of the Contract and the Loan Agreement: namely those creating the obligations to pay $1.5 million to the Seller. This is an order of a character within s 77: see s 77(3)(c).

144 If that is what is intended, I would not have made an order of this kind. The effect of an order of this kind would be to permit the Buyers to retain the Property without paying the agreed second instalment of the purchase price, namely the Loan Amount of $1.5 million. In other words, in substance the purchase price would be varied to be $1.23 million. The Buyers led no evidence of the value of the Property at the time of settlement or at the time of trial. In the absence of evidence of the value of the Property, and in circumstances where the Contract is not to be avoided, in my view it would be arbitrary and unjust to refuse to enforce the payment of the second instalment of the purchase price under the Contract, while the Buyers retain the Property.

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145 An order under s 77 must be directed to compensating the claimant for loss or damage suffered, or preventing or reducing loss or damage: s 77(1). It has not been demonstrated that the amount of the unpaid Loan Amount of $1.5 million has any real or sufficient connection to any loss or damage suffered or likely to be suffered by the Buyers by reason of acquiring the Property in reliance on the Seller's misleading conduct.

146 Consequently, if I had found that the Seller engaged in misleading or deceptive conduct, in the form of the valuation representation, and that the Buyers had relied on that representation in entering into the relevant transactions, I would nevertheless have given judgment for the Seller on his claim to the monies due under the Contract and Loan Agreement.

147 As I have said, the Buyers also claim damages. They claim damages under the following heads:

(1) costs associated with the Contract and Mortgage, including stamp duty of $146,000 and the sum of $130,000 said to be a part of the purchase price as explained above at [9(a)];

(2) legal expenses in relation to the Contract, Loan Agreement and Mortgage;

(3) consultant planners' fees of applying for development approvals and rezoning;

(4) planning application fees; and

(5) interest and charges paid to Westpac from 15 June 2009 to 15 May 2011.

148 In my view, none of these claimed heads of damage are recoverable. Essentially, that is because:

(a) the Buyers have retained the Property; and

(b) there is no evidence about the value of the Property.

149 In those circumstances, the heads of damage claimed cannot be said to have been lost as a result of entering the transaction. Loss and damage must be assessed in a holistic way, taking into account the benefits as well as costs of entering into a transaction induced by misleading conduct.

150 In my view, the evidence does not sustain a conclusion that the Buyers are worse off for having entered into the transaction. Certainly,

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and in any event, in my view the Buyers have not demonstrated that they are worse off to the extent of the various heads of damage claimed.

151 For these reasons, even if I had found in favour of the Buyers in relation to misleading conduct and reliance, I would nevertheless have dismissed the counterclaim and given judgment for the Seller on his claim.

Conclusion

152 For these reasons, I would dismiss the Buyers' counterclaim and give judgment in favour of the Seller for $1.5 million plus interest at 8.81% from 15 June 2010.

153 I will hear from the parties as to the form of orders and as to costs.