Laudenbach v Biedrzycki No. DCCIV-95-491 Judgment No. D29

LAUDENBACH v BIEDRZYCKI & BIEDRZYCKI
[1999] SADC 29

Judge Lowrie
Civil

The plaintiff, in March 1991 with her friend, purchased from the defendants a piece of land being allotments 2 and 3 at Totness Road, Hahndorf and being the land comprised in Certificate of Title Register Book Volume 4381 Folio 705 and 4381 Folio 76 (hereinafter called “the land”) for the sum of $45,000. Subsequently the plaintiff by assignment became the sole contracting party and settled pursuant to the contract on 2 July, 1991.
The plaintiff alleged that she purchased the property on representations by the defendants’ agent, one Mr Chilton, an employee of Elders Real Estate at Stirling that the property was suitable for the erection of a house. Subsequently, the District Council of Mount Barker advised her that the council would refuse an application for a house to be built on the property because of the difficulty of effluent disposal due to the location of a creek on the property as the relevant guidelines provided that there must be a 50 metre setback for waste disposal from a watercourse, and, due to the location of the creek on the property, this setback was impossible.
The plaintiff pleaded that the defendants were well aware of this requirement and it had not at any time been disclosed to her by the defendants or particularly their agent.
The plaintiff based her claim pursuant to section 7 of the Misrepresentation Act 1972 and section 54 of the Fair Trading Act 1987 and sought a declaration that the sale was void and/or should be set aside and orders made for the retransfer of the property to the defendants and an order for restitution of the monetary amounts paid by the plaintiff.
The plaintiff issued the proceedings for relief on 17 December, 1997, and sought an application to extend the time to institute her proceedings pursuant to section 48 of the Limitation of Actions Act 1936.
The material fact as pleaded was the written advice to her solicitors in which she was advised on or about 5 June, 1997, of the council’s refusal to allow the development of the house on the property. Other matters are also pleaded as being facts material in paragraph 21 of the statement of claim.
The defendants initially appeared in their own right and filed a defence specifically denying the relevant allegations of the plaintiff.
When this matter came on for hearing on 11 February, 1999, the defendants were represented by counsel and because of the limited nature of the defence pleading I allowed in the course of the trial an amended defence to be substituted. That document pleaded some relevant allegations and particularly denied that the plaintiff was entitled to the extension of time as sought pursuant to the Limitation of Actions Act.

EVIDENCE

The plaintiff who is rather a naive and unsophisticated young lady gave evidence about the negotiations and the events which have transpired since she purchased the land.
The plaintiff also subpoenaed Mr Neville Pash, a South Australian Health Commission employee, who attended with his substantial file relating to the history of the development by the defendants of this land and adjoining land. Mr Pash has been employed by the commission for 27 years, and holds relevant university qualifications. His experience was initially in SA Water, Public Health and he now has duties in the Health Commission. His area of expertise is in regard to effluent systems in land development. Such systems must be commented on or approved by the Health Commission before the council authority will grant approval for development.
Mr Pash was well aware of the land in question and gave evidence about the history of the development application.
The plaintiff also subpoenaed a Mr Desmond Collins, a senior technical officer with the Department of Environment and Housing, who also attended with his large file concerning the subject land. He has a background as a technical officer in the Department of Engineering and Water Supply. His duties very much coexist with the Health Commission in regard to commenting on land development and effluent disposal. He also had dealings with the development of this land and had discussions with Mr Pash and the male defendant.
The male defendant gave evidence and called an employee of the council in question and a trenching contractor, Mr James.

The Plaintiff’s Evidence

The plaintiff outlined how she was anxious to obtain an allotment of land in the Hills area and approached a Mr Des Chilton of Elders Real Estate at Stirling and outlined her desire to purchase a Hills allotment. At that time Mr Chilton was acting for an acquaintance of the plaintiff in regard to a property at Bridgewater. She said that she mentioned to Mr Chilton that she wanted perhaps half to an acre of land in the Hills area to establish a house.
Mr Chilton showed her a number of allotments and eventually showed her land at Totness Road, Hahndorf. She inspected this land in the presence of Mr Chilton and she said that they talked generally about the siting of a house. She said that Mr Chilton mentioned there was a creek that ran at the bottom of the property. As this was a summer period the creek was not evident.
She was asked if he made any comment about the creek and she said:
“A.... He did. He just said it would be aesthetically pleasing to have a little stream running through your property and perhaps you could make quite a nice ornamental garden from it.
Q.Did he suggest that there was any type of problem which might arise because there was a creek in the land.
A. Didn’t mention it at all.”
The plaintiff confirmed that subsequently Mr Chilton said the asking price for the allotments was $50,000 and she eventually offered $45,000 which offer was accepted by the defendants. A contract was then prepared by Mr Chilton and signed by her and the defendants. The contract is dated 22 March, 1991. The contract is in the form as used by the Real Estate Institute of South Australia and has annexed to it the relevant Form 18 outlining the cooling off rights and the prescribed particulars which were all completed mainly with the comment “N.A.”. On the final page is the following:

“ADDITIONAL PARTICULARS NOT SET OUT IN THE TABLE
Type of encumbrance Particulars to be supplied
(Reference Particular)
Disposal of effluent on the property must be approved by the S.A. Health Commission.”

The plaintiff said she observed this note and spoke to Mr Chilton about it. She said in response to her request:
“A.... Des Chilton explained to me that it was a standard clause that they put in all contractual arrangements due to the fact that we were living in the hills and that we weren’t on mains.
Q.Did Mr Chilton indicate to you that there may be a problem in obtaining any approval from the Health Commission.
A. Not at all.”
The plaintiff said she had never at any time spoken to the vendor or his wife.
The plaintiff made no further enquiries, but, relied on the fact that the agent was aware that she required the block to establish a house. No mention was made of any difficulties with such a proposal except the clause making reference to effluent disposal which was viewed as a standard clause in all contracts.
The plaintiff outlined how she was able to borrow the money from the Cooperative Building Society and settled on the agreement.
The plaintiff said she made an application to the council for approval to build a house and the council advised her there were effluent problems with a septic tank. The plaintiff said she made her application on 10 May, 1995, to the District Council of Mount Barker and, consequently, received a letter from the council dated 16 May, 1995, advising her that there was a problem with effluent disposal on the site.
The plaintiff said she then sought the advice of a solicitor, a Mr Brown at Bridgewater. She believed Mr Brown entered into negotiations with the council on her behalf concerning her desire to build on the land and eventually the council confirmed their views to Mr Brown in a letter dated 11 September, 1997, which outlined the effluent problems. On page 2 of the letter, Andrew Grear, the manager of environmental services of the council, advised as follows:
“The possibility that certain allotments for environmental reasons associated with effluent disposal or for that matter vegetation retention may never be able to be developed for residential purposes was clearly understood at the time the strategies and policies for the Mount Lofty Ranges region were put into effect via the respective legislation.
It seems that the allotments in question could well be allotments that will never be able to be developed until appropriate technical advances are made in effluent management. I would further add that while this is distressing for the owners of the allotments the legislation has been in place for many years and a number of other land owners have found themselves in exactly the same position. So the situation of itself is not unique.”
Miss Laudenbach outlined that other types of approved effluent systems had been mentioned, but she could not afford their installation as well as the weekly or monthly costs to maintain the same.
She said the first system that was suggested was the District Council of Mount Barker common effluent system. She believed the installation cost of the service was in the vicinity of $12,000 and thereafter there were maintenance fees.
The plaintiff said that she, in a rather desperate state, placed the allotments on the market for sale with Western Real Estate at Mount Barker. The allotments were listed for sale for approximately six months, but, at no time was any offer received for the land.
The plaintiff said she also unsuccessfully approached all adjoining owners.
The block in question has a depth of approximately 82 metres and a width of 40 metres with the frontage to Totness Road. The blocks run generally in an east/west direction and it appears that the creek also runs generally in an east/west direction perhaps more to the northern side of the allotment, thus it is impossible to comply with the directive concerning effluent disposal near a watercourse.
Mr Pash outlined his lifetime government work concerning septic disposal systems on land developments in this State.
He has personally met the male defendant because of his involvement in land division matters. It was apparent that the defendant is experienced in development of residential rural sites.
Mr Pash was well aware of the land at Totness Road as he had discussed this land with the defendant and his planner, a Mr Tonkin. The discussions centred solely around the 50 metre setback. He explained this requirement as follows:
“50 m setback refers to a septic tank effluent disposal area, which means on a block of land you may have your house, your septic tank or any other plant, but it must distribute the waste water whether it’s treated or not, 50 m from a creek.”
He also said he believed that the defendant had engaged the engineers Woodburn Fitzharding in regard to this problem for a more sophisticated system if the soils were impervious. He believed the test had failed because of the nature of the soil. He was asked:
“Q.... You have made a note that it was against your advice to initiate soil testing because it’s not normally relevant to setback distances, what was that about.
A.I felt that if you couldn’t meet the setbacks, it costs money to have soil testing and if you can’t meet the setbacks you can’t meet the approval criteria, so it meant the tests were not significant.”
This area of Totness and Mount Barker Roads was initially subdivided into numerous small allotments. Indeed, there were some 12 allotments on the western side. There are many examples in this State of this type of subdivision of land. The subdivisions of land are very old - perhaps 100 years. Some may well have been prepared in England and simply approved in our early Registry without any regard to their topography or location and the allotments really are totally unusable. There has been a suggestion some were Germanic in origin being the creation of small parcels of land outside a township for some agricultural pursuits and often featuring a watercourse. They are often called “paper subdivisions”.
Land is now unable to be subdivided in such a manner. As these paper subdivisions have previously occurred the titles remain in existence. A developer coming into ownership of numerous titles may begin an application of re-subdividing the land into more viable allotments by consolidating many of the allotments.
The defendant, thus as a developer of such allotments, became the owner of the same and then commenced his re-subdivisional applications.
The plan, Exhibit P2, was the plan prepared by the defendants and was lodged for a re-subdivision of the land through his survey agents, Forest Grigulis & Associates, in early 1991. That plan showed, on what I will call the large allotments on the western end of this large holding, that the defendant had created four allotments being allotments 51, 52, 53 and 54. Then, proceeding east along Mount Barker Road and travelling in a northerly direction along Totness Road, the defendant had proposed existing allotments numbered 2, 3, 6, 7, 8, 9, 10, 11 and 12, thus nine parcels of land. The defendant then created some three allotments, the first being allotment 55 which comprised former lots 10, 11 and 12, lot 56 which comprised allotments 6, 7, 8 and 9, and then finally lot 57, being allotments 2 and 3. Eventually allotments 2 and 3 were withdrawn from that application. I attach a copy of that proposed plan.
Mr Pash outlined that he was aware of a Mr Des Collins who worked in a similar position in the Water Resources Branch, a person with whom he had many discussions concerning divisions over the years.
He believed he had referred Mr Biedrzycki to Mr Collins.
Mr Pash said that his memory was that he had spoken to Mr Biedrzycki and his planner about the problem and the difficulty of placing a septic system on allotments 2 and 3.
The application which came before him was eventually approved after allotments 2 and 3 were withdrawn from that proposal. Allotments 2 and 3 were still left in their original titles as he said “they were probably laid out one hundred years ago”.
Mr Pash outlined on a hills outing by chance he saw a “For Sale” sign on allotments 2 and 3. He then went to the office of Mr Chilton, the selling agent, and explained to the agent the effluent problem on the site. He was asked:
“Q.... What did Des say to you.
A.It is a long time ago that he said it, but what I recollect is he was upset that the block wasn’t any good.
Q.     Did he say anything else.
A...... I said ‘Are you covered by indemnity insurance?’, he said ‘Yes, but I’ve got to pay the first $1,000.’
.......
Q...... What did he say to you, can you recall his words. This was at a time when you actually saw the ‘For sale’ sign.
A.     This is at a much later date.
Q.     The ‘For sale’ sign is gone.
A.     No, this was the time I saw a ‘For sale’ sign on the block.
Q...... You saw the ‘For sale’ sign, so you assumed when you spoke to him the block was for sale.
A.Correct. He did say he wondered why, in the course of the sale of the complete development, he was given the contract to sell one allotment, and another firm was given the contract to sell the balance of the land development.
Q.     He only had allotments 2 and 3.
A.     That’s correct.
Q.     And had nothing more, and some other agent had the rest.
A...... Yes, I can’t remember - I knew the Elders one, I can remember that, but the other one was another agent with a different sign, but I can’t remember specifically which agent it was.”
Mr Pash confirmed that Mr Biedrzycki knew from his discussions with him of the serious effluent problems that existed concerning allotments 2 and 3. Mr Pash confirmed that in October 1993 a letter was forwarded to the plaintiff’s solicitors as follows:
“RE:..... ALLOTMENTS (2 & 3) DP 63 PT. SECTION 2963, HUNDRED OF MACCLESFIELD, TOTNESS
I reply to your letter (your ref.JMCE/63416.2/hmw) 21st September, 1993, concerning the above allotment and whether any restrictions apply to building approval.
Advice has been given on this land holding with respect to planning application D.A. 580/D027/90. A letter to the SA Planning Commission in June 1990 indicated the land defined as proposed allotment 57 (lot 2 + 3) in the development application, could not comply with a 50 metre set back distance from a watercourse with respect to the approval of any future on-site waste water disposal area under the Standard for the Installation and Operation of Septic Tank Systems in South Australia.
The developer of this land division was referred to the Engineering and Water Supply Department for confirmation that a water course existed on the property. Mr D. Collins of that department gave advice on the existence of the water course and dams located in the land holding being developed by land division.
As proposed allotment 57 was withdrawn from the limits of DA 580/D027/90 in a subsequent amended plan no further advice was given in respect to the land holding defined as allotment 2 and 3 Totness Rd Handorf.”
Mr Collins was also subpoenaed. He outlined his background in the Department of Lands, E & WS and the Department of Environment and Housing. He confirmed his long working relationship with Mr Pash. Mr Collins also produced his departmental file of the land in question and his diary.
He said his diary note disclosed that he first became aware of this land on 15 June, 1990.
Mr Collins outlined his involvement with Mr Pash as follows:
“Mr Pash, being a working colleague I have had numerous dealings with in land divisions, and because land division is closely linked to the septic tank approvals and building approvals, and because we were water resource officers and water resource orientated, we had a vested interest in seeing where septic tanks were located, in relation to where the water course is. Neville, on this occasion, had a development application referred to him through the South Australian Health Commission, I believe straight from the Mount Barker council, which involved a definition of a water course or a water course that was within the area being divided.”
He confirmed that Mr Pash had asked him to speak to a client about problems with an application and then spoke with the defendant. He made a note of that conversation. This was a conversation about allotments of land not meeting the 50 metre setback and he said he outlined to Mr Biedrzycki that his department would insist on such a setback and as a developer -
“...... he may need to reassess the use of the proposed allotments, or construct an approved waste disposal system called common effluent drainage scheme, or a package treatment plant, or devote these allotments to an area called common land or reserve.”
He said after this conversation Mr Collins had very little to do with this matter. He was aware that it did proceed and two of the allotments were removed from the subdivision.
Mr Collins also confirmed the contents of the letter which was forwarded by Mr Pash to the solicitors for the plaintiff in October 1993.

Defendant’s Evidence

The defendant gave evidence and also called Mr Waddington, a technical officer in the employ of the Mount Barker Council, and Mr James, a trenching contractor in and about the Hahndorf area.
Mr Biedrzycki said that he became the registered proprietor of numerous allotments of land in Hahndorf in 1990, and, consequently it was his desire to establish larger parcels of land which were attractive and saleable. He subsequently lodged a development application re-subdividing the land into larger allotments. The defendant is clearly a very experienced developer of this unique type of existing land.
He said he was aware of the concerns of Mr Pash and attended him to address those concerns. He believed that there were discussions about alternate septic systems for the allotments in question, but believed that there was no specific effluent disposal recommended for allotments 2 and 3. He was under the impression that Mr Pash would consider all options.

Mr Biedrzycki said he had never met the plaintiff and had never spoken to her in the course of the sale of the land and did not ever intend to mislead her.
Mr Biedrzycki said he was aware that the council owned a common effluent scheme and said he thought there was an entry point approximately 900 metres from the subject land. The plaintiff said in her evidence that she believed the entry point was 1.2 kilometres from that land. However, the defendant said he believed his solicitor had made some enquiries about the possible link up of this land to that scheme.
Mr Biedrzycki was cross-examined about details of his listing of this land with Mr Chilton for sale and after a number of questions admitted that he did not draw Mr Chilton’s attention to the known septic system problems. When asked why allotments 2 and 3 were withdrawn from his earlier application he said:
“Q.... If there hadn’t been the problem of the 50 metre setback, you would have left allotment 2 and 3 in the subdivision plan, wouldn’t you.
A. Of course.”
He was then asked a further series of questions:
“Q.... The absolute difference between allotment 2 and 3, and the other allotments, was that all the other allotments could have an ordinary septic tank system and 2 and 3 couldn’t. That’s the only difference.
A.     Not necessarily.
Q...... That’s were it got withdrawn, and the plan was put in as amended, so that the SA Health Commission would give it a tick.
A.The land division? I could have fought that attitude, but for expediency, and being a businessman, time is money, and ending up in an ERD court, when a council officer or a Health Commission officer flags a warning, you sit down and talk with them and you make the rational decision that is necessary, and it turned out that those two came out.
Q.     When you instructed your agent, did you flag the warning.
A.     That these two had a bit of a problem?
Q.     And you couldn’t build a septic tank system there.
A.     No. No-one ever talked septic tank system.
Q...... Did you flag the warning that you couldn’t build a septic tank system there.
A.     To the agent?
Q.     Yes.
A.     No, I didn’t.”
He was then asked a further question:
“HIS HONOUR
Q.Did he, after he got his instructions, ever get back to you to say that he had had a visit from Mr Pash.
A. No. I was absolutely amazed when that came out in evidence.
Q. So was I.”
Mr Biedrzycki agreed that it was on 3 October, 1990, that he withdrew allotments 2 and 3 from his plan for development of the land.
Mr Biedrzycki also in cross-examination agreed that in September 1990 he lodged an application for development with the District Council of Mount Barker for allotments 2 and 3 although this had been denied in his defence. He said that the wording in the defence was an error on his part.
Clearly Mr Biedrzycki is an experienced developer. He was asked:
“Q.... How much land resubdivision projects had you undertaken prior to this one.
A.     Do you want to give me ten minutes?
Q.     Is the answer ‘many’.
A...... Do you mean land division, land resubdivisions or dealings in land in general?
Q.     Yes.
A.     Many, yes.”
The defendant said he was involved in land development initially on a casual basis for about five years and it has been his full-time occupation for the last fifteen years. He said practically all these developments have been in areas outside the metropolitan area.
Mr Biedrzycki did not disagree that he had spoken with Mr Collins but could not recall the details of the conversation.
The defendant also called a Mr Waddington, a technical officer employed by the District Council of Mount Barker and the person in charge of STEDS or the common effluent system of that council. He outlined that a STEDS scheme is similar to a sewer scheme except that it is generally made with smaller pipes and is a cheaper alternative to a full sewer scheme. The scheme takes the liquid overflow from the septic tanks. The solids always remain in the septic system.
Mr Waddington said he was aware of the land in question as he had driven past it to familiarise himself with the land. He believed that it was some 1.2 kilometres from the nearest point of the Littlehampton STEDS scheme. He was asked:
“Q.... In the case of lots 2 and 3, where you can’t have a septic disposal pit on the land, would you give consideration to approving linkage into the STEDS scheme.
A.It is not something that is encouraged, but in this particular case, I understand there is no other choice but to do something like that as on-site disposal, as I understand it, is impossible.”
He mentioned, which is readily apparent, that the council would not allow subdivisions outside the township to take place where on-site disposal would be impossible.
Mr Waddington outlined that if this block was to be connected to a STEDS scheme, because of the distance, some type of pump would be required, pipes would have to be large enough for that to occur and he expected the line would have to be laid in a Transport SA road corridor and therefore approval would need to be sought from that authority. The applicant would be responsible for a contingency plan for accidental spillage or breaking. Mr Waddington confirmed that the connection fee would be $2,500 with an annual fee of $230.
Letters which have been tendered, particularly the letter from the council of 11 September, 1997, from Mr Grear, were placed before Mr Waddington for his consideration about the difficulties or impossibility of these allotments being developed. Mr Waddington said he had never discussed those matters with Mr Grear.
A long question was put to Mr Waddington about comments of council officers as follows:
“Q.... The council applies its mind to that proposal, and it says ‘It was the view of the council officers that an effective septic tank disposal system on this site would require a three to four thousand litre tank, which, with an average usage of 120 to 160 litres per person per day would be required to be pumped out fortnightly at a cost of approximately $100 per pump-out. In addition to these concerns about the cost effectiveness of the proposal, the office has indicated that they would need additional information in order to consider whether the council was prepared to discuss the proposal further. The information required would include: A proposal as to how the septic system would be linked to the dwelling forever, for instance, by means of a land management agreement. An engineering report specifying the technical details. An indication that the Department of Transport, the authority responsible for Mount Barker Road, was prepared to consent to the poly pipe being in place under the road. Details of a sophisticated alarm system to warn of any leakage or faults in the effluent system. Council would need legal advice, and would be looking to recover an annual fee.’ In relation to that system, does it sound right that one would have to go through all of those steps.
A.I’d say it is something I’ve never really dealt with before in quite that manner. We are using one parcel of land to dispose of effluent from another parcel of land. That’s how I read it.
Q...... Would you agree with this proposition - that is the interpretation of the person who had been speaking to the council - ‘In general discussion with the council officers, Mr Greer and Mr Richter, I gained the clear impression that any proposal, the effect of which would impact upon or impede the use of any of the council’s land for an indefinite period would not be an attractive proposition.’ Does that sound right to you.
A. It’s a fair enough proposition.”
He was also then asked questions about the cost of installing such a system as follows:
“Q.... ‘Installation costs are, again, difficult to quantify, but a minimum of $10 per metre, $12,000 capital cost. This, again, would be in addition to pumps and an alarm system being installed.’ Can you comment on that?
A.I’d say it would be hard to make that assumption, not knowing the terrain, and not knowing the ground conditions.”
I then asked the question:
“Q.... Whatever way you look at it, this block, because of the age of the subdivision, is very, very unusual, isn’t it. If you, today, were looking at that block to buy it, you would appreciate that there are going to be many significant and expensive problems before you get your house underway. Would you agree with that.
A.     There are a few hurdles to overcome.
Q.     Aren’t they major hurdles, expensive hurdles.
A.     From this evidence, yes.
Q...... You have got to employ an engineer to do what you plan, you have got to buy the equipment to do the pumping, you have got the cost of installation, over a kilometre of pipe. You agree that they are very -
A.I would agree that, given the location of this block of land, any form of effluent disposal is not going to be cheap.
Q.     Either to implement and then put in place.
A.     Exactly.”
I further asked:
“Q.... Do you know of any other situation where you have got a kilometre down a public road.
A.No, not for a STEDS scheme.
Q...... That, in itself, gives rise to problems, doesn’t it, because of roadworks, Telecom works and all the works that go on with the road.
A. That’s right.
........
REXN
Q...... You are saying there is no other property that you are aware of that has a pipe into a STEDS scheme.
A.Not of 1.2 kilometres in length, no. There may be some short ones, maybe a couple of metres or something like that, perhaps, even a couple of tens of metres. None spring to mind right now.”
The defendant also called Mr James, an experienced trenching contractor in this area who has been in recent times requested by him to look at trenching for a septic system from allotments 2 and 3 to the nearest entry point. Mr James said he had taken a measuring wheel and walked down Totness Road, the main road and down to a common effluent scheme which was at a point adjacent to a funeral parlour and the distance was about 1,000 metres.
He said that he normally charged $1.00 a metre for a 300mm or 1 foot trench. If he has to go down 600mm or 2 feet, the price doubles. As he is experienced in this area he did not anticipate any difficulty with the soils. He said when asked about power lines and Telstra:
“I said to Ray over the phone that it does need to be located. When I went for a walk I couldn’t actually see that anybody had power lines that were coming down off the poles on our side of the road, and going across where we would be trenching. But, there are certainly Telstra cables in there, and there is even an E&WS main line which runs up the side that we were trenching, and that does need to be located, which I don’t have anything to do with. I said to Ray ‘You’ll need to get that located and have that marked, and if something is marked and I damage it, I pay for it, but if it is not marked and I hit it, I’m not going to wear the cost of it.’”
Mr James admitted that a number of approvals would be required before such trenching work could be carried out, but this was not part of his job as it was the responsibility of the client.

The following matters are evident from the above evidence.

1...... The defendant is an experienced developer of land outside of the metropolitan area and no doubt areas like the subject land. Consequently, he was well aware of all relevant government and institutional regulations in regard to the re-subdivision and development of land.

Prior to 1990 the defendant became the registered proprietor of these numerous historical titles in and about Totness and Mount Barker Roads and subsequently filed a development plan which initially proposed consolidating allotments 2 and 3 into one allotment.
After this plan was lodged it became apparent that there were major difficulties and, in fact, it was impossible to install a septic system on allotments 2 and 3 because of the required 50 metre setback from a watercourse. This fact was clearly made known to the defendant by both Mr Pash and Mr Collins and no doubt his planners Messrs Bone & Tonkin. With this knowledge, the defendant then proceeded with the redevelopment of the remaining allotments. withdrawing allotments 2 and 3 from the development because of the Health Commission guidelines. The only reason the defendant withdrew allotments 2 and 3 from the plan was following the discussions with Messrs Pash and Collins of the inability to comply with the septic guidelines. I have no difficulty whatever in rejecting the defendant’s evidence of his recall of the Pash conversation and could not recall the Collins conversation. No doubt that conversation was concise and that the options for the land were either reassess the land, or create and construct a common draining scheme, or designate the area reserve. The defendant as an experienced developer no doubt considered the first option, but was more than happy with the creation of the large number of other allotments, so the second suggestion would involve him in much expense, so clearly not an option, nor for obvious reasons the creation of the reserve. So, the defendant following the practical and expedient course from his point of view and withdrew the land well knowing the titles were in existence and he may be able to sell the same to some unsuspecting person. The defendant was also clearly aware that the other type or types of septic disposal would not only be difficult but costly as no doubt confirmed by his engineers.
The defendant then placed the majority of the land in the hands of an agent for sale. I am uncertain as to the time they were listed for sale. These were blocks where there was no difficulty in complying with Health Commission guidelines. Then at some time the defendant placed allotments 2 and 3 with a different agent for sale. An unusual course. However, it would have been in his interest to make full disclosure about the ability to comply with Health Commission guidelines for the other allotments, a factor which would no doubt aid their sale.
The defendant did not, in those instructions to his agent for the sale of the subject land, advise his agent of any of the difficulties that he had encountered concerning septic disposal. He deliberately remained silent on this issue. Clearly the reason for his silence is apparent.
The plaintiff in her discussions with the agent relied upon his clear representations that the block was suitable for the erection of a house which would include the disposal of its waste. Indeed, she talked about the placement of a house on that land. The agent wrote in the contract “Disposal of effluent on the property must be approved by the S.A. Health Commission” and advised the plaintiff that this was a “standard” clause in such a contract.
I accept the evidence of Mr Pash who, out of concern, attended Mr Chilton and outlined the difficulties or rather impossibility of meeting the guidelines on this block for a septic system. I find that this conversation was at a point when the land was for sale and prior to it being purchased by the plaintiff
Mr Chilton in no way relayed these difficulties or this information to the plaintiff. Plaintiff’s counsel commented, and rightly so, on the absence of not only Mr Chilton but also the defendants’ planners. There is an inference to be drawn from the absence that such persons would certainly not have assisted the defendant in this matter.
The plaintiff relied entirely on the representations of Mr Chilton that the block was acceptable and by acceptable understood that there would be no difficulties in obtaining approval for the erection of a house. At that time the defendant was aware of the difficulties and the impossibility of placing a septic system on the land. The agent on instructions may have been ignorant of this fact but because of his discussions with Mr Pash no doubt became aware of the difficulties prior to settlement.
The defendant’s conduct in remaining silent on this significant factor when listing the land with the selling agent was most deceptive. No doubt to be contrasted with I assume his instruction to the other agent relating to the remaining land.
The plaintiff was subsequently advised by letter of 11 September, 1997, from the council of the impossibility of providing suitable septic services on this land. The plaintiff has endeavoured to sell the block but no offer was received in that period. The plaintiff has further approached adjoining owners and no person is interested in purchasing her allotment. The plaintiff has been left with the block.

I find:

a)..... That the defendant, by the failure to instruct his agent fully, was aware that the agent would represent that this property was suitable for the erection of a house, as in fact happened, which was never at any time the true position, a situation well known to the defendant.
b)That the defendant by remaining silent in regard to such instructions clearly misled the agent who then very materially misled the plaintiff. The defendant is responsible for his agent’s representations. The defendant made no attempt to call his agent and one can only speculate that this course would certainly not have aided his defence. I was not impressed by the manner in which the defendant gave his evidence. I viewed him as being evasive when questioned about the Pash and Collins conversations. His evidence cannot be accepted.
c)The handwritten comment of “Disposal of effluent on the property must be approved by the S.A. Health Commission” was in itself misleading because the defendant was well aware of the views of the Health Commission which was responsible for him withdrawing the allotments from his development application. The land was not able to be serviced with a normal septic system of which fact he was well aware.

LIMITATION OF ACTIONS ACT

I have little difficulty in accepting the plaintiff’s evidence concerning the events which transpired after settlement and particularly her instructing Mr Brown, her solicitor, and the formal advice from the District Council of Mount Barker by reason of the letter of 10 May, 1995.
I view that certainly as a fact material and, being aware of all the matters which one is required to consider before exercising my discretion, do so in favour of the plaintiff.
Having done so, I am conscious of the length of the delay, the explanation for the delay and the hardship to the plaintiff. Clearly the defendant has not suffered any prejudice and, accordingly, I extend the time for which the plaintiff is able to make this claim.

MISLEADING OR DECEPTIVE CONDUCT

The plaintiff has based her claim both under the Fair Trading Act 1987 and the Misrepresentation Act 1972.

Fair Trading Act and Misrepresentation Act

Section 54 of the Fair Trading Act is relied upon by the plaintiff. This section is contained in Part 10 of the Act and deals with representations. Inter alia this section provides that where a person makes a representation with respect to any future matter and the person does not have reasonable grounds for doing so, the representation shall be taken to be misleading. It is notable that in section 54(2) the onus of proof is shifted to the defendant who must satisfy the tribunal of fact that reasonable grounds existed for the making of the representation. In the absence of evidence to the contrary, a person shall be deemed not to have had reasonable grounds for the representation.
Misleading or deceptive conduct in trade or commerce is impugned in section 56 in terms identical to section 52 of the Trade Practices Act.
No doubt the defendant, operating as he does in the business of a property developer, is engaging in trade or commerce and therefore section 56 would be applicable.
More particularly, however, section 59 impugns representations made in connection with the sale or possible sale of land or in connection with the promotion by any means of the sale or grant of an interest in land and which relate to the characteristics of the land, the use to which the land is capable of being put or may lawfully be put or the existence or availability of facilities associated with the land.

The remedies for misleading and deceptive conduct are set out in Part 11 and sections 84 and 85 would appear to be the most relevant to this case.
Section 6 of the Misrepresentation Act extends the remedies available at common law and in equity for misrepresentation. It provides an entitlement to a party to rescind a contract despite the fact that conveyances, transfers, or other documents have been registered at any public registry office in pursuance of that contract.

Silence as misleading or deceptive conduct

The alleged misrepresentation is as to the use to which the land can be put.
It has been found that the defendant did not have reasonable grounds for making the representation. He did not advise his land agent of any of the difficulties he had encountered concerning septic disposal and deliberately stayed silent on the issue. The defendant, by his failure to instruct his agent fully, was aware that the agent would represent that this property was suitable for the erection of a house, as in fact happened. The defendant in remaining silent in regard to such instructions clearly misled the agent who then very materially misled the plaintiff. The defendant is responsible for his agent’s representations and the defendant made no attempt to call his agent.
The defendant has argued that the issue in this case is whether silence on the part of the defendant, or his agent at the time of dealing with the plaintiff, constitutes, in all the circumstances, misleading or deceptive conduct. Further, the defendant submits that it is not a question of considering one action, but of considering the conduct of the defendant in the context of all the circumstances and that, if one considers the circumstances in which the defendant found himself at the time of the sale, there were reasonable grounds for representing it was fit to build a house on the land.
According to the authorities, silence or non-disclosure will not, without more, amount to misleading or deceptive conduct. However, that silence, when combined with other factors, may constitute misleading or deceptive conduct, when the combination amounts to some form of misrepresentation.
Silence or non-disclosure can be misleading when combined with other factors, such as the provision of incomplete information or half truths depending on the circumstances of a particular case. It is important to note that what will, in a particular case, amount to these necessary “other factors” is impossible to categorise in the abstract and French J in Kimberley NZI Finance Ltd v Torero Pty Ltd (1989) ATPR (Digest) 46-054 has warned that:
“The cases in which silence may be so characterised [as misleading or deceptive conduct] are no doubt many and various and it would be dangerous to essay any principle by which they might be exhaustively defined.”
The test traditionally applied in such cases is whether in the circumstances there is a duty to make disclosure (Henjo Investments v Collins Marryatville (1988) 79 ALR 83) although more recent cases have considered the question from the perspective of whether the circumstances are such that they give rise to the reasonable expectation that if some relevant fact exists it should be disclosed. That being the case, the question of the circumstances in which silence can constitute misleading or deceptive conduct “cannot be said to have been definitely settled” (Kabawand Pty Ltd v National Australia Bank Ltd (1989) ATPR 40-950 per Lockhart J at 50-376).

Incomplete information

The provision of incomplete information will be misleading or deceptive conduct if it creates an erroneous impression because the omission is material. In such a case, even though the information communicated may be literally correct, the recipient is led into error because without the benefit of the facts withheld the true position is distorted.
In Aliotta v Broadmeadows Bus Service Pty Ltd (1988) ATPR 40-873, the respondent’s agent, when negotiating the sale of an investment property to the applicant, informed him that there was a proposal to lease the property for a certain purpose. That was correct. However, the agent did not disclose that the property could not be used lawfully for the purpose without a local government permit and that one had not been obtained. In these circumstances it was held that the agent’s conduct contravened section 52 of the Trade Practices Act. According to Gray J the agent’s conduct conveyed the impression that the property could be lawfully used in the manner proposed. As a result it was his duty to “complete the picture” by communicating that a permit was required. His failure to do so rendered misleading the information actually conveyed (at 49,444).
Other examples include the sale of a business conducted in contravention of planning legislation without correcting the inevitable impression that it was being conducted lawfully in that manner (Henjo Investments). In the situations described, it is not the respondent’s silence as such, which is misleading or deceptive, but the misleading nature of the actual representations in the context of the information not revealed.

Duty of Disclosure

Where a duty to disclose information exists, silence may amount to misleading conduct. In Henjo Investments, the Federal Court accepted that it had been established by the Full Court in Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd (1986) 68 ALR 77 that silence may be relied upon in order to show a breach of the Trade Practices Act when the circumstances give rise to an obligation to disclose relevant facts. In that case Bowen CJ at page 490 stated that:
“The notion of relationships [under the general law] giving rise to an obligation to make disclosure is one which may well prove useful in determining some of the cases which may well arise under s.52 TPA. However, the court will not be restricted to cases where such a relationship has already been held to exist at common law or in equity. The court is likely to be faced with situations under s.52 between particular parties, where it will feel bound to hold that such an obligation to disclose arises from the circumstances.”
The courts have frequently granted relief on this ground in cases where one party to a transaction has knowingly taken unfair advantage of an erroneous assumption made by the other.
In the HenjoInvestments case, the Federal Court was concerned with the sale of a business premises which was used as a restaurant. Despite the liquor licensing authorities placing a limit on its seating, the business was operating beyond its limit. This limitation was not disclosed to the purchaser and the purchaser made no independent inquiries. The purchase was completed before the respondent became aware of the true position. In operating lawfully and for various other reasons the business was unsuccessful. An action was commenced under section 52 of the Trade Practices Act.
In their judgment the Full Federal Court noted that misleading or deceptive conduct generally consists of representations, whether express or by silence. However the court observed that it is erroneous to approach the section with the assumption that the application of the section is confined exclusively to circumstances which constitute some form of representation. Ultimately in each case it is necessary to examine the conduct, whether representational in character or not, and ask the question whether the impugned conduct of its nature constitutes misleading or deceptive conduct.
The court held that at common law, silence can give rise to an actionable misrepresentation where there is a duty upon the representor to reveal a matter if it exists, and where the other party is therefore entitled to infer that matter does not exist from the silence of the representor. Silence may be relied on in order to show a breach of section 52 when the circumstances give rise to an obligation to disclose relevant facts (Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Ltd). The duty to disclose is not confined to cases where there are particular relationships between the parties, as the circumstances in which the duty to disclose will arise will depend on the facts of each case.

100 In this case the vendor sold a business knowing that it was subject to serious limitations upon its lawful seating capacity, limitations which affected the business, its goodwill, takings and profitability and knowing that the restaurant was being conducted contrary to law with a substantial element of over-seating. The vendor’s agent had given the purchaser to understand that the limitations upon the seating capacity and the limitations arising from the licensing of the restaurant were less restrictive than was actually the case and the manner in which the business was conducted at the time of sale supported this understanding. In the opinion of Lockhart J these circumstances gave rise to a duty on the part of the vendor to reveal the true position to the purchaser before any contract was signed. It was no answer that the purchaser should have made its own inquiries and that, if it had done so, the true position would have been revealed. These circumstances did not negate the duty to disclose which the circumstances otherwise imposed.

101 As liability in this situation is based upon the non-fulfilment of a duty to disclose information, rather than a duty to correct earlier representations or to provide complete information when communicating with another party, it is suggested that liability for non-disclosure can arise only if there is an intentional withholding of information. Consequently, in order to bring the respondent’s action within the definition of conduct, the respondent must not only be aware of the information involved but must also withhold it deliberately.

Causation

102 For applicants to establish that a contravention has occurred, it is not sufficient for them to show that they had an erroneous belief about some relevant matter and would not have been in that position had the respondent disclosed certain information. Rather, they must show that their belief was caused by the respondent’s conduct (Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd (1978) 140 CLR 216, Stephen J at 229-30).

103 In Bradford House v Leroy Fashion Group (1983) ATPR 40-387 a warehouse was let to the plaintiff for the purpose of carrying on a printing business. The plaintiff went into occupation but their heavy machinery fell through the inadequate flooring. The plaintiffs sued for a breach of an implied covenant in the lease concerning the fitness of the premises, in particular the floor thereof, to withstand the strains of the operations of the company in the carrying on if its business.

104 The plaintiff took proceedings contending that the defendant, through its agent and by advertising the premises as available for letting as a warehouse and by submitting a lease containing certain questionable paragraphs, had engaged in misleading and deceptive conduct contrary to section 52 of the Trade Practices Act. The failure of the respondent or its agent to inform the appellants of the condition of the floor, in particular that it had only a thin layer of concrete, was uneven and lacked reinforcement.

105 The plaintiff’s case was put at its highest in answers to questions by counsel.

“In my opinion as a professional agent for a company that is either selling or leasing industrial or commercial properties, his knowledge should be such that if he leases or sells that property to me, that property should be to that standard.”

106 The court held that silence, in the sense of refraining from making comment, may amount to engaging in conduct contemplated by section 52 of the Trade Practices Act. Thus circumstances may arise where a person is aware that his silence is conveying an erroneous impression to another. He may in such a case come under an obligation to speak. If he does not do so, he may in the words of the definition be refraining otherwise than through inadvertence, from doing an act ie. speaking out.

107 In this case, no specific inquiry was made by the appellants or the respondent or its agents as to the condition of the warehouse floor. Nor was any specific statement about the floor’s condition made by the respondent or its agents to the appellants. Nor is there any evidence that the respondent or its agent knew about the condition of the floor or that it was unsuitable for the use to which the company proposed to put it.

108 The trial judge held that this was a case where the applicable rule was that of caveat emptor. The Full Court agreed with this finding.

109 With respect to the argument that the respondent engaged in misleading or deceptive conduct through the agent by continuing to offer to the company a tenancy of the premises after it had been given an outline of the way in which business had been and would be conducted by the applicant. The trial judge said that the applicant was the only party with precise knowledge of the weight to be carried and the manner of carrying it. The applicant inferred from his own observations and the manner in which the premises were presented as such, that they, and in particular the floor, were suitable for his purposes. None of this involved any conduct of a misleading or deceptive nature on the part of the agent or the respondent. Even had the agent permitted the applicant to think that he did have a belief that the floor would be sufficiently strong, such conduct would not have been misleading or deceptive in any sense. The Full Court agreed.

110 The case of Gardiners (SA) Pty Ltd & Duffield v Sanderson & Maroske (S6658) was an appeal against the decision of a stipendiary magistrate by which he awarded damages on a claim brought by the respondents for damages for misrepresentation and breach of contract. The genesis of the dispute concerned was the purchase by the respondents of a house and land situated at Macclesfield. The respondents purchased a house and land which had been advertised as “SOLID HOME - TWO ACRES”. The respondents conducted independent inspections of the property and then signed a contract for purchase. They also signed an endorsement on a copy of the certificate of title acknowledging that that they were satisfied of the details and description of the land in the certificate of title.

111 Following a later inspection the respondents discovered that the land measured only 1.4 acres. The respondents sought damages for misrepresentation pursuant to sections 7(1) and 7(3) of the Misrepresentation Act. The magistrate found that the vendors and their agent had represented that the area of the property was 2 acres, that those representations subsisted without correction until the signing of the contract and that the acknowledgment signed by the respondents did not change the fact that the respondents were under the mistaken belief that the property was 2 acres in area. He inferred that the respondents relied upon the misrepresentations.

112 On appeal Justice Bleby observed that in an action under the Misrepresentation Act, the respondents were required to prove that they had been induced to enter into the contract by the misrepresentation, or in other words that they relied on the representation in entering into the contract. His Honour found that nowhere in the proceedings before the magistrate was there any evidence by either respondent that they relied on the representation in entering into the contract or that they were induced to do so by the representations. Not only was there no indication in the evidence of the respondents of any form of reliance on the representations, but the respondents had signed the contract and the copy of the duplicate certificate of title, thereby acknowledging an understanding of the precise area and description of the land at the time they entered into the contract. The appeal was allowed.

113 The cases suggest that there must be actual reliance upon the misleading or deceptive conduct, although that conduct might not be the only factor in the applicant’s decision to enter a particular agreement and although the plaintiff does not seek to verify the representations or did so inadequately and so failed to discover their falsity.

CONCLUSION

114 I accept that the concepts of a septic tank and the process of effluent disposal are not synonymous. Every waste disposal system involves the use of a septic tank but there are various methods of effluent disposal. The plaintiff would have been able to place a septic tank on the subject land but what she would not have been able to do was meet the standard for the soakage pit or on-site disposal method. That is not to say that an effluent disposal system could not have been approved in some other form, such as a STEDS system and placed on the land.

115 What I have difficulty with is the fact that, if the defendant was aware that the usual septic system would not have been approved for the land, and any other system would involve extra cost and in the case of a STEDS scheme, would rely on permission being given by several instrumentalities, he did not make that known to the purchaser.

116 I do not accept that there was evidence to satisfy me of the existence of an available effluent system. Nor do I accept that the defendant was not obligated to disclose his knowledge of the effluent system because he believed that there was one available. Even if we judge the conduct of the developer at the time of the sale, he was still an experienced developer and would have been aware of the contingencies and risks associated with the other effluent solutions. The circumstances were such that there was a duty upon the defendant to disclose that information to his agent and therefore to the plaintiff.

117 The defendant argues in the case at bar that there was no such obligation or duty on the vendor as he believed that an effluent system was available. He sought to distinguish Henjo Investments on the basis that in that case there was a “serious and significant limitation upon the lawful seating capacity that was being exceeded and everybody knew that”. In the present case all that there was, was a representation that the land was suitable for a house, subject to approval for the effluent system. There were no specific inquiries made about effluent disposal and in this case the defendant believed that an effluent system would be available.

118 I find that both cases are indistinguishable on this issue. In Henjo there was a limitation on the use of the hotel premises for the intended purpose ie as a bar and hotel. In the present case there was also a limitation on the use of the land for its intended purpose ie to build a house. In both cases the vendors were aware of the significant limitations and did not disclose them to the purchaser. Clearly the circumstances gave rise to an obligation or duty to disclose and the purchasers acted in reliance upon the information given to them regarding their intended purpose.

119 The defendant also argued that Bradford is analogous to this case. In this case there were representations about a house where effluent was the problem. In that case there were alleged representations about a warehouse and its floor. No specific inquiry was made of the defendant as to the suitability of the warehouse floor, nor was any specific statement made by the defendant or its agent to the plaintiff. Nor was there any evidence that the defendants knew about the condition of the floor in any event. This case is distinguishable from the case at bar in that the defendant clearly knew of a problem with the effluent system. In the circumstances, the defendant’s silence conveyed an erroneous impression and he thereby came under an obligation to speak. Granted there was no inquiry specifically addressing the question of effluent disposal, but there was an inquiry as to the suitability of the house and there was a question about the clause in the contract regarding sewerage directed at the defendant’s agent. At any rate, Henjo is authority for the proposition that the absence of inquiry on the part of the plaintiff does not negate the duty to disclose the circumstances otherwise imposed.

120 Finally, the principles in the decision of Aliotta apply equally in this case in that the representations that were made to the plaintiff were misleading because they were incomplete. It was not the respondent’s silence as such, which was misleading or deceptive, but the misleading nature of the actual representations in the context of the information not revealed.

REMEDY

121 Section 85 of the Fair Trading Act deals with the compensatory nature or remedies for breaches under the Act and, particularly, section 85(5)(d) provides as follows:

“an order directing the refund of money or the return of property (including real property);”

Clearly the only relief which is appropriate to this plaintiff in the factual circumstances of this case and the state of the evidence before me is to declare:

(a)That the contract entered into between the plaintiff and the defendant dated 22-23 March, 1991, be set aside.
(b)That the plaintiff forthwith transfer such property to the defendants.
(c)That at the time of such retransfer the defendants are to pay to the plaintiff the following amounts:
·....... the initial purchase price of $45,000;
·the interest on the amount borrowed on portion of the purchase price namely $40,475 to 21 January, 1999, the figure of $29,974.83 from that date until settlement and interest accrued thereunder in accord with the letter from the former Cooperative Building Society dated 24 May, 1991, being Exhibit P9;
·....... The use of money - the plaintiff paid the sum of $4,525 at settlement and using a figure of 6% I fix the sum of $2,000 under this head; and
·Expenses at settlement -

Loan establishment fee $575.
Brokerage, stamp duty, registration fees $1,331.
Rates and taxes to 31 December, 1998 $2,906.

122 The position is as follows:

Initial purchase price	$45,000.00
Interest on purchase price	29,974.83
Use of money	2,000.00
Expenses at settlement:
· Loan establishment fee	575.00
· Brokerage, stamp duty, registration fees	1,331.00
· Rates and taxes to 31 December, 1998	2,906.00	4,812.00
TOTAL	$81,786.83

123 I will hear the parties on the form of the order and the costs on this action.

[1999] SADC 29

11 March 1999