Latella, v L.J. Hooker Ltd

[1985] FCA 97

Re: VINCENZO LATELLA and DIEGO LATELLA
And: L.J. HOOKER LIMITED
No. G.54 of 1984
Trade Practices
(1985) ATPR para 40 - 555 / 5 FCR 146

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Franki J.(1)

CATCHWORDS

Trade Practices - advertisement by agent - False or misleading representation about use to which land may lawfully be put - Whether principal can recover damages from agent - Measure of damages under s.82.

Trade Practices Act 1974 - ss.53A, 82.

Trade Practices - False or misleading statement by vendors' agent - Claim for damages by vendors under s 82 - Whether a person not misled can make such a claim - Measure of damages - Duty to mitigate - Trade Practices Act 1974 (Cth), ss 53A, 82(1).

HEADNOTE

Held: In proceedings for damages for a breach of s 53A of the Trade Practices Act 1974 (Cth) (the Act) the words "a person" in s 82(1) of the Act embrace a person who was not a purchaser and who was not himself misled by the false or misleading statement. Yorke v. Treasureway Stores Pty Ltd (1982) 82 ATPR 43, 850 and Parkdale Custom Built Furniture Pty Ltd v. Puxu Pty Ltd (1982) 149 CLR 191, referred to.

The Court applied the principles enunciated in Yorke v. Treasureway Stores Pty Ltd (supra); Frith v. Gold Coast Mineral Springs Pty Ltd (1983) 65 FLR 213; Hellyer Drilling Co v. MacDonald Hamilton and Co Pty Ltd (1983) 51 ALR 177, relating to the recovery and measure of damages under s 82 of the Act and also referred to T. N. Lucas Pty Ltd v. Centrepoint Freeholds Pty Ltd (1984) 1 FCR 110; Marine Board of Launceston v. Minister of State for the Navy (1945) 70 CLR 518; Sanrod Pty Ltd v. Dainford Ltd (1984) 54 ALR 179; Corbidge v. The Bakery Fun Factory Pty Ltd (1984) 84 ATPR 45, 677 and Smolonogov v. O'Brien (1982) 2 TPR 223, with approval.

HEARING

Sydney, 1985, March 20. #DATE 20:3:1985
APPLICATION

Application for damages under s 82 of the Trade Practices Act 1974.

J. A. McCarthy, for the applicants.

S. D. Robb, for the respondent.

Solicitors for the applicants: D. La Rosa, Izzo & Co.

Solicitors for the respondent: Bell, Cadogan, Couston & Gengos.

GFV

ORDER

1. The respondent to pay to the applicants $6,600 damages together with costs. (Settlement and entry of order is dealt with by O.36 of the Federal Court Rules.)

Orders accordingly

JUDGE1

This is an action between Vincenzo Latella and Diego Latella claiming damages from L.J. Hooker Limited ("Hooker") under s.82 of the Trade Practices Act 1974 ("the Act"). The section of the Act which was alleged to have been contravened is s.53A. The applicants submitted that the respondent by its servant and agent had made a false or misleading statement concerning the use to which the land might lawfully be put. The applicants were the registered proprietors of the property at 14 Trevilyan Avenue, Rosebery. It was alleged and accepted by the respondent that on 18, 19 and 27 June and 2 & 3 July 1982 the respondent, by its servant and agent, placed an advertisment in two newspapers in Sydney in the following terms:

"Auction: 10/7/82 Rosebery Home and Income 14 Trevilyan Ave., Inspect: Sat. & Wed. 12 noon - 1 p.m.

A unique property with 3 bedroom residence in front of site and superb 2 bedroom home on rear of block, vendor interstate, will be sold."

It emerged that the "superb 2 bedroom home on rear of block" could not lawfully be used for residential purposes. The first applicant had been so advised by the relevant Town Clerk by letter of 17 November 1980.

1. The respondent conducted an auction on 10 July 1982 and the property was sold to a Mr. Harris. Ultimately when the facts were known Mr. Harris refused to complete the purchase.

2. The applicants had mortgaged the property and on 7 July 1982 the mortgagee obtained judgment against the applicants for late payment of interest. On 19 July 1982 the applicants' solicitors, Messrs. D. La Rosa, Izzo & Co., wrote to the mortgagee advising that the property had been sold and on 26 July 1982 the mortgagee advised them of the judgment for both principal and interest.

3. On 18 August 1982 the Sheriff was instructed by the mortgagee to take possession and the applicants obtained an ex parte stay of execution. Ultimately, on 17 September 1982, the application was contested and a stay was obtained for a further four weeks on the basis that the applicants should pay interest at the rate of 17.75% on the mortgage. As a result of negotiations the stay was further extended until the property was sold. The property was sold for $105,000 and the sale was completed on 20 April 1983.

4. The applicants commenced an action for specific performance presumably after the purchaser's solicitors declined to complete in November 1982. This action was ultimately settled upon senior counsel's advice about the end of March 1983. The applicant received legal aid. An appeal was also instituted in the Land and Environment Court against the refusal, in May 1982, that is about two months before the auction took place, by the Council to allow an application to convert the structure at the rear of the land into a residence. The application to the Land and Environment Court was not lodged until 23 December 1982. It was dismissed on 8 April 1983.

5. Counsel endeavoured to conduct this case in a way which would enable the question at issue to be determined with a minimum of oral evidence. In fact no oral evidence was given, except by Mr. Izzo, a partner in the firm of solicitors who had acted for the applicants in all relevant transactions. His evidence was directed mainly to the question of costs which had been incurred in relation to the various matters. Some facts were agreed and the rest of the material before me was documentary. For example a copy of an affidavit of the purchaser, Mr. Harris, in the suit for specific performance was admitted by consent and I was asked to treat it on the basis that its contents were in the category of agreed facts. In the same way there was tendered without objection a written statement of a Mr. Andre Jerom, an employee of the respondent, who had dealt with the first applicant and Mr. Harris in relation to the sale and purchase of the property.

6. The first question for consideration is whether the words "A person" in s.82(1) embrace a person who was not a purchaser and who was not himself misled by anything in the advertisement. Most of the cases seem to deal with s.52 and not with the breach of a section such as s.53A where the criminal onus of proof must be satisfied before a contravention is established. Counsel did not argue that any different approach should be made in relation to the application of s.82 in conjunction with s.53A. Counsel for the applicants could not direct my attention to any case where the clear words of s.82 had been read down. In Yorke v. Treasureway Stores Pty. Ltd., (1982) 4 ATPR 40-313 an agent which had unwittingly wrongly advertised a business contrary to s.52 of the Act, after having taken all reasonable precautions to check the correctness of an advertisement, was held liable to a purchaser. At p.43,862 Fisher J. cited the following passage of Gibbs C.J. in Parkdale Custom Built Furniture Pty. Ltd. v. Puxu Pty. Ltd (1982) 149 CLR 191 at p 197:
   
   

"A corporation which has acted honestly and reasonably may therefore nevertheless be rendered liable to be restrained by injunction, and to pay damages, if its conduct has in fact misled or deceived or is likely to mislead or deceive. The liability imposed by s.52 in conjunction with ss.80 and 82, is thus quite unrelated to fault ..."

1. The case before me was conducted, and I think correctly conducted, upon the basis that the main issue was the measure of damages.

2. The respondent relied upon the question of causation and remoteness of damage. Both counsel agreed upon the importance of the issue of causation.

3. The "two bedroom home on rear of block" was in fact furnished at the time of the auction and for some time before and after, and had been let by the applicants to a tenant. This fact was known to Mr. Jerom. It appears that Mr. Harris phoned the respondent after he read two of the advertisements of the respondent and was told by Mr. Jerom that the flat was let to a tenant but that the property would be sold with vacant possession and that the flat could be rented for about $100-120 per week. On the morning of the auction Mr. Harris inspected the property and Mr. Jerom's statement sets out that he gave Mr. Harris the key. Mr. Harris considered that the opportunity to let the rear building was a very important consideration.

4. An authority to list and sell the property had been given to the respondent on 18 February 1982, at which time it would appear the property was also advertised. It appears that the first applicant instructed the respondent to submit the property to auction on 10 July 1982 and on 7 June 1982 an authority to submit the property to auction and to advertise was given to the respondent. At some time well before the auction and before the first applicant moved to Queensland Mr. Jerom says that the applicant said that the house at the back had not been approved as a residence but that he had "paid some money over" and he was going to appeal against the Council's decision. Mr. Jerom said he needed to know whether approval had been granted before the auction. At the time of the auction it appears that the applicants had not advised the respondent about the fate of any appeal. Indeed it appears no appeal had been lodged before the auction.

5. By letter dated 8 June 1982 the solicitors for the applicants sent the contract for sale at the proposed auction to the respondent and it appears that this was received by it on 16 June 1982. By letter dated 9 June 1982 entitled "Re: Confirmation of listing and inspection report", the respondent sent to the first applicant a sales inspection report describing the property as "14 Trevilyan Avenue, Rosebery, being a three bedroom cottage with extra 2 b-r residence at back". There is no evidence that the first applicant or anybody on behalf of the applicants replied to this letter. The letter also described the property in the same terms as the sales inspection report. On 15 June 1982, apparently again before the contract was received, the respondent wrote to the solicitors for the applicants asking for confirmation that "the property comprises a three bedroom cottage. Included in the sale are fixed floor coverings, blinds and light fittings". There is no doubt that the respondent should have enquired further. However, I consider that the first applicant should have taken some steps to respond to the letter of 9 June 1982.

6. Attached to the contract was a certificate under s.317A of the Local Government Act 1919, which described the property as "Single storey, brick cottage with a tile roof and a brick storage shed at the rear...". The contract also disclosed a covenant created by memorandums of transfer B607008 and B821336 to erect "... only a double fronted cottage residence of one storey and shall not erect more than one such residence upon the said land ...". This covenant was referred to in the second schedule of the contract.

7. There was also a surveyor's certificate attached to the contract which showed a brick cottage as the main cottage and also another brick cottage separate therefrom at the rear.

8. I pass now to the consideration of the question of damages. Damages were claimed under five headings:
   
   

a) Costs and disbursements in instituting specific performance proceedings $8,574.00

b) Costs and disbursements in defending proceedings by mortgagee - Up to the end of September 1982 (not claimed)

- After beginning of October 1982 $4,400.00

c) Interest on $105,000 for six months at 17.75% from 20 October 1982 to 2 April 1983 $9,320.00

d) Costs of Appeal to the Land and Environment Court $ 180.00

$22,474.00

e) Interest on $13,154 (the total of (a), (b), & (d))

- for the period 21 April 1983 to 31 December 1983 at 15.5% $1,424.42

- 1 January 1984 to 31 December 1984 at 14.5% $1,907.33

- 1 January 1985 to 1 March 1985 at 13.5% $ 287.04

$3,618.79

The applicants' claim in total was therefore $26,092.79.

1. It is necessary to consider the appropriate method for assessing damages under s.82 of the Act. There are a number of cases where this Court has considered the question and I will only refer to certain of these cases although I have considered all which have been dealt with by counsel and certain others. I do not intend to express any conclusions which would be applicable in all cases but for the purposes of this case I propose to follow, with respect, the principles extracted from the cases to which I refer. Fisher J. in Yorke v. Treasureway Stores Pty. Ltd., supra, at pp 43,862-43,868 considered the question of the measure of damages under s.82 where the breach was of s.52 of the Act. In general his Honour followed the following principles:
   
   

a) Whilst damages are to be assessed in much the same way as in an action in deceit, the legislature is not required and did not intend to require strict compliance with the rules of practice evolved by the Courts in making such assessments.

b) In general the Court should assess how much worse off an applicant was for entering into the transaction.

c) That losses considered should be the actual losses flowing directly from the inducement and not only those which are reasonably foreseeable.

1. A similar question was considered by Fitzgerald J. in Frith v. Gold Coast Mineral Springs Pty. Ltd. (1983) 5 ATPR 40-339 particularly at pp 44,085-44,087. It appears to me that his Honour followed similar principles to those enunciated in Yorke v. Treasureway Stores Pty. Ltd., supra. Attention was paid to the need for a sufficient causal connection and it was said at p.44,087 that the Court had to be satisfied "...that there is a causal connection and not a mere following on between the offending conduct of the respondents on one hand and, on the other hand, the losses of an applicant and that the chain of causation has not been broken by some conduct or event". It was also said at p.44,086 that the proper measure of damages included not only losses which were the immediate result of the offending conduct but also the result of consequential losses if sufficiently direct. Fitzgerald J. reiterated a similar view in Hellyer Drilling Co. v. MacDonald Hamilton and Co. Pty. Ltd. (1983) 5 ATPR 40-414 and at p 44,826 pointed out that the damages were not necessarily irrecoverable if, for example, some action was reasonably taken by the applicant in the circumstances in which he found himself in consequence of the contravention, including such action in an attempt to mitigate loss or damage. The standard required of the applicant had to be assessed by reference to the circumstances of the time and not as they appeared with the advantage of hindsight.

2. The question of allowing interest was discussed by Jenkinson J. in T.N. Lucas Pty. Ltd. v. Centrepoint Freeholds Pty. Ltd. (1984) ATPR 40-440, in particular as discussed at pp.45,069-45.072. In that case his Honour refused to allow a claim for interest referring to a statement by Latham C.J. in Marine Board of Launceston v. Minister of State for the Navy (1945) 70 CLR 518 at p 525 where a distinction was drawn in relation to the losses of money ultimately awarded as damages. It was said "The loss of the use of the money ultimately awarded as damages is not part of the loss occasioned by the tort or breach of contract itself. It is a loss due entirely to delay in the payment of money ultimately held to be due, and is not recoverable as part of the damages". The case before me was commenced before s.51A was inserted in the Federal Court of Australia Act 1976. The question of interest was also considered by Fitzgerald J. in Sanrod Pty. Ltd. v. Dainford Ltd. (1984) ATPR 40-464 at p 45,358 where his Honour drew a distinction between money paid in consequence of misleading conduct and loss of the use of money awarded as damages. In the first instance his Honour held that the damages could be obtained for the loss of use of money paid over in consequence of misleading conduct since that was directly related to the misleading conduct. In Corbidge v. The Bakery Fun Factory Fun Shop Pty. Ltd. (1984) ATPR 40-493 at p 45,688 Woodward J., following Frith v. Gold Coast Mineral Springs, supra, accepted that the damages under s.82 were recoverable where they represented the amount of any loss or damage the applicant had suffered as a result of the conduct and this included losses which were the immediate result of the offending conduct and also consequential losses if sufficiently direct.

3. Ellicott J. considered a claim for damages for a contravention of s.53A(1)(b) of the Act in Smolonogov v. O'Brien (1982) 4 ATPR 40-312. The significant part of that case is that his Honour held that the relevant breach of the section need not be the only contributing cause to the loss or damage where it is an integral part of the events which led up to the signing of a contract. That approach seems appropriate in the case before me.

4. On 27 July 1982, the solicitors for the purchaser made a number of requisitions on title and I refer in particular to numbers 10 and 24. Number 10 asked:
   
   

"Have the plans and specifications of buildings and other improvements erected on the property been approved by the relevant authorities and have such buildings and improvements been completed in accordance with such plans and specifications?"

The answer was yes.

1. Requisition 24 was as follows:
   
   

"The transferors must at their expense prior to settlement obtain a release of the following restrictive convenants created by transfers B607008 and B821336 and by deed dated 10 July, 1929; '...but will only erect a double fronted one storey cottage and will not erect more than one such residence upon the said land.'"

This requisition was answered so far as is relevant as follows:

"We are instructed that there is only one residence on the subject property. The building at the rear of the same was constructed to be used as a storage area for domestic goods and garden equipment and is a home workshop area. It is not used for residential purposes".

Further correspondence followed and on 18 August 1982 the solicitors for the purchaser pointed out that the rear structure had been represented as being a separate residence capable of human habitation.

1. The applicants submitted that they had not been aware of the details of the advertisement until discovery was obtained in the action for specific performance. However, the letter of 18 August 1982 referring to the rear structure, clearly alleged that the structure was represented as being a two bedroom flat by both verbal and visual representation. There is no evidence before me of when the applicants or their solicitors first became aware of the nature of the advertisements but I am not prepared to conclude that this was not until December 1982. I consider that at least upon the receipt of the letter of 18 August 1982 the applicants and their solicitors ought to have satisfied themselves about the nature of the representations. By a letter of 8 September 1982 the solicitors for the applicants said:
   
   

"Our clients deny that they made any representation either verbal or visual in relation to rear structure as alleged by your client."

In my opinion, although I consider that the respondent must pay some damages to the applicants, the applicants had a duty to mitigate those damages. Applying the principles to which I have referred I consider that they ought to have made more enquiries concerning the nature of the advertisements, certainly before the letter of 8 September 1982.

1. It is common ground that the first sale would not have proceeded to completion in the ordinary course of events until about the end of September 1982.

2. I hold that, allowing four months from about 8 September 1982 to advertise and sell the property and settle the transaction, the applicants cannot recover any damages after 1 January 1983.

1. The specific performance suit was settled on the advice of senior counsel and it is clear that it could never succeed once the true facts were known. I will not allow any damages in relation to the costs of it.

2. I will allow the costs and disbursements in defending the proceedings by the mortgagee after October 1982 in the sum of $4,400 since I am prepared to assume that, in any real sense, the majority of these were incurred or would have been incurred in any event before 1 January 1983.

3. I have difficulty with the claim for interest on $105,000 after 20 October 1982. I am not prepared to allow an amount which might be calculated at the rate of 17.75% on money that the vendor might have got had the sale been settled in October 1982. However, I am prepared to allow the interest which the applicants were obliged to pay the mortgagee between about 20 October 1982 and 1 January 1983. There is no evidence before me in relation to the amount of the mortgage or when interest was paid but I have to do the best I can and I think it is proper to allow about two months interest at 17.75% on about $75,000 or thereabouts. I will allow $2,200 under this head.

4. I disallow the cost of the appeal to the Land and Environment Court which, so far as the evidence goes, had no real chance of success.

5. I will not allow the claim for interest of $3,618.79.

6. I find for the applicants in the sum of $6,600 together with costs.