Lawson Hill Estate Pty Ltd v Tovegold Pty Ltd - [2004] FCA 1593

FEDERAL COURT OF AUSTRALIA
Lawson Hill Estate Pty Ltd v Tovegold Pty Ltd [2004] FCA 1593
TRADE PRACTICES – FAIR TRADING – Alleged misleading and deceptive conduct in relation to sale of a vineyard – Applicants purchased property in reliance on false representations as to area of planted vines and water flow rate from a bore – First misrepresentation attributed to vendor, his wife and agent – Second misrepresentation attributed to vendor, his wife and bore driller – Agent derived false information from vendor and his wife – Whether agent should be held liable to purchaser – Driller gave true oral estimate to vendor and his wife as to bore’s water flow rate but mistakenly wrote incorrect figure on an invoice that was subsequently produced (in good faith) by vendor to purchaser – Whether driller should be held liable to purchaser – Whether vendor’s wife can be liable otherwise than on an accessorial basis – Indemnity claims – Apportionment of liability for total loss – Assessment of damages – Computation of difference between value of property reflected in purchase price and true value at purchase date – Recoverability of trading losses in context of applicants’ duty to mitigate their loss.
Fair Trading Act 1987 (NSW) ss 42, 45, 61, 68
Trade Practices Act 1974 (Cth) ss 52, 53A, 75B, 82
LAWSON HILL ESTATE PTY LTD as trustee of the Lawson Hill Estate Trust, PAUL HOULIHAN, MARY HOULIHAN, LESLEY EVANS, PETER ROCHFORT, ANTHONY FLEMING, MARGARET FLEMING, PATRICK HOULIHAN, MARIE HOULIHAN, NOEL MAGEE, ANNE MAGEE, RUPERT NEWTON, BARBARA NEWTON, CLIVE POOLMAN, CREMORNE HOLDING PTY LTD v TOVEGOLD PTY LTD trading as O’Brien McGregor First National Real Estate as trustee for O'Brien McGregor Trust Fund, TIMOTHY BRUCE O'BRIEN, JOSE JOHN HAROLD GRACE, JUNE MARGARET GRACE, JOHN MICHAEL DALTON
NSD 1303 of 2003
WILCOX J
10 DECEMBER 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1303 of 2003

BETWEEN:

LAWSON HILL ESTATE PTY LTD as trustee of the Lawson Hill Estate Trust
FIRST APPLICANT

PAUL HOULIHAN
SECOND APPLICANT

MARY HOULIHAN
THIRD APPLICANT

LESLEY EVANS
FOURTH APPLICANT

PETER ROCHFORT
FIFTH APPLICANT

ANTHONY FLEMING
SIXTH APPLICANT

MARGARET FLEMING
SEVENTH APPLICANT

PATRICK HOULIHAN
EIGHTH APPLICANT

MARIE HOULIHAN
NINTH APPLICANT

NOEL MAGEE
TENTH APPLICANT

ANNE MAGEE
ELEVENTH APPLICANT

RUPERT NEWTON
TWELFTH APPLICANT

BARBARA NEWTON
THIRTEENTH APPLICANT

CLIVE POOLMAN
FOURTEENTH APPLICANT

CREMORNE HOLDING PTY LTD
FIFTEENTH APPLICANT

AND:

TOVEGOLD PTY LTD trading as O’Brien McGregor First National Real Estate as trustee for O'Brien McGregor Trust Fund
FIRST RESPONDENT

TIMOTHY BRUCE O'BRIEN
SECOND RESPONDENT

JOSE JOHN HAROLD GRACE
THIRD RESPONDENT

JUNE MARGARET GRACE
FOURTH RESPONDENT

JOHN MICHAEL DALTON
FIFTH RESPONDENT

JUDGE:

WILCOX J

DATE OF ORDER:

10 DECEMBER 2004

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.Judgment be entered in favour of the first applicant, Lawson Hill Estate Pty Ltd, against Tovegold Pty Ltd (first respondent), Timothy Bruce O’Brien (second respondent), Jose John Harold Grace (third respondent) and John Michael Dalton (fifth respondent), in the sum of seven hundred and five thousand, five hundred and eighty nine dollars ($705,589).
2.The said respondents pay the costs of the proceeding incurred by the first applicant, those costs not to include costs that are solely referable to the claim made by any of the second to fifteenth applicants.
3.Judgment be entered in favour of each of the said respondents in respect of the claims of the second to fifteenth applicants.
4.The second to fifteenth applicants pay the costs of the proceeding incurred by any of the said respondents in relation to their claims, those costs not to include costs that would in any event have been incurred in relation to the claim of the first applicant.
5.Judgment be entered in favour of the fourth respondent, June Margaret Grace, in respect of the claim made against her by the applicants and John Michael Dalton.
6.The applicants and John Michael Dalton respectively pay the costs incurred by June Margaret Grace in relation to their claims against her, those costs not to include costs that would in any event have been incurred in relation to the conduct of the proceedings on behalf of Jose John Harold Grace.
7.Judgment be entered in favour of each cross-claimant against each cross-respondent (other than June Margaret Grace) for the recovery of such amount as is necessary to ensure the following ultimate burden of the payment of moneys to the first applicant pursuant to orders 1 and 2:
(a)Tovegold Pty Ltd and Timothy Bruce O’Brien – together 10%;
(b)Jose John Harold Grace – 65%; and
(c)John Michael Dalton – 25%.

8.There be liberty to apply for any further order necessary to achieve the contribution set out in order 7.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NSD 1303 of 2003

BETWEEN:

LAWSON HILL ESTATE PTY LTD as trustee of the Lawson Hill Estate Trust
FIRST APPLICANT

PAUL HOULIHAN
SECOND APPLICANT

MARY HOULIHAN
THIRD APPLICANT

LESLEY EVANS
FOURTH APPLICANT

PETER ROCHFORT
FIFTH APPLICANT

ANTHONY FLEMING
SIXTH APPLICANT

MARGARET FLEMING
SEVENTH APPLICANT

PATRICK HOULIHAN
EIGHTH APPLICANT

MARIE HOULIHAN
NINTH APPLICANT

NOEL MAGEE
TENTH APPLICANT

ANNE MAGEE
ELEVENTH APPLICANT

RUPERT NEWTON
TWELFTH APPLICANT

BARBARA NEWTON
THIRTEENTH APPLICANT

CLIVE POOLMAN
FOURTEENTH APPLICANT

CREMORNE HOLDING PTY LTD
FIFTEENTH APPLICANT

AND:

TOVEGOLD PTY LTD trading as O’Brien McGregor First National Real Estate as trustee for O'Brien McGregor Trust Fund
FIRST RESPONDENT

TIMOTHY BRUCE O'BRIEN
SECOND RESPONDENT

JOSE JOHN HAROLD GRACE
THIRD RESPONDENT

JUNE MARGARET GRACE
FOURTH RESPONDENT

JOHN MICHAEL DALTON
FIFTH RESPONDENT

JUDGE:

WILCOX J

DATE:

10 DECEMBER 2004

PLACE:

SYDNEY

REASONS FOR JUDGMENT
WILCOX J:

This proceeding arises out of the purchase of the Lawson Hill Estate vineyard and winery (‘the property’), situated at Mudgee, New South Wales.
Background
There are 15 applicants. They consist of the purchaser, Lawson Hill Estate Pty Ltd (‘Lawson Hill Estate’), and 14 persons who are members of a unit trust of which Lawson Hill Estate is the corporate trustee.
The proceeding is brought against five respondents, comprising three interest groups.
The first interest group consists of Tovegold Pty Ltd (‘Tovegold’), a real estate agent carrying on business in Mudgee (first respondent), and Timothy Bruce O’Brien (second respondent), a person associated with that company. At relevant times, Tovegold traded as O’Brien McGregor First National Real Estate (‘O’Brien McGregor’). The case has been conducted on the basis that all relevant actions of Mr O’Brien may also be imputed to Tovegold. Except when it is necessary to distinguish between them, I will refer to Tovegold and Mr O’Brien, collectively, as ‘the agent’.
The second interest group comprises the vendor of the property, Jose John Harold Grace (third respondent), and his wife, June Margaret Grace (fourth respondent). It will be convenient at times to refer to Mr and Mrs Grace, collectively, as ‘the Graces’.
The third interest is that of the fifth respondent, John Michael Dalton. At relevant times, Mr Dalton carried on business (either on his own behalf or through a company of which he is a director, Dalton Water Drilling Services Pty Ltd) as a water drilling contractor.
The applicants contend that, during the course of negotiations for the sale of the property, the agent and the Graces each represented that the property contained 20 acres of fruiting vines, whereas it in fact contained only some 14 to 16 acres of fruiting vines. I will refer to this representation as ‘the vine area representation’.
The applicants also claim that the Graces, although not the agent, represented that the property contained a bore capable of supplying 1,800 gallons (8,183 litres) of water per hour whereas the output of the bore was only 400 gallons (approximately 1,800 litres) of water per hour or less. I will call this ‘the bore representation’.
It is not disputed that these representations were made, and that they were false. There is a dispute about the extent of the fruiting vine acreage deficiency and, to some extent, about the circumstances under which each of the representations were made.
The applicants’ claim against Mr Dalton arises out of the fact that he delivered an invoice to the Graces in which he stated the estimated supply of the bore as ‘1800 gph’. During the course of negotiations for sale of the property, this invoice was produced by Mr Grace to representatives of the applicants.
The case against the respondents depends on ss 52, 53A, 75B and 82 of the Trade Practices Act 1974 (Cth) (‘the TPA’) and ss 42, 45, 61 and 68 of the Fair Trading Act 1987 (NSW) (‘the FTA’). No respondent disputes the applicability of either the TPA or the FTA provisions to that respondent’s conduct, if the applicants’ relevant factual allegations are found proved.
The facts
(i) The property
The property comprises 51.51 hectares (approximately 127 acres) of land. It is situated on the eastern side of Henry Lawson Drive about 5km north of the town of Mudgee. The property immediately adjoins a memorial to the poet, Henry Lawson, the memorial being the ruins of his boyhood home. There are several other wineries in the area. The area attracts numerous visitors.
The property was purchased by Mr Grace in 1985. With the assistance of his wife and a viticulturist, Mr Grace planted what he described in evidence as ‘a small “dryland” vineyard’. The vines were planted in stages in four separate areas. During the period of negotiation between the present parties, the total vine area amounted to 5.82 hectares (14.37 acres), if regard be paid only to the trellised areas of land, or 6.59 hectares (16.28 acres), if access areas (headlands and sidelands) are included.
Shortly after he purchased the property, Mr Grace caused the erection upon it of a four-bedroom main dwelling with attached garage (‘the dwelling’). At a later date or dates, he caused the erection of two other buildings: a sales building with attached winery, called ‘the Cellar Door’, and a two-bedroom cottage (‘the cottage’). For a number of years before sale of the property to the applicants, the Graces sold wine from the Cellar Door (as well as by other means, including a customer mailing list, advertising and local promotions). Mrs Grace used the cottage to provide a bed and breakfast service to tourists.
(ii) The failed auction
During the period 1990 to 1995, Mr and Mrs Grace both suffered health problems that impeded their ability to carry on the property’s businesses. Accordingly, they decided to put the property up for auction through Richardson and Wrench. In preparation for the auction, they produced a small booklet describing the property. This booklet is headed ‘Lawson’s Hill Vineyard and Winery 574 Henry Lawson Drive Mudgee NSW Australia’. Under a photograph of the property is the sub-heading ‘Rare Opportunity’. During the course of the hearing, and in order to distinguish this booklet from brochures subsequently prepared, this booklet was referred to as the ‘rare opportunity booklet’.
The fifth page of the rare opportunity booklet contained the following statement:
‘We have at present 22 acres of vines, consisting of Chardonnay, Sauvignon Blanc, Riesling, Chenin Blanc, Gewurztraminer, Marsanne, Verdelho, Pinot Noir, Malbec, Merlot, Gamay and Cabernet Sauvignon.’
In his affidavit, Mr Grace explained how the area of 22 acres was calculated:
‘The measurement of the area of vineyard on the property was carried out by me. I calculated the width of each block of vines by multiplying the number of rows less one by the distance between each row (4 metres) and then adding to that a further 4 metres each “side” of the block to allow for “side lands”. The length of each block was measured from the odometer on my car from corner post to corner post. I also checked this measurement by stepping it out. To this length measurement I added a further 12 metres each end to allow for “headlands”. After obtaining the length and width of each block of vines I was then able by multiplication to ascertain the area of each block.’
Richardson and Wrench conducted an auction in 1995 but no bids were received. The Graces were left with no choice but to carry on the businesses.
(iii) Drilling for water
In early 1998, the Graces contacted a water diviner. Their motive was to add to the property’s marketability; they saw a successful bore as a marketing tool. They both disclaimed the possibility that they, themselves, might use a bore for irrigation purposes.
The water diviner recommended drilling a bore at a particular place in a small gully. Mr Grace contacted Mr Dalton. On a date that is not identified in the evidence, but was probably about mid-April 1998, Mr Dalton attended the property and drilled at the selected position. No water was found, so Mr Grace asked Mr Dalton to drill at another location some 70-80 metres further down the gully. About 21-25 metres below ground, water was encountered. Mr Dalton gave evidence that he estimated the water flow rate at 400 gallons per hour and conveyed this estimate to Mr Grace. Mr Grace claimed in evidence that Mr Dalton told him 2,000 gallons per hour. The truth about that matter is a major issue in this case. Whatever the estimate that was communicated to him, Mr Grace was disappointed. It appears that water flow rates of 10,000 gallons per hour and more had been encountered on some nearby properties. Apparently against the wishes of his wife, who was concerned about the expense of the drilling, Mr Grace instructed Mr Dalton to drill a third – and subsequently a fourth, fifth and sixth – bore-hole. All of these bore-holes proved dry.
Mrs Grace sent a sample of the water found in the second bore-hole to a local laboratory. She received a certificate of analysis dated 5 May 1998. No evidence was addressed to the contents of the certificate. However, it seems to be common ground that the quality of the water was such that it would be suitable for grape vine irrigation, subject to Mr Grace’s comment that, unless it was diluted by stored rain water, it would have such a concentration of calcium carbonate that it would block the filters on a drip irrigation system.
On 22 April 1998, Mr Dalton sent to the Graces invoice number 0642 for $16,500. The invoice was issued in the name of ‘Dalton Water Drilling Services’. It nowhere stated the full company name, ‘Dalton Water Drilling Services Pty Ltd’, nor the company’s ACN.
The only particulars included on the invoice were ‘[t]o drill 1,450 feet of test bores’. Mr Dalton did not complete the boxes that had been printed on the invoice for indication of bore details.
According to Mrs Grace, she noticed this invoice contained no indication of the water flow rate, so she telephoned Mr Dalton and asked for an invoice giving this information. She said she then received invoice number 0650, dated 29 April 1998, in which Mr Dalton had inserted the figures ‘50’ against the words ‘water cut’, ‘10’ against ‘thickness’, ‘30’ against ‘standing water level’ and ‘1,800 gph’ against estimated supply. It is common ground that the figures ‘50’, ‘10’ and ‘30’ were intended as measurements in feet. The invoice was signed by Mr Dalton.
According to a note made by her on invoice 0642, Mrs Grace paid the invoiced amount by a cheque drawn on 28 April 1998. She stated in evidence that she was not prepared to pay the claim until she received an invoice containing the water flow rate. This statement is not necessarily inconsistent with her note. She may have retained the cheque for a day or two until invoice 0650 was provided to her.
At some stage, Mrs Grace requested Mr Dalton to case the second bore-hole. There is a dispute as to when this happened.
Mrs Grace said it was not until two or three months after the drilling activity that she asked Mr Dalton to case the second bore-hole. She explained: ‘We had asked various people how much water would be needed to … irrigate the vineyard if it was in an emergency; so we could tell people who were interested in buying the property. We didn’t want to use it at all’. Mr R S Toner SC, who appeared with Mr J Gruzman for Mr Dalton, asked Mrs Grace whether she spoke to her husband about the yield of the second bore-hole. She responded: ‘We talked about it and that is why we took so long to decide to have it cased’.
Mr Dalton’s version of events is that he was approached by Mrs Grace a few days after the six bore-holes were drilled. At that time, he was working on a nearby property. He said Mrs Grace asked him to return and case the second bore-hole; he did so on 29 April 1998.
This version of events gains support from the fact that invoice 0650, dated that day, contained some information about casing. Under a heading ‘Method of Fixing Casing in Hole’, were four boxes: ‘clamped’, ‘in rock’, ‘on bottom’ and ‘cement’. Mr Dalton ticked the second and third boxes. Under a heading ‘material supplied’, Mr Dalton wrote the figure ‘6’ as the casing size. He stated the amount of casing as 80 feet. In another part of the form he gave the ‘height of casing above ground’ as 12 inches. He said the casing was slotted from ‘50 to 65’. The invoice was signed by Mr Dalton who also ticked a box marked ‘log completed’.
It is also relevant to note some oral evidence about casing that was given by Mr Dalton. He said ‘there is no way we could have cased it … three months later. We wouldn’t have had a hole to case because it would have deteriorated that much there wouldn’t have been a hole there’. The evidence went on:
‘So you say there was only one casing event and that was within days of drilling? --- Yes, your Honour.
If you had left it three months the hole would have caved in? --- There wouldn’t have been a hole there, your Honour, because you’ve got dehydrated clay … up the top and then you’ve got your gravels and everything. What happens is all that just falls in and then the water level coming up to that dehydrated clay, the clay hydrates and then swells up and then you’ve just got no hole.
Thinking back to what happened when you did this [drilling. As] you’ve told us you tried six holes and only one of them got any water at all? --- That’s right.
So when you left the job, having done the six holes, was there any casing in the No.2 well, the No.2 drill? --- They are all classed as dry holes.
But you were brought back to case that? --- Yes.
And you think that was within days of doing the original drill? --- Absolutely, your Honour, absolutely.’
No counsel challenged this evidence. Having regard to that fact, and bearing in mind that it was evidence about a matter undoubtedly within Mr Dalton’s area of expertise, I accept what he says. Although the finding does not resolve the more fundamental issue between Mr Dalton and the Graces, as to his oral estimate of the water flow rate, I find that the bore-hole was cased on or about 29 April 1998. Why Mr Dalton waited four and a half months before sending an invoice for the casing work is as mysterious as the contents of the invoice itself.
The relevant invoice was numbered 0679. It was sent on 11 September 1998. In that invoice, Mr Dalton claimed $800 for casing the ‘existing bore to 100 feet with six inch steel casing’. Mr Dalton completed the printed boxes on the invoice with the information that the water cut was ‘65’, the thickness ‘20’, the standing water level ‘30’ and the estimated supply ‘1400 gph’. In evidence, Mr Dalton was unable to explain these figures. They bear no relationship to those shown on invoice 0650. He said he had no recollection whatever of invoice 0679, although he conceded it was in his handwriting and signed by him. Mr Dalton said it was not his practice to defer issuing invoices for work performed by him.

In his affidavit, Mr Dalton said that, after he cased the second bore-hole, he went up to the Cellar Door and spoke to the Graces. Mr Dalton gave the following account of the ensuing conversation:
‘I said words to the effect of:-                  “The 400 gallons an hour from that bore is equal to approximately 10000 gallons per day or 70000 gallons per week which is a hell of a lot of water if held in storage”.
June then said words to the effect of:-     “How many litres per hour would 400 gallons an hour work out to be”.
I then did some calculations on a calculator.
I said words to the effect of:-                   “About 1800 litres per hour”.
June said:-“Would you mind writing that amount down on the invoice”.
I said words to the effect of:-                   “I can do that because it means exactly the same thing”.
I then completed invoice number 0650 and handed it to June or Jose.’
Under cross-examination, Mr Dalton said that, although he had just converted gallons to litres, in conversation with the Graces, when he wrote out invoice number 0650, he ‘forgot and wrote from habit “gph” instead of “lph”’.
After the bore-hole was cased, a bucket was placed over its top. The Graces made no attempt to use it prior to sale of the property, notwithstanding that the property continued to be adversely affected by drought conditions.
Mr Dalton’s account of his dealings with the Graces is supported, but only to a limited extent, by an affidavit made by Darren Keith Groat, a person who was employed by Mr Dalton from April 1998 to May 2001 as a driller’s offsider. Mr Groat said he recalled the drilling activity on the property and having had a conversation with Mr Dalton in relation to the second bore-hole. He said he asked Mr Dalton the water flow rate and Mr Dalton replied ‘400 gallons per hour, I reckon’ or words to that effect. Mr Groat also recalled Mr Dalton being approached by Mrs Grace while they were working at the next job and that, after finishing that job, they returned to the property. He said nothing about casing the bore-hole but he remembered a conversation on that return visit at the Cellar Door when somebody referred to litres. Mr Groat could not say who mentioned litres. He said he noted that part of the conversation because, in his experience, Mr Dalton always referred to gallons rather than litres. Mr Groat was not cross-examined.
(iv) The 1999 sale attempt
At some point during 1999, the Graces decided to attempt to sell the property by private treaty. They contacted Bruce McGregor of O’Brien McGregor. A one page brochure (‘the 1999 brochure’) was produced. It described the vineyard as ‘twenty acres of fruiting vines including Merlot, Cabernet Sauvignon, Chardonnay & Verdelho’. No sale was achieved.
(v) The September 2000 inspection
In about August 2000, Mr O’Brien was contacted by Jason Dunne, a person who was known to him as an employee of Orlando Wines in Mudgee. Mr Dunne said he was inquiring about the availability of the property on behalf of a friend. Mr O’Brien told him the property had previously been on the market. He said he would talk to the owners. Subsequently, Mr O’Brien told Mr Dunne that the property was available for sale at a price of $1.35 million. Mr Dunne said he would pass on that information.
The person on whose behalf Mr Dunne had enquired was Paul Houlihan (‘Mr Houlihan’), the second applicant in this proceeding. Mr Dunne was a friend of Mr Houlihan’s son. Upon learning that the property was available for sale, Mr Houlihan asked Mr Dunne to have Mr O’Brien set up an inspection.
The inspection took place on 3 September 2000 (‘the September inspection’). Prior to that date, Mr Dunne sent a questionnaire to O’Brien McGregor concerning the property. The questionnaire sought detailed information about a number of matters. Some of this information was supplied by the Graces, apparently after the September inspection. The only part of the supplied information which counsel have thought to be relevant to this case is the grape production figures for the years 1996 to 2000. The claimed total tonnages over those five years were 55.7, 46.7, 23.55, 38.5 and 19.3 respectively. In respect of most years, the supplied information distributed the total tonnage amongst the 12 varieties of grape grown on the property.
Mr Houlihan attended the September inspection with his wife, Mary Houlihan (the third applicant), and Mr Dunne. Mr O’Brien and the Graces were also present, although Mrs Grace may not have remained for the whole of the ensuing discussion.
The details of the inspection and discussion do not matter. It is common ground amongst the participants that Mr Grace stated the property contained 20 acres of vines – this must have been fruiting vines, as there were then no immature vines – and, second, that there was no general discussion about the bore. However, Mr Houlihan claimed Mr Grace pointed out to him the location of the bore-hole; and Mr Dunne said Mr Grace told him it was possible to ‘pump 1800 gallons an hour from it’. It is also agreed that Mr Grace handed Mr or Mrs Houlihan a brochure. This was probably the rare opportunity brochure. Mr or Mrs Grace also gave Mr Houlihan a document headed ‘Property At Present’. This document set out 15 points about the property. They included:
‘6.20 acres of fruiting vines, dry-land cultivation, success probably due to underground water from the hill.
…
9.A bore giving 1800 g.p.h. of good water (see lab. report). This could be shandied with rainwater gathered from Lawson Hill’s natural watershed.’
The laboratory report was not attached to this document.
Mr Houlihan claimed in evidence that, during the September inspection, Mr O’Brien handed him a brochure published by O’Brien McGregor, in which it was stated that the vineyard contained 20 acres of fruiting vines. At first he thought the relevant brochure was one which, I am satisfied, did not come into existence until October 2000. However, Mr Houlihan was not dogmatic about that; he accepted it may have been the 1999 brochure. Mr O’Brien conceded he may have given Mr Houlihan a copy of the 1999 brochure during the September inspection.
Following the September inspection, Mr Dunne obtained cost estimates for managing a 20 acre vineyard at this location and prepared a draft budget in which he spread those costs over a financial year. He also prepared production projections.
(vi) The 2000 brochure
Mr and Mrs Houlihan did not immediately decide to purchase the property. However, presumably encouraged by their inquiry, Mr O’Brien had Mr Grace execute a new selling agency agreement and set about compiling a new one page brochure (‘the 2000 brochure’). He did this in conjunction with Mrs Grace, who effectively settled its final form. The published version of the 2000 brochure included the statement: ‘At present there are 20 acres of vines consisting of Chardonnay, Sauvignon Blanc, Riesling, Chenin Blanc, Gewurztraminer, Marsanne, Verdelho, Pinot Noir, Malbec, Merlot, Gamay and Cabernet Sauvignon’ (original emphasis). The brochure made no reference to the bore.
Mr O’Brien agreed in cross-examination that the purpose of O’Brien McGregor, in publishing brochures of this type, ‘is to attract potential buyers to a particular property’ and that he put in bold ‘some of the essential features of the property’ to which he wanted to attract a potential buyer’s attention.
It is common ground that Mr O’Brien provided at least one copy of the 2000 brochure to Mr Houlihan before exchange of contracts for purchase of the property.
(vii) The January 2001 inspection
In December 2000, after a discussion with his accountant, Mr Houlihan decided to attempt to put together a consortium of friends to buy the property. He ascertained that the property was still available. A further meeting was arranged for 7 January 2001 (‘the January inspection’). Mr and Mrs Houlihan again attended the property. Although the evidence does not make the position entirely clear, it is possible that they were accompanied on this visit by Mr Dunne and the eighth and ninth applicants, Patrick and Marie Houlihan. The visitors had a discussion with the Graces. Mr O’Brien was not present.
According to Mr Houlihan, Mr Grace repeated some of the information he had given at the September inspection, including the extent of the vine area on the property. Mr Houlihan said he asked the Graces about the capacity of the bore. Mr Grace pointed to the location of the bore and replied: ‘That bore produces about 1800 gallons per hour in a dry year. You can expect better than that in a good year’. Mr Houlihan said Mr Grace went on to say that it was common practice to ‘shandy the bore water with rain water’ but he did not think it was necessary to do that on this property. Mr Houlihan said he asked about the possibility of irrigating the vines directly from the bore but Mr Grace replied: ‘I wouldn’t do that’. Mr Houlihan then asked: ‘Then a dam would be the preferable way of irrigating the vines?’ Mr Grace said: ‘Yes’.
(viii) Organisation of the consortium
Mr Houlihan said that, after the January inspection, he was enthusiastic about purchasing the property and its potential for improvement – especially by irrigating the existing vines. He also had in mind the prospect of planting additional vines. Mr Houlihan discussed the project with various friends. There were further inspections. The rare opportunity booklet, the ‘Property at Present’ document and the 2000 brochure seem to have been widely distributed amongst potential consortium members.
One of the potential consortium members was Anthony Fleming (the sixth applicant), a trained accountant. Mr Fleming considered Mr Dunne’s costs analysis. He prepared profit and cash flow estimates, these being based on the assumption that the property contained 20 acres of fruiting vines, all of which would be irrigated from a dam constructed around the bore.
In February and March 2001, Mr Fleming made two visits to the property, once with his wife, Margaret Fleming (the seventh applicant) and Mr Dunne and once with Mr Houlihan. During the second visit, there was a long meeting, primarily involving Mr Fleming, Mr Houlihan and Mr Grace, during which Mr Fleming showed his financial estimates to Mr Grace and asked him whether his assumptions for grape production and wine yield were reasonable. Mr Grace said they were.
During this meeting, there was discussion about irrigating the vines. Mr Houlihan commented to Mr Grace that he had said the bore supplied 1,800 gallons of water per hour. Mr Grace went into another room and returned with invoice 0650. He showed this document to Mr Houlihan and Mr Fleming, saying ‘[t]his is from the fellow who sunk the bore’. He pointed out the estimated water flow rate of 1,800 gallons per hour.
The income projected by Mr Fleming was sufficient to cover not only estimated running costs, but also the cost of servicing a bank loan for $1,300,000. On the basis of these projections, if the property could be purchased for $1,250,000, it would be unnecessary for investors to make any personal contribution to either the cost of purchase or running expenses.
A meeting was held on 29 March 2001 at the home of Patrick and Marie Houlihan. It was attended by most of the non-corporate applicants. Those present at the meeting discussed the project and a proposal that it be implemented through a unit trust financed by the National Australia Bank, the unit holders being required to act as personal guarantors for a loan of $1,300,000. This proposal was approved at the meeting. Those applicants who were not present at the meeting subsequently endorsed those decisions.
(ix) Reliance on the representations
All the non-corporate applicants gave evidence to the effect that, in deciding to invest in the unit trust, they relied upon both the vine area representation and the bore representation. Many of them had seen one or more of the brochures obtained by Mr Houlihan. Whether or not they had, there is no doubt that Mr Houlihan orally passed on to all of them the substance of both representations. At the trial, there was no serious challenge to the non-corporate applicants’ evidence about reliance; indeed, most of them were not required for cross-examination.
However, Mr D S Fagan SC, who appeared with Mr B McManus for the agent, cross-examined Mr Dunne at some length about his production projections. Mr Fagan suggested that yield per acre tends to vary from one grape variety to another and that Mr Dunne had taken this fact into account in estimating the likely yield of the vineyard. He further suggested Mr Dunne used these more precise yield estimates, rather than a general rate of 2.5 tonnes per acre, in assessing likely total grape production, if the vineyard was watered by drip irrigation. Mr Dunne agreed he had considered the likely yield of particular varieties, but he pointed out that he did not have accurate acreage information in relation to some of them, so he could do no more than make a rough estimate of the likely production from those varieties. He maintained that yield per acre, even within a particular variety, may vary according to the location of the particular vines in the vineyard and seasonal factors. Perhaps more importantly, Mr Dunne pointed to the link between yield and quality. He explained:
‘the past yield was an indicator. It set more of a trend as opposed to an indicator of what we could and could not do. What I was working off was I was aiming to produce good quality wine and from a dry land vineyard obviously your yields are low. To supplement that water, you can take out some of those peak[s] and troughs but in doing that you also maintain quality. So I figured that if you worked off two and a half tons per acre, of course there’s going to be some variations based on variety but if you worked on two and a half tons per acre across 20 acres, that would give you approximately 50 tons. Now, if you work that 50 tons back in line with some of the trends which was – which I drew from the grape production Jose gave me, I could then manipulate some of those figures and average tonnages, expected tonnages to extrapolate the 48.5 or round it off to 50.
Sorry, the 2.5 tons is an expected production per acre, is it? --- That’s what I was looking for.’
I think it is clear that Mr Dunne treated 2.5 tonnes per acre as the desirable average yield of this vineyard. He wished to maintain it as essentially a dry land vineyard with supplementary drip irrigation. He was looking for a yield that would provide both acceptable volume and good quality wine. He apparently selected the figure of 2.5 tonnes per acre on the basis of his training, general experience and knowledge of the Mudgee district. He then examined Mr Grace’s production records, in order to see whether they suggested a total yield of 50 tonnes was attainable, assuming the property contained 20 acres of fruiting vines, with the various proportions of existing varieties. Mr Dunne concluded that, on the basis of past performance without drip irrigation, 50 tonnes was attainable, year in and year out, with drip irrigation. An essential ingredient of this assessment was that the total vine area comprised 20 acres. Mr Dunne’s assessment found its way into Mr Fleming’s profit and cash flow projections and, ultimately, into the decisions of the various applicants to proceed with the purchase of the property. Reliance has been proved.
(x) Implementation of the project
The first applicant, Lawson Hill Estate, was incorporated on 17 April 2001. About that same time, all the non-corporate applicants signed requests for allocation of shares in the company. A trust deed was executed. Units in the trust were subsequently allocated to the various applicants.
On 23 April 2001, Lawson Hill Estate contracted to purchase the property from Mr Grace. The purchase price was $1,250,000. That price included 25,000 bottles of wine. It also included ‘all the vendor’s right title and interest in the business Lawson’s Hill Winery including current mailing list data base of clients (approximately 850) the telephone and fax numbers for the winery … and the registered business name’.
The contract contained two special conditions purporting to exclude claims arising out of a representation or warranty. They read:
‘1.The purchasers acknowledge that they have inspected the subject property and are purchasing the same in its present situation, conditions and state of repair. The vendors have not and nor has anyone on the vendors behalf, made any representations in respect of the same and the purchasers will make no objection requisition or claim for compensation in respect of the property in its present situation, condition and state of repair or in respect of any inability to obtain or supply any Certificates in respect of the same.
…
4.The purchasers acknowledge that no warranties are given by the vendors or their agent as to the condition or state of repair of any structural improvement or any inclusion passing with the property or as to the carrying capacity of the land, its productivity or the uses to which it may be put and agree to accept delivery of the same on completion subject to all defects (if any) both latent and patent.’
At the purchasers’ request, the contract also contained a special condition about the bore:
‘Prior to completion the vendors will furnish to the purchaser written confirmation from the Department of Land and Water Conservation that there is an appropriate licence in respect of the bore for 37 megalitres.’
I was told by counsel that the reference to 37 megalitres was a reference to the purported annual output of the bore.
(xi) The problems revealed
The applicants engaged Mr Dunne to manage the property on the basis that he and his wife would live in the dwelling and work part-time on the property. They were not to receive wages; they would be remunerated by accruing an equity in the unit trust.
Purchase of the property was settled on 14 June 2001. Prior to that date, Mr Dunne obtained a quotation for construction of a dam in the vicinity of the bore. Subsequently, he negotiated an amended quotation on the basis of reduced work. Shortly after settlement, dam construction commenced.
Mr Dunne commissioned a Mudgee firm, Thompson’s Irrigation (‘Thompson’s’), to carry out an assessment of the bore so that he could better plan his irrigation requirements. Thompson’s carried out a four-hour bore test on 13 July 2001. It revealed a water flow rate of 198.25 gallons per hour. Mr Dunne immediately contacted Mr Grace and asked him for documentation relating to the bore. Mr Grace gave him copies of Mr Dalton’s invoices 0642 and 0650 and the water analysis certificate. Mr Dunne again contacted Mr Grace and told him the bore flow ‘is way below the 1800 gallons per hour you said’. Mr Grace replied: ‘Well that’s what the driller said it was’.
Mr Dunne contacted Mr Dalton. They met at the bore site on 19 July 2001. According to Mr Dunne, Mr Dalton said to him:
‘Jose and June always knew it was only 1800 litres per hour not 1800 gallons per hour. I must have made a mistake in writing the flow rate down as 1800 gallons. I should have said litres as they had asked me. I remember when I was sitting down with the owner and the lady after drilling the bore. I told them that the flow rate was 400 gallons per hour. June Grace asked me to write that down as 1800 litres per hour. June Grace said that this would look better for them.’
Mr Dunne subsequently had the bore examined by a geologist, Ronald John Lee. Mr Lee wrote a report in which he offered the following summary and recommendations:
‘The study has concluded the following:
•An investigation of the drilling results of the registered Bore 1 (GW801304), licensed for irrigation, stock and domestic purposes, has confirmed that it is inadequate to meet the groundwater demands for irrigation.
•The deemed indicative yield of Bore GW801304 is 2.3 L/sec. Both drawdown testing and confirmatory drilling reveal that the likely sustainable yield is less than 10% of that rate. It is usual to be confident that the driller’s reported yield is at least within 70% accuracy, for pumping periods of 1 – 2 hours.
•The groundwater potential of the property is considered poor, and test drilling has exhausted the possibility of defining an adequate groundwater resource.
•The most viable options would be to either seek out an arrangement to acquire groundwater from the adjacent property to the west, to acquire additional adjoining land after proving the existence of a sustainable resource, or by an amalgamation.’

Mr Lee’s conclusions were not disputed at trial. A rate of 2.3 litres per second equates to 8280 litres per hour. This was the rate recorded on the Department of Land and Water Conservation’s bore register.
In July 2001, Mr Dunne arranged for a survey of the vine area. The surveyor reported an area of 5.82 hectares (14.38 acres), this being the trellised area. It is agreed that, if headlands and sidelands are added, as the respondents contend they should be, the area rises to 6.59 hectares (16.28 acres).
Having heard evidence as to the usual practice, I am not satisfied it was appropriate for the headlands and sidelands to be included in the stated vine area. However, in one sense, it does not matter whether or not they should have been included. On any view, the vine area falls short of the 20 acres represented by the agent and the Graces prior to purchase of the property by Lawson Hill Estate.
The applicants’ claims against the Graces
(i) Basis of the claims
The applicants base their claims against the Graces on ss 42, 45(1), 61(c) and 68(1) of the FTA.
Section 42 of the FTA provides that ‘[a] person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive’. Section 45(1) provides, amongst other things, that a person shall not, in trade or commerce, in connection with the sale of an interest in land, make a false or misleading representation concerning the characteristics of the land or the availability of facilities associated with the land.
Section 68(1) of the FTA provides that a person who suffers loss or damage by conduct of another person that is in contravention of s 42 or s 45(1), amongst other provisions, ‘may recover the amount of the loss or damage by action against the other person or against any person involved in the contravention’. Section 61(c) defines the term ‘person involved in a contravention of a provision of this Act’ so as to include a person who ‘has been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention’.
Both Mr and Mrs Grace were involved in making the vine area representation and the bore representation. The claim against Mr Grace is appropriately based on ss 42 and 45(1). As vendor of the property, he was acting ‘in trade or commerce’. Although he made the representations in connection with the sale of a capital asset, the asset was one that had been used by him in trade or commerce: see Bevanere Pty Ltd v Lubidineuse (1985) 7 FCR 325 at 330-332.
However, Mrs Grace was not a vendor of the property. Nor did she act as an agent for reward of the vendor. Accordingly, I do not think she should be regarded as having acted ‘in trade or commerce’ when she supplied information about the property. Any recovery against Mrs Grace must be on the basis of accessorial liability, under s 61(c) of the FTA, related back to s 42 or s 45(1).
The fact that liability attaches to Mrs Grace, if at all, only through s 61(c) of the FTA, is a matter of practical importance. Although it is not necessary that an alleged accessory be shown to have appreciated that the representation constituted a contravention of the relevant statute, s 61(c) of the FTA applies to Mrs Grace only if she had knowledge of the essential facts constituting the contravention. The essential facts, in the case of a contravention of

s 42 or s 45(1) of the FTA, include the facts that render the representation misleading or deceptive: see Yorke v Lucas (1985) 158 CLR 661 (‘Yorke’), the discussion by Lindgren J in Australian Competition and Consumer Commission v Giraffe World Australia Pty Ltd (1999) 95 FCR 302 and the Full Court judgment in Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at [156]-[160].
The evidence in the present case establishes that:
(i)both Mr and Mrs Grace were involved in the making of the vine area representation and the bore representation;
(ii)those representations were made directly to some of the non-corporate applicants – in particular Mr Houlihan and Mr Fleming – prior to the decision of Lawson Hill Estate to enter into a contract for purchase of the property;
(iii)the representations reached all the non-corporate applicants, directly or indirectly, and were relied upon by all of them in deciding to proceed with the incorporation of Lawson Hill Estate, the formation of the unit trust and the purchase of the property by Lawson Hill Estate; and
(iv)both representations were false.
Subject to one argument put by Mr J T Johnson, counsel for the Graces, it follows that the applicants’ claim against Mr Grace must succeed. The claim against Mrs Grace must depend upon whether it is shown that she was aware of the falsity of at least one of the representations. There is no evidence that suggests Mrs Grace was aware of the inaccuracy of the vine area representation. The case against her, therefore, turns on the question whether she knew the bore representation was false. I will return to that issue.
(ii) Liability of Mr Grace: the special conditions argument
The argument of Mr Johnson, to which I just referred, arises out of special conditions 1 and 4 of the contract of sale of the property: see [61] above. On the pleadings, this argument may not be open to Mr Johnson. However, it is not necessary to decide that question. Whether it is open to him or not, it is, in my opinion, misconceived.
In essence, Mr Johnson argues that, because of the terms of one or both of the special conditions, none of the applicants is entitled to succeed in this case against Mr Grace. As none of the second to fifteenth applicants was a party to the contract of sale, it is difficult to see how any condition of that contract could preclude recovery by any of those applicants, as distinct from the first applicant, Lawson Hill Estate. Further, it does not appear to me that special condition 4 is relevant to a representation as to the characteristics of the property or the availability of facilities associated with it. The only real issue is whether special condition 1 gives Mr Grace a defence to Lawson Hill Estate’s ss 42 and 45(1) claims against him.
The terms of any contractual disclaimer or exclusion clause may be relevant to determination of the factual question whether statements made by a misrepresentor induced the misrepresentee to enter into the contract. As Burchett J said in Benlist Pty Ltd v Olivetti Australia Pty Ltd (1990) ATPR 41-043 at 51,590:
‘if the [disclaimer] clause actually has the effect [of] erasing whatever is misleading in the conduct, the clause will be effective, not by any independent force of its own, but by actually modifying the conduct. However, I should think, it would only be in rare cases that a formal disclaimer would have that effect.’
In Oraka Pty Ltd v Leda Holdings Ltd (1997) ATPR 41-558 (‘Oraka’), Burchett J discussed the more usual position. He said at 43,717:
‘Counsel for Leda sought to place reliance on clause 9 of the agreement for lease, and on the corresponding provision in the letter of intent. Clause 9 has been drawn in formidable language, as a representation and warranty by Oraka, reinforced by what is expressed as an indemnity in clause 9.3, that Oraka was not induced by and did not rely on any representations made to it. But there is a difficulty in depending on such a provision according to its literal terms. It cannot be thought that the very agreement that was obtained by a misrepresentation can be made good by incorporating in it a further misrepresentation falsely asserting that it was not procured by the means which were in fact employed. The agreement that so seeks to sustain itself was obtained by a misrepresentation, and no verbal magic of an added clause can change that. Many authorities have made this clear.’
His Honour went on to cite several of those authorities, including decisions of the Full Court of this Court.
In the course of cross-examination by Mr Johnson, Mr Houlihan agreed he signed the contract of sale on behalf of Lawson Hill Estate. He said that, before he did so, he read the special conditions, including special conditions 1 and 4. He agreed he did not seek the inclusion of an express warranty as to the output of the bore, although he did require inclusion of special condition 10, relating to the bore licence.
Mr Johnson did not suggest to Mr Houlihan that the existence of special condition 1 or 4 caused him not to rely on either representation. In relation to the vine area representation, Mr Houlihan said: ‘I believed what I was told’. Mr Johnson did not challenge that statement.
I agree with the view expressed by Burchett J in Oraka. The existence of special conditions 1 and 4 does not affect my conclusion that the applicants relied on both the vine area representation and the bore representation. Neither of the special conditions precludes the applicants’ claim for damages against Mr Grace, or indeed any other respondent.
During the course of his submissions, Mr Johnson criticised the applicants’ failure, prior to contract, to make their own investigation of the extent of the vine area and bore output. They could have done this. No doubt, in hindsight, they wish they had. However, their omission provides no defence to any respondent. As the Full Court noted in Sutton v A J Thompson Pty Ltd (1987) 73 ALR 233 at 240-241:
‘there is nothing in the principles cited, or in any other authority which has been brought to our attention, to suggest that a person who has been misled into entering a contract, by false representations of a type which were likely to produce that result, and in fact did so, can be deprived of his remedy because of his failure to check the accuracy of those representations: see, to the contrary, Neilsen v Hempston (1986) 65 ALR 302 at 309, and Collins Marrickville Pty Ltd v Henjo Investments Pty Ltd (1987) 72 ALR 601.’
See also Henville v Walker (2001) 206 CLR 459 (‘Henville’).
The applicants are entitled to succeed in their claim against Mr Grace.

The applicants’ claims against the agent
(i) Basis of the claims

The applicants claim that, in publishing and distributing various brochures, Tovegold (through Mr O’Brien) and Mr O’Brien, personally, engaged in misleading and deceptive conduct, contrary to s 52 of the TPA and s 42 of the FTA respectively, and also made misleading representations contrary to s 53A of the TPA and s 45(1) of the FTA respectively. It is inherent in these allegations that the conduct of both respondents was ‘in trade or commerce’.
Although the filed defence of the agent contains a blanket denial of the applicants’ allegations against it, it was not contended by counsel that its actions were not ‘in trade or commerce’. It seems to me they clearly were.
There is confusion in the evidence as to which brochures were seen by particular applicants at particular times. However, it is clear that Tovegold published, and Mr O’Brien distributed, at least two brochures, the 1999 brochure and the 2000 brochure, in which it stated that the property contained 20 acres of vines.
Mr Houlihan may have received a copy of the 1999 brochure at the September inspection. Whether or not he did, it is clear that he received a copy of the 2000 brochure prior to the exchange of contracts for purchase of the property. This document was widely distributed amongst potential consortium members. Additionally, Mr Dunne gave evidence that Mr O’Brien told him, in response to an inquiry in about September 2000, that there were 20 acres of vines on the property. Mr O’Brien did not recall having done so. However, the issue does not matter. As Mr Fagan pointed out early in the hearing, the applicants’ pleaded case against his clients is confined to the statements made in the 1999 and 2000 brochures.
Mr Fagan argues that the evidence does not satisfactorily establish that the 1999 brochure was provided by Mr O’Brien to Mr Houlihan or any other person representing the applicants. I think he is right about that. Accordingly, the case against the agent is narrowed to the statement about 20 acres of vines in the 2000 brochure. There is no doubt that this statement was communicated to the applicants and, as Mr Fagan concedes, there is no doubt that the statement was incorrect.
(ii) The agent’s defence
The essence of the agent’s defence is that it was apparent to the applicants that the Graces were the agent’s sole source of information about the extent of the vine area; accordingly, the applicants knew that the agent was not itself making any statement about that matter. Counsel say the applicants realised that Mr O’Brien had not attempted to verify the figure of 20 acres; he was simply repeating what he had been told and was not endorsing its accuracy. Counsel say this is the reason why the applicants sought confirmation of the vine area from Mr Grace, including by Mr Dunne submitting a written inquiry seeking ‘[a]reas by variety + Vineyard Map’.
Mr Dunne did seek this information from Mr Grace. However, the sketch plan he received in reply did not provide any information as to the total vine area.
During the course of cross-examination by Mr Fagan, Mr Houlihan agreed that Mr Grace repeatedly said the vine area comprised 20 acres. He also agreed that he understood Mr Grace had planted the vines and that he expected Mr Grace had incurred some costs (such as cultivating and spraying) that are ordinarily charged by the acre. The evidence went on:
‘Now, can I put this to you that so far as the area of vines on the land was concerned, by that time, that’s March 2001, you wouldn’t have considered it necessary to get a survey of the area of vines because you had had it confirmed from the vendor based upon his knowledge of his own vineyard that there were 20 acres? --- We had it confirmed by the vendor and the agent and everybody else concerned.
But with respect to verification, the 20 acres was the right figure. So far as you were concerned, by the time the question of buying the property came around, you had got confirmation from a reliable source in the vendor? --- Yes.
By the time you [came] to exchange the contracts, anything that the agent had written or said, that is Mr O’Brien or his firm had written or said about 20 acres, as far as you were concerned was not material. It had been overtaken by the vendor having repeatedly confirmed on the basis of his knowledge of his own property that it was 20 acres? --- I had difficulty with this yesterday and I’ve got difficulty with it now. The – there was never any – there was never any delineation. I mean, we were, we were buying, we were buying the property from the vendors, from the Graces through, through Mr O’Brien’s agency. It was, it wasn’t, it wasn’t that we were doing this with O’Brien [McGregor] and this with the Graces. It was one transaction that we were doing. The transaction was to be done through the agent for the vendor.’
Reference was made to the conflict in the documents between 20 acres and 22 acres. Mr Houlihan said he ‘was comfortable that there was 20 acres’. His evidence continued:
‘You were comfortable with that because it was verified by the man who would know? --- Yes, well that’s, yes.
And … the other side of that was that the agent could only have whatever he had been told by the man who would know, you saw that? --- Yes but you look to the agent to have the local knowledge.
As you were saying, you look[ed] --- I looked to it.
No you didn’t I suggest to you. You looked to the vendor as the man who knew his own property and who had planted it out to tell you what area he had planted out and what area he had cultivated? --- I’m sorry I looked in fairness to both of them in that regard.
By the time you came to exchange the contract I suggest to you it would be completely irrational to be relying upon whatever the agent had told you? --- The agent’s position was one of corroboration as far as I was concerned. That is probably the best way to put it.
How corroborated, on the basis of what? --- On the basis that he told me it was 20 acres.
But he had, to your observation, he had no independent source of verifying that? --- But that’s not my issue, that’s his issue, not mine. I looked to him to have independent expertise. That’s what I expected him to have.’
Mr O’Brien gave evidence that his information concerning the extent of the vine area came solely from the Graces. He made no independent inquiries; in preparing the 2000 brochure, he relied entirely upon what he had been told by the Graces.
In written submissions provided to the Court, counsel for the agent referred to a line of authority relating to the circumstances in which a corporation which passes on information supplied by another will be adjudged to have engaged in misleading or deceptive conduct. The line begins with a statement of Mason ACJ, Wilson, Deane and Dawson JJ in Yorke at 666:
‘It is, of course, established that contravention of that section does not require an intent to mislead or deceive and even though a corporation acts honestly and reasonably, it may nonetheless engage in conduct that is misleading or deceptive or is likely to mislead or deceive … That does not, however, mean that a corporation which purports to do no more than pass on information supplied by another must nevertheless be engaging in misleading or deceptive conduct if the information turns out to be false. If the circumstances are such as to make it apparent that the corporation is not the source of the information and that it expressly or impliedly disclaims any belief in its truth or falsity, merely passing it on for what it is worth, we very much doubt that the corporation can properly be said to be itself engaging in conduct that is misleading or deceptive.’
As Mr Fagan submitted, this does not purport to be an exhaustive description of the circumstances under which an agent would not be regarded as engaging in misleading or deceptive conduct. Nevertheless, whether or not there has been an express or implied acceptance of responsibility has always been regarded as a matter of importance: see The Saints Gallery Pty Ltd v Plummer (1988) 80 ALR 525 at 529-531; Lezam Pty Ltd v Seabridge Australia Pty Ltd (1992) 35 FCR 535 (‘Lezam’) at 552-553; and Nescor Industries Group Pty Ltd v MIBA Pty Ltd (1997) 150 ALR 633 (‘Nescor’). In the last-mentioned case, Davies J (with whom Tamberlin and R D Nicholson JJ agreed) said at 641:
‘Agents may be held to be in breach of the statutory provision either because they are directly responsible for the misleading information or because the fact that the information has come from them has added something to its weight and authority.’
In Nescor, Davies J referred to an earlier Full Court decision, John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41-249 (‘John G Glass’). In that case, the appellant, a real estate agent, was informed by the vendor’s consultant that the net lettable area of a building under construction would be 180 square metres. The appellant included this information in a brochure that it prepared, along with a disclaimer as to the completeness and accuracy of the information in the brochure. However, the brochure contained no disclaimer of the appellant’s belief in the truth of the information it contained. At 41,359, the Court said:
‘In our opinion an estate agent which holds itself out as, amongst other things, “consultants to institutional investors and to developers of major properties” would not be regarded by potential purchasers of properties as merely passing on information about the property “for what it is worth and without any belief in its truth or falsity”.
Information of the kind in question, the net lettable area of a building, stands on a different footing from the puffery which often accompanies the sale of real property. The figure is one of hard physical fact. As the appellant’s own calculations indicate, it is an essential factor in determining the likely profitability of a commercial building and hence its value. We think a purchaser like Karawi would ordinarily expect, to quote the terms of the appellant’s own disclaimer, that the agent had no reason to doubt the completeness or accuracy of the information provided.
In the present case the appellant adopted the information in question and incorporated it as a central and prominent feature of their selling effort on behalf of the vendor. There was certainly no express disclaimer of the appellant’s belief in the truth of the information in the brochure – indeed there was an express assertion of such belief. As part of its ordinary business the agent was providing information in a persuasive form with a view to achieving a sale of its principal’s property and of course earning commission. It was this conduct which the learned trial judge, correctly in our opinion, held to be misleading and deceptive. Once the falsity of the figure was demonstrated, it seems to us that no other conclusion could follow.’

In Harkinsv Butcher (2002) 55 NSWLR 558 (‘Harkins’), the New South Wales Court of Appeal exonerated from liability an agent who had provided to a purchaser a survey report and diagram that turned out to be inaccurate. Handley JA (with whom Beazley and Hodgson JJA agreed) referred to part of the passage in Yorke quoted in [99] above and commented at [42]: ‘Any implied disclaimer of a belief in the truth of information passed on to another would have to be quite clear’. At [47], his Honour went on:
‘The agents represented that the reproduction was an accurate copy of what they believed was a genuine and correct survey diagram. In my judgment they made no representation as to its accuracy. The question can be tested by supposing that they handed copies of the survey report and diagram to prospective purchasers telling them, without more, that it was a copy of a survey they had obtained from the vendor. The recipients would know that the agents did not hold themselves out as professional surveyors, and had not carried out the survey themselves.’
The High Court has recently given judgment in an appeal against the Court of Appeal decision in Harkins: see Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60 (‘Butcher’). By majority (Gleeson CJ, Hayne and Heydon JJ; McHugh and Kirby JJ dissenting), the appeal was dismissed.
In a joint judgment, the majority referred at [38] to the principles stated in Yorke that are quoted at [99] above. Their Honours commented that, in applying those principles, ‘it is important that the agent’s conduct be viewed as a whole’. They said at [39]:
‘It is not right to characterise the problem as one of analysing the effect of its "conduct" divorced from "disclaimers" about that "conduct" and divorced from other circumstances which might qualify its character. Everything relevant the agent did up to the time when the purchasers contracted to buy the … land must be taken into account.’
Their Honours then considered three particular matters: the nature of the parties, the character of the transaction and the contents of the brochure. In reference to the first matter, they commented at [43] on the complexity of questions of title, both legally and factually. They said:
‘Hence they have to be dealt with by specialists. So far as the complexity is factual, the specialists are surveyors. So far as the complexity is legal, the specialists are solicitors or conveyancers, relying on specialists like surveyors. The skills of these specialists, and the problems on which those skills are brought to bear, are quite outside what suburban real estate agents hold themselves out as doing and are likely to be able to do.’
In relation to the third matter, the majority referred to evidence that the purchaser appreciated that the incorrect diagram was a survey diagram. At [47] they noted a finding by the trial judge that ‘potential purchasers would be likely to assume that the diagram had been taken from an identification survey report’. They said:
‘Not only was it plain that the diagram had not been made by the agent, the circumstances also negated any suggestion that the agent had adopted the surveyor's diagram as its own, or that it had verified its accuracy.’
At [51] their Honours said:
‘Hence it would have been plain to a reasonable purchaser that the agent was not the source of the information which was said to be misleading. The agent did not purport to do anything more than pass on information supplied by another or others. It both expressly and implicitly disclaimed any belief in the truth or falsity of that information. It did no more than state a belief in the reliability of the sources.’
(iii) The applicants’ argument
Consistently with the authorities mentioned above, Mr M A Ashhurst, counsel for the applicants, accepted there are circumstances in which agents are not liable for misrepresentations in brochures produced or distributed by them. However, he contended, these are not the circumstances of the present case. Rather, he suggested, this case is similar to John G Glass. John G Glass was distinguished, but not disapproved, in Butcher.
In the present case, the agent claimed both local knowledge and to have taken care to check the accuracy of the information in its brochures. During the course of cross-examination, Mr Ashhurst elicited from Mr O’Brien the information that the building in Mudgee in which O’Brien McGregor carries on its business bears a sign ‘Local knowledge, national strength’. He also had Mr O’Brien confirm that information of the kind set out in the 2000 brochure was of the type that was regularly sought by prospective purchasers of rural properties and that he realised purchasers might rely on that information. Mr O’Brien said that is why it was his policy to have such information confirmed by the vendor.
In submissions, Mr Ashhurst pointed out that the 2000 brochure bore an inscription, in small but legible print: ‘Whilst every care has been taken in respect of the information contained herein no warranty is given as to the accuracy and prospective purchasers should rely on their own enquiries’.
Mr Ashhurst pointed out that Mr Houlihan gave evidence that he in fact relied on what was conveyed to him by Mr O’Brien, believing him to ‘have the local knowledge’: see [97] above.
Mr Ashhurst also submitted it did not matter that Mr Houlihan, and other applicants, also relied on representations made by the Graces. He cited Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (No 1) (1988) 39 FCR 546. In that case, at 558-559, Lockhart J (with whom Burchett and Foster JJ agreed on this point) said:
‘recovery under s 52 is founded by the applicant’s actual reliance upon the misleading or deceptive conduct of the respondent although that conduct was not the only factor in the applicant’s decision to enter a particular agreement, and although the applicant did not seek to verify the representations or did so inadequately and so failed to discover their falsity’.
(iv) Conclusions on the applicants’ claims against the agent
There is no question about the accuracy of the submission referred to in the preceding paragraph. Nor is there any doubt that Mr Houlihan was influenced by the representations made to him, and to others representing the applicants’ interests, by the Graces. However, Mr Houlihan insisted he also placed reliance upon the fact that the vine area representation was contained in a sales brochure prepared by the agent and distributed to him and others with a view to increasing their interest in purchasing the property. I see no reason to disbelieve Mr Houlihan in relation to that matter. He seemed a careful and honest witness. He was initially confused as to what documents he received at the September inspection. However, when the probable sequence of events was suggested to him in cross-examination, he considered that suggestion in a careful and open-minded way and accepted what was put to him.
The agent gains no assistance from the fact that, as I have held, the vine area representation was not the only factor in causing the applicants to proceed with purchase of the property; they also relied on the bore representation (see Henville at [14], [60], [106] and [163]).
I think the only real issue in relation to the agent’s defence against the applicants’ claim is whether the circumstances were such as to make it apparent that the agent was not the source of the vine area representation and took no responsibility for it; in the words of Yorke, whether it was apparent that the agent was merely passing on information about the vine area ‘for what it is worth’.
Sometimes an issue such as this may easily be determined. The evidence may clearly indicate the answer, either way. In other cases, the situation is more borderline. I think this case falls into the latter category, but I have concluded that the agent should not be excluded from responsibility for the vine area representation. The agent was a local agent who claimed local knowledge. It was in the business of selling local properties, including rural properties such as vineyards. Anybody dealing with Mr O’Brien in 2000 would have reasonably expected him to have a good knowledge of the property and to appreciate the importance of correctly stating the size of the vine area. This was a matter likely to be at the forefront of a purchaser’s assessment of both the value of the property and the cash flow it would provide. A reader of the 2000 brochure would be entitled to assume its statement that ‘every care has been taken in respect of the information contained’ would apply to the vine area representation. And I think a reader would assume this care extended beyond merely repeating, for what it was worth, an estimate given to the agent by the vendor. A reader would not necessarily assume that the agent had obtained a formal survey but, I think, would assume the agent had made at least an informal check of the position; for example, by requesting to look at plans or driving a vehicle along the lines of trellises and making an arithmetical calculation.
The agent made no disclaimer about its knowledge or belief in the correctness of the statements in the brochure. As the authorities show, it is never enough for an agent to tell prospective purchasers that it gives no warranty and they must rely on their own enquiries. If an agent is to escape liability for a misrepresentation that is made by it, it must bring home to the purchaser – or at least a reasonable person in the position of the purchaser – that it is not in a position to take responsibility for its statement but is acting as a mere messenger. Mr O’Brien did not suggest, in his evidence, that he said anything to that effect to Mr Houlihan or Mr Dunne.
Mr Houlihan said, in effect, that he believed the agent to be taking responsibility for the vine area representation in the 2000 brochure. I accept Mr Houlihan’s evidence on that point and I cannot say his belief was unfounded or unreasonable.
To a large extent, the authorities cited by counsel depend on their own facts. I think this case has some factual similarities to John G Glass. It is dissimilar to Butcher. As the High Court majority held in the latter case, it was obvious to the purchaser that the survey diagram was the work of an independent professional person having specialised training in surveying. It was a document for whose accuracy an untrained person could not be expected to vouch.
The applicants are entitled to succeed against the agent.
The applicants’ claim against Mr Dalton
(i) Basis of the claim
The applicants’ case against Mr Dalton is based on ss 42 and 45(1) of the FTA. In its Further Amended Statement of Claim, the applicants identify the relevant conduct as ‘creating and not rectifying the mistake in invoice 0650’.
It will be noted the applicants do not allege that Mr Dalton (or his company) made any representation directly to them. They could not make that claim. So far as the evidence indicates, Mr Dalton had no knowledge of the applicants, or their interest in the property, until he was contacted by Mr Dunne in July 2001, after settlement of the purchase of the property by Lawson Hill Estate. It appears that, when Mr Dalton carried out his work at the property and delivered invoice 0650, he did not even know that the Graces had in mind an eventual sale of the property, or that they were interested in the bore as a marketing tool.
(ii) The applicants’ argument
Mr Ashhurst emphasises that Mr Dalton created invoice 0650 and wrote ‘1800 gph’ as his estimate of the water flow rate. He says the evidence establishes this figure was incorrect. Mr Ashhurst’s argument is, therefore, a simple one. He submits that Mr Dalton, in trade or commerce, created a document that contained a misrepresentation and that the applicants saw, and relied upon, that misrepresentation in deciding to proceed with the purchase of the property. Therefore, he suggests, the applicants suffered loss or damage due to conduct of Mr Dalton that was in contravention of ss 42 and 45(1) of the FTA and s 68(1) of the FTA.
It is convenient to deal immediately with Mr Ashhurst’s statement that the evidence establishes the incorrectness of the estimate of 1,800 gallons per hour.
Mr Dalton gave evidence that he carried out a test ‘for about half an hour, three-quarters of an hour’, on the basis of which he estimated the water flow rate at 400 gallons per hour. That is the only evidence about the April 1998 water flow rate. However, nobody challenged the truth of Mr Dalton’s statement or suggested that he carried out the test in an incompetent manner. Moreover, no counsel attempted to make a case that the output of the bore dramatically deteriorated between April 1998, when the bore was drilled, and July 2001, when Thompson’s measured the water flow rate at 198.25 gallons per hour. I presume counsel’s decisions not to attempt such a case were based on instructions and after consideration of the question whether it would be possible to obtain evidence of the likelihood of such a substantial fall in the water flow rate. The case has been fought by all parties on the basis that the water flow rate was never more than 400 gallons per hour and the figure written by Mr Dalton on invoice 0650 was incorrect. Under those circumstances, I also should proceed on that basis.
(iii) Mr Dalton’s argument
Mr Dalton admits he was the author of invoice 0650 and wrote on it an incorrect estimate of the bore’s output. However, Mr Toner says the applicants have not established the necessary causal connection between Mr Dalton’s incorrect estimate and their loss. He points out that, in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 (‘Wardley’) at 525, Mason CJ, Dawson, Gaudron and McHugh JJ applied to s 82(1) of the TPA ‘the common law practical or common-sense concept of causation’ discussed by the High Court in March v E & M H Stramare Pty Ltd (1991) 171 CLR 506 (‘March’). Mr Toner submits (and I accept) that it must be equally appropriate to apply March to s 68(1) of the FTA.
In his written submission, Mr Toner quoted a statement made in March by Mason CJ (with whom Toohey and Gaudron JJ agreed) at 517:
‘In similar fashion, the “but for” test does not provide a satisfactory answer in those cases in which a superseding cause, described as a novus actus interveniens, is said to break the chain of causation which would otherwise have resulted from an earlier wrongful act. Many examples may be given of a negligent act by A which sets the scene for a deliberate wrongful act by B who, fortuitously and on the spur of the moment, irresponsibly does something which transforms the outcome of A's conduct into something of far greater consequence, a consequence not readily foreseeable by A. In such a situation, A's act is not a cause of that consequence, though it was an essential condition of it. No doubt the explanation is that the voluntary intervention of B is, in the ultimate analysis, the true cause, A's act being no more than an antecedent condition not amounting to a cause. But this explanation is not a vindication of the adequacy of the “but for” test.’
Mr Toner submitted that the creation of invoice 0650 by Mr Dalton in April 1998, in the context of this litigation, can properly be characterised as an ‘antecedent condition not amounting to a cause’.
Mr Toner emphasised his client’s lack of involvement in the sale of the property. He said the entry on invoice 0650, at best, was a representation to the Graces and not ‘with either … the world or any other class of persons in mind’. He said:
‘Dalton could not know that the Graces or their agent would represent to the applicants in these proceedings that the flow rate was 1,800 gallons per hour when he had told them that in fact it was 400 gallons per hour or 1,800 litres per hour. Even though the Graces were in possession of invoice 650, clearly they were also seized with the information of the true rate of flow of the bore, and Dalton could not have anticipated that they would represent otherwise.’
Mr Toner also argued:
‘Further, if the Court accepts that at that time both Mr & Mrs Grace knew the true position, namely that the flow rate of the bore was 400 gallons, not 1800 gallons, and that the “1800” figure on the docket represented a conversion of 400 gallons to litres, and further that Mr Dalton put a “g” rather than a “l” on the document by mistake, truly demonstrates that the representation that was made by the Graces to the applicant was all their own work.’
(iv) Legal principles
In the typical case caught by s 82(1) of the TPA and s 68(1) of the FTA, the defendant has communicated misleading information directly to the plaintiff, who has thereby been misled and suffered damage. However, neither section is confined to such a case. In any damages claim founded on s 82(1) of the TPA or s 68(1) of the FTA, the question will be whether the applicant has suffered loss or damage by reason of the contravening conduct: see Wardley at 525. The alleged loss may be caused by the fact that the respondent misled customers of the applicant. This was the situation considered by Lockhart J in Janssen-Cilag Pty Ltd v Pfizer Pty Ltd (1992) 37 FCR 526. At 529, his Honour said:
‘What emerges from an analysis of the cases … is that they do not impose some general requirement that damage can be recovered only where the applicant himself relies upon the conduct of the respondent constituting the contravention of the relevant provision.’
Similarly, as it seems to me, s 82(1) of the TPA and s 68(1) of the FTA are capable of applying in a situation where the person who receives a representation is aware that the representation is false but passes it on to a person who is unaware of its falsity and, relying upon the representation, acts to his or her detriment. The representee’s action in passing on the statement will not necessarily amount to a novus actus interveniens breaking the chain of causation; whether or not it will do so must depend on the circumstances surrounding the passing on of the representation.
I think this proposition is supported by statements made in March. In the passage of his judgment cited by Mr Toner, Mason CJ referred to ‘a deliberate wrongful act by B’ who ‘irresponsibly’ does something that transforms the outcome of A’s conduct. In such a situation, the Chief Justice said, ‘the voluntary intervention of B is, in the ultimate analysis, the true cause’. His Honour went on at 517 to explain the decision in McGhee v National Coal Board; M’Kew [1970] SC (HL) 20 as stemming from the plaintiff’s own ‘independent and unreasonable action’.
At 518, Mason CJ noted authorities in which it had been said that ‘the fact that the intervening action was foreseeable does not mean that the negligent defendant is liable for damage which results from the intervening action’. He went on:
‘But it is otherwise if the intervening action was in the ordinary course of things the very kind of thing likely to happen as a result of the defendant’s negligence.’
After referring to other authorities, Mason CJ concluded at 518-519:
‘As a matter of both logic and common sense, it makes no sense to regard the negligence of the plaintiff or a third party as a superseding cause or novus actus interveniens when the defendant’s wrongful conduct has generated the very risk of injury resulting from the negligence of the plaintiff or a third party and that injury occurs in the ordinary course of things. In such a situation, the defendant’s negligence satisfies the “but for” test and is properly to be regarded as a cause of the consequence because there is no reason in common sense, logic or policy for refusing to so regard it.’
See also Deane J at 522-524, noting particularly his adoption of the following statement of Lord Reid in Stapley v Gypsum Mines Ltd [1953] AC 663 at 681-682:
‘One must discriminate between those faults which must be discarded as being too remote and those which must not. Sometimes it is proper to discard all but one and to regard that one as the sole cause, but in other cases it is proper to regard two or more as having jointly caused the accident. I doubt whether any test can be applied generally.’

Mr Aylward noted the sales indicated ‘a range in values of between $32,488/ha - $75,823/ha with most in the range between $50,000/ha - $60,000/ha’. He thought the most comparable sale was of ‘Ronari Vineyard’, on Henry Lawson Way, Mudgee. This was a small (10.13 hectare) property with an established 8.61 hectare irrigated vineyard. The property had no structural improvements but contained a bore providing 90,800 litres of water per hour. After allowing for the value of a house site ($100,000), Mr Aylward opined that this sale represented $52,265 per hectare for the vineyard.
Mr Aylward identified eight sales, between December 1999 and July 2003, of properties containing land suitable for vineyard development. Seven properties were in the Mudgee district and one at Gulgong. The properties varied in size from 23 hectares to 193.40 hectares. Prices ranged from $276,000 to $1,050,000. On Mr Aylward’s analysis, values per hectare, without improvements, ranged from $3,400 to $19,616. The higher priced properties were those with bores or river irrigation.
Mr Aylward analysed the price paid by the applicants for the property. He valued the wine stock at $207,516 and plant and equipment at $50,000. Deduction of $257,516 from the sale price of $1,250,000 leaves $992,484 as the price paid for the land (including improvements). Mr Aylward calculated the value of each of the buildings by reference to a selected square metre rate and ascribed $10,000 to ‘general Site Improvements’. After calculating the value of the ‘Vineyard Development Land’ ($7,500 per hectare) at $25,800, and ‘Undeveloped Land/Winery Site’ ($5,500 per hectare) at $219,890, Mr Aylward was left with the assumed 8.09 hectare vineyard at $48,309 per hectare. He commented this rate ‘is high in relation to the available market evidence – in view of the fact that the vineyard was not irrigated – however, [it] reflects the fact that the purchasers were of the view that there was potential to irrigate the vineyard from the existing bore’.
In a section dealing with bore performance criteria, Mr Aylward expressed the view that a ‘bore flow rate of 8,183 litres per hour would be adequate for the requirements of the vineyard’ but rates of 900 litres per hour and 1,800 litres per hour would be inadequate. Whether Mr Aylward has the expertise necessary to make that statement was not explored, possibly because his view is, in any event, consistent with the position taken by all relevant parties to this proceeding.
Mr Aylward set out a table of calculations in relation to each of his valuations. The table in respect of the first valuation (for a 8.09 hectare vineyard with a bore yielding 8,183 litres of water per hour) was as follows:

Land

Vineyard    8.09 ha @ $40,000 /ha $323,600

Vineyard Development Land    3.44 ha @ $7,500 /ha $25,800

Cellar Door Sales /Homesite Value    5.00 ha @ $25,000 /ha $125,000

Residual Timbered hill 34.98 ha @ $2,500 /ha $87,450 $561,850

51.51

Improvements

Main Dwelling

-Main 287.89 m2

-Garage 49.33 m2

-Pergola 26.80 m2 $235,000

Cellar Door Sales Outlet    51.2 m2 $25,000

Winery 113.89 m2 $17,500

Cottage

-Main 85.83 m2

-Verandah 20.42 m2 $65,000

Site Improvements $10,000

Summatted Value $914,350

Round To $915,000

The table in respect of the second valuation (for a 5.75 hectare vineyard with a bore yielding 900 litres of water per hour) was as follows:

Land

Vineyard    5.75 ha @ $15,000 /ha $86,250

Vineyard Development Land    3.44 ha @ $3,750 /ha $12,900

Cellar Door Sales/Homesite Value    5.00 ha @ $12,500 /ha $62,500

Residual Timbered hill 37.34 ha @ $2,500 /ha $93,300 $254,950

51.51
[sic]

Improvements

Main Dwelling

-Main

-Garage

-Pergola $195,000

Cellar Door Sales Outlet $10,000

Winery $10,000

Cottage

-Main

-Verandah $55,000

Site Improvements $10,000

Summatted Value $534,950

Round To $535,000

The third valuation table (for a 5.75 hectare vineyard with a bore yielding 1,800 litres of water per hour) was as follows:

Land

Vineyard    5.75 ha @ $17,500 /ha $100,625

Vineyard Development Land    3.44 ha @ $3,750 /ha $12,900

Cellar Door Sales/Homesite Value    5.00 ha @ $12,500 /ha $62,500

Residual Timbered hill 37.00 ha @ $2,500 /ha $93,300 $269,325

51.51
[sic]

Improvements

Main Dwelling

-Main

-Garage

-Pergola $195,000

Cellar Door Sales Outlet $20,000

Winery $10,000

Cottage          $0

-Main          $0

-Verandah $50,000

Site Improvements $10,000

Summatted Value $554,325

Round To $555,000

During cross-examination, Mr Fagan suggested to Mr Aylward that his first valuation allowed too much for the value of the cottage ($700 per square metre), given that he had valued the dwelling at $750 per square metre. Mr Aylward did not agree. Although he conceded the dwelling was of a superior construction standard, he said, ‘after many years of looking at dwellings’, he thought a small cottage (a building under 95 square metres) ‘will attract a higher rate per square metre’.
Mr Aylward was also asked why he had not allowed an item for the winery ‘label’; that is, goodwill. He said he had allowed it within the value of the Cellar Door site; goodwill was an inherent characteristic of that value.
The values attributed by Mr Aylward to each of the buildings in the second and third tables are less than those in the first table. Mr Fagan suggested a diminution in value of the land did not justify reduced building values. Mr Aylward responded:
‘I took the view that the property is a whole. It is a package and that’s what the purchaser buys, they buy the whole property and the appeal of this property was the ability to produce fruit to either sell or produce your own wine, depending on which way you wanted to head, and I took the view that without the ability to more reliably produce an income, the property as a package is diminished.’
(ii) The Graces’ valuation evidence
Michael Roderick Thomas gave evidence on behalf of the Graces. He also has appropriate academic qualifications and about 20 years experience in private valuation practice, after several years valuing for financial institutions. His practice has been more varied than that of Mr Aylward. In his report, he described his work since 1984 in this way:
‘A private consultancy practice involved in valuations predominantly of a commercial/development nature, work out advice on distressed portfolios and general advice on property related matters.
Major projects under the heading of appraisals during this period cover a broad geographic spread extending across all states in Australia plus a number of offshore locations including Vanuatu, New Zealand and the Peoples Republic of China. Many of the larger commissions have involved tourism projects including island resorts and golf course developments.
The consultancy side of the practice has been primarily in the area of developing trade out/liquidation strategies for major institutions covering a broad range of property types. Included in this area was a joint exercise with County NatWest providing advice to a banking syndicate on the Housing and Land Division of the failed Hooker Corporation Limited.
In the area of litigation, the commissions have covered a broad range of property related matters with the most significant relating to a major hotel project in Melbourne.
On the subject of specialised properties, considerable experience has been gained in the area of marina valuations, port facilities and a number of other “business cash flow” type properties. An investment in the wine grape industry broadened the consultancy base with instructions received from financial institutions looking to finance vineyards and wineries.’
In oral evidence, Mr Thomas revealed his previous experience with vineyards and wineries had been confined to the Hunter Valley. He had not previously completed a full valuation of a Mudgee district vineyard, only a preliminary report in respect of one property.
Mr Thomas also provided a description of the wine industry, both generally and in the Mudgee district. He described the property, noting details of the bore licence.
Mr Thomas also analysed the sale price of $1,250,000 in order to determine the portion of that price that should be attributed to the real estate. He allowed $200,000 for wine stock (as against Mr Aylward’s $207,516), $25,000 for plant and equipment (as against Mr Aylward’s $50,000) and $100,000 for goodwill (which Mr Aylward did not treat as a separate item). This gave him a figure of $925,000 for the real estate (as against Mr Aylward’s $992,484).
Mr Thomas took the value of the improvements to be $548,100, as compared to Mr Aylward’s first table figure of $352,500. Mr Thomas thought the vineyard was worth $164,750, as against Mr Aylward’s first table figure of $323,000, and the balance of the land area was worth $202,095, as against Mr Aylward’s first table figure of $238,250.
Mr Thomas assessed the true value of the property, at 23 April 2001, as $900,000; that is, only $25,000 below the portion of the purchase price that, on his analysis, should be apportioned to the real estate. However, in reaching that figure, he assumed use of the bore. In analysing the past performance of the vineyard, Mr Thomas said:
‘Based on the above in an approach to stabilise yields, Blocks A, B & C would benefit from irrigation whereas D, E & F appear a little more drought proof although irrigation would assist but would need to be considered on a cost benefit basis.
To supplement natural rainfall a dam in the position of that now constructed with additional top up from the bore may go a long way to meet the more vulnerable sections of the vineyard. While this would need to be completed having due regard to the economics of the property and a budget around $25,000 subject to a detailed quote on plant equipment and labour should go along [sic] way to provide an adequate system.’
Mr Thomas also mentioned, as one of the ‘opportunities’ of the purchase:
‘The construction of a dam and the installation of a basic irrigation system would have gone some distance in stabilising yields.’
Under cross-examination by Mr Fagan, Mr Thomas said he had based his estimates of the building values on figures taken from the 2001 edition of Rawlinson’s Australian Construction Handbook, multiplying each figure by 112.5%, to allow for the greater cost of construction in a country area than a metropolitan area, and then applying a discount of 30%. Mr Thomas said he based his percentage adjustments on his experience in the Hunter Valley. He thought there was not much evidence about prices in the Mudgee area. Mr Thomas accepted Mr Aylward’s figure of $700 per square metre for the cottage but thought his estimate of the value of the dwelling was too low. Mr Thomas did not agree that the value of the dwelling was affected by the extent or productivity of the vineyard. He said:
‘I hold a view of the property in its entirety that it’s more a lifestyle property than what you would describe as a commercial vineyard. And I think being a lifestyle property I think that whether there was five hectares, six hectares, 10 hectares, should not diminish the value of the house in the eye of a purchaser.’
Mr Thomas applied similar logic to the value of the cottage, Cellar Door and vineyard.
Mr Thomas later agreed, in response to Mr Ashhurst, that it takes expertise to apply the Rawlinson rates. He is not a builder or quantity surveyor. He did not have his calculation sheets available for inspection.
During cross-examination, Mr Ashhurst asked Mr Thomas about the references in his report to a bore. Mr Thomas agreed he had valued the property on the assumption of ability to irrigate the property from stored rainwater in a dam supplemented by water derived from the existing bore. He did not agree that, if he was wrong about that assumption, his valuation would be substantially incorrect. However, Mr Thomas did concede ‘that the provision of adequate water supply is critical to the decision of purchasing a vineyard in this area’. He also said ‘[p]rovision of irrigation would affect its potential for further development with a vineyard’.
Mr Ashhurst referred Mr Thomas to his opinion that $100,000 of the purchase price should be attributed to the value of the vineyard’s name, or ‘label’. Mr Thomas’ evidence was as follows:
‘The issue, is it not, as to the value of any name of a winery is the extent to which that name is portable? --- In some respects yes.
Well don’t you say yourself in this particular situation as the transferability of the label is limited you applied a discount in fact? --- I did apply a discount, yes.
And isn’t this the case that if you are able to take that label and sell it on the market to a number of buyers then you have an asset of some considerable value? --- That’s correct.
But where the label is not transportable, that is where it is not particularly well known apart from that particular piece of land that we are talking about, then you can really only sell it to one person and that’s the person who purchases that land? --- Or somebody within the Mudgee area.
Well people associate with small vineyards, people associate the name with the vineyard or winery itself, don’t they? --- Yes.
And with small vineyards the moment that the property is sold it is difficult to take that name and move it somewhere else isn’t it? --- That’s true.
And that’s what you talk about transportability? --- That’s correct.
And it’s fair to say, is it not, given the size of this winery, the Lawson Hill name would have had very limited transportability? --- Yes that’s correct.’
Mr Thomas agreed that, if he was incorrect about the value of the name, the proportion of the purchase price that should be attributed to the real estate would increase.
Mr Aylward also asked Mr Thomas about his ‘lifestyle’ approach. The exchange between them was as follows:
‘Do you accept that the market will pay more for a house and cottage and winery in circumstances where the sale is for a property which has the ability to irrigate the vines and therefore be a commercial venture? --- It is more attractive if it has irrigation, yes.
Without irrigation you’re likely to attract only those people who are interested in a lifestyle type purchase, with irrigation you can get both the lifestylers and those people who seek to run it as a commercial venture, correct? --- Yes.
With both groups available, then you’ve got added competition? --- Yes, you would have greater appeal, yes.
Higher demand, higher prices? --- Higher demand.
The same property, the same improvement, the same house, on a winery which can only be used for lifestylers is worth less than the same improvement on a winery that could be used for both purposes, isn’t it? --- I don’t believe that the improvements would change.
You’ve increased the demand for that property? --- Yes, but the - - -
You’ve increased the costs? --- It would show in the land.
What you’re really saying is that you agree there will be an increase in the overall package? --- But not in the improvements.
So your criticism to the extent you make it of Mr Aylward, is that he reflects it in his improvements rather than reflecting it in his bottom line? --- Yes.’
At the conclusion of cross-examination, I asked Mr Thomas to clarify his assumption about a dam. He said he did ‘assume that an option for the hypothetical purchaser would be to install a dam to use on irrigation of the vines’. The evidence went on:
‘You assumed that that would be a dam that was at least primarily dependent on natural rain fall? --- On natural catchment to be supplemented by the bore, recognising that it allegedly didn’t have the capacity that it was originally stated. In other words you could supplement the dam by topping it up from the bore, be it only had the capacity of 400 gallons an hour or whatever the case may be, and that would give you, assuming a 3.7 megalitre dam topped up, would enable you to supplement water on the existing vineyard to get it over, particularly the more elevated sections that are really more subject to dry conditions than the lower section towards dam itself.
Now did you make any calculation of the land area that’s within the catchment of a hypothetical dam? --- No I didn’t, only other than observation and having discussion with Mr Zoffman when we were on site together.
But it is possible isn’t it to delineate precisely the catchment area feeding a particular point? --- Yes it is.
And am I not right in thinking that if people want to work out this they then also look at the rain fall pattern and try and work out what is the reliable predictable rain fall, particularly in dry seasons, which is of course the only time you need to use irrigation? --- Yes, that’s correct.
Did you do any of that? --- We looked at the rain fall pattern but you know I’m not qualified as a valuer to – I made an assumption that I felt was reasonable ---
Well, I’m ---? --- Based on my own experience.
Let me be quite frank here. My question stems from the fact that I question the reasonableness of the assumption. We have heard evidence from Mr Grace who has been on this property for years that natural rainfall was just not on. When it was suggested to him that, he said, what is the point of the dam. You couldn’t top up the water from the bore with natural – you couldn’t shandy it, there was no, there simply wasn’t any relevant rain. Then you, for your valuation purposes assumed the opposite. How do I cope with that? --- With difficulty.’
(iii) Conclusions about value of the property
Mr Aylward and Mr Thomas are both experienced valuers. Both of them put considerable effort into their reports and assembled an impressive amount of material. However, I have derived far more assistance from Mr Aylward’s report and oral evidence than from the report and oral evidence of Mr Thomas. There are several reasons for this.
First, Mr Aylward has an intimate knowledge of vineyard values in the Central West of New South Wales, including the Mudgee district. By contrast, Mr Thomas has had minimal experience in the Mudgee area. In forming his opinions, he has relied to a significant extent on the Hunter Valley, where conditions may be different.
Second, I have a problem with Mr Thomas’ logic. He conceded to Mr Ashhurst that irrigation potential would make the property more attractive to the market and that attraction of commercial, as well as lifestyle, purchasers would increase demand for the property. However, he seemed to think this increased demand would not increase the property’s likely price.
Third, Mr Thomas assumed that the property could be irrigated from stored rainwater in a dam, supplemented with water from the bore. He made no assessment of the potential run-off into a dam from the natural catchment area, although it would have been possible to do this, making selected assumptions as to the likely volume and intensity of rainfall over the catchment area. As I pointed out to Mr Thomas, his assumption conflicts with the evidence of Mr Grace that natural rainfall in dry seasons would be insufficient to supplement the bore. As Mr Grace has lived and worked on the property for many years, I think his evidence on that matter is likely to be correct; consequently, Mr Thomas’ valuation is erected on a flawed foundation.

Fourth, I see no warrant for ascribing a separate value, particularly one as high as $100,000, to the value of the label. As Mr Thomas conceded, the label of a small vineyard has limited transportability. This must especially be true of a name that reflects the location of the particular vineyard. I believe the label would not be separately saleable.
Finally, and most importantly, Mr Thomas failed to address the only valuation issue with which I am concerned: the difference in value, at contract date, between a property having the characteristics represented to the applicants and the property as it really was.
I was impressed by Mr Aylward’s report and oral evidence. I have no doubt he is correct in saying that the proper square metre rate is higher for a small cottage than a large house. Further, I doubt that it is possible to gain much assistance from a handbook of construction costs. The square metre cost of a new building is often much greater than the value, assessed at a square metre rate, that the market places on an existing building.
Notwithstanding what I have just said, I formed the opinion that Mr Aylward’s square metre rate for the dwelling may be on the low side, given the recency of its erection and standard of construction. This matters to only a limited extent. Mr Aylward’s analysis apportions $992,484 of the purchase price of $1,250,000 to the property (the real estate, as distinct from the wine stock and plant and equipment). His valuation of the property at the purchase date, assuming a vineyard of 8.09 hectares and a bore yielding 8,183 litres of water per hour, is only $915,000. It follows that, in Mr Aylward’s opinion and on the basis of his valuation of the dwelling, the applicants paid $77,484 more for the property than it was worth. This is so, even on the assumptions they took into the purchase decision. To the extent that Mr Aylward has undervalued the dwelling, the applicants’ overpayment was less than that. However, in itself, this does not affect assessment of the damages recoverable by the applicants against the respondents.
As between the applicants and respondents, the dwelling value becomes important insofar (but only insofar) as it affects the gap between Mr Aylward’s first table valuation and whichever is adopted of the second and third tables. Mr Aylward has applied a discount to the last two tables, reducing the dwelling value adopted in the first table ($235,000) to $195,000. Although I generally accept Mr Aylward’s ‘package’ approach, in relation to a lower yielding vineyard, $195,000 seems too low. If I assume that $5,000 of the $40,000 discount is to be taken off the value of the garage and pergola (together $18,819), the figure of $195,000 would leave a value to the dwelling itself of only about $180,000 or $625 per square metre. Such a large discount ought not be applied to a dwelling value that is already on the low side. I would adopt a discount of only $15,000.
Subject to this comment, I see no flaw in the course taken by Mr Aylward. The proper comparison is between the first table and the second table. The latter’s assumptions (a 5.75 hectare vineyard with a bore yielding 900 litres of water per hour) correspond with the position that was discerned by the applicants after settlement of the purchase of the property and is verified by evidence in this case.
The difference between the values assessed in the first and second tables ($915,000 minus $535,000) is $380,000. I reduce this difference, by $25,000, to $355,000. I use that figure as the measure of the loss suffered by the applicants, in relation to value of the property, as a result of their reliance on the vine area representation and the bore representation.
Trading losses
As indicated, Lawson Hill Estate claims the trading losses said to have been incurred by it to 30 June 2004. Of that sum, $259,206 is attributable to the period to 30 June 2003 and $30,150 is for the twelve months from that date to 30 June 2004. The primary reason for the company’s reduced rate of loss in 2003-2004 is that, just before the commencement of that financial year, the company paid out the National Australia Bank loan, using funds provided for that purpose by the second to fifteenth applicants. The damages claims of the second to fifteenth applicants arise out of the interest burden they incurred in providing those funds.
Affidavits made by Michael Coates, a chartered accountant with personal knowledge of Lawson Hill Estate’s financial affairs, satisfy me that Lawson Hill Estate did in fact incur the claimed losses. The company’s only commercial activity was the conduct of the businesses at the property, so it is reasonable to attribute all these losses to that conduct.
Counsel for the respondents put submissions to the effect that the losses incurred by Lawson Hill Estate were exacerbated by the applicants’ manner of conducting its businesses. In particular, counsel offered criticisms about the marketing of the wine. I do not think it is necessary to burden these reasons with details of the criticisms. I am not persuaded that any of them have force. All the trading losses may reasonably be regarded as flowing from the applicants’ decisions to purchase the property.
There is, however, a significant issue as to the period for which I should allow recovery of trading losses. People who purchase assets in reliance on the misleading conduct of others are bound to take reasonable steps to mitigate their losses. Where losses stem from unprofitable trading, this duty will ordinarily entail taking action, within a reasonable time, to dispose of the asset and thereby terminate the trading losses.
The evidence in this case is that the applicants did not make a decision about disposal of the property until early 2004, two and a half years after their discovery of the inaccuracy of the bore representation and over two years since they learned the inaccuracy of the vine area representation. Even after they made a decision to sell the property, they did not energetically search for a buyer.
It was reasonable for the applicants to take time to consider the position in which they found themselves, after they discovered the falsity of the representations. Consideration of their position would reasonably involve trading for a time, in order to ascertain how the businesses were faring. Consequently, I think the applicants were entitled to delay a decision about disposal for about twelve months after their discovery of the falsity of the bore representation.
If the applicants had decided to sell the property on about 13 July 2002, at a price ($895,000) reflecting the loss of capital value ($355,000) which I will allow, they would have needed time to find a buyer. Contrary to one submission put to me, the fact that a valuer has to assume the existence of a willing, but not anxious, purchaser (and vendor) does not mean a court has also to assume, regardless of the probabilities, that a purchaser, who was willing to pay the valuation price, would in fact have been available at any particular date. The amount of time that is really likely to be required, or to have been required, for the owner to find a buyer must be a matter of judgment based on the whole of the circumstances.
The evidence suggests that sales of Mudgee vineyard properties were sluggish in 2002-03. Rainfall was poor. There may have been concern about over-supply in the wine industry. Accordingly, it is reasonable to assess damages on the basis that the applicants may have needed about twelve months, after a sale decision, to dispose of the property, even at $895,000. Accordingly, I allow the trading losses incurred by Lawson Hill Estate to 30 June 2003, but not those incurred thereafter. It follows that I do not allow the claims of the second to fifteenth applicants for the interest payments they incurred after the refinancing exercise carried out in June 2003.
I assess the damages attributable to trading losses at $259,206.
Having regard to the conclusions set out above, the applicants’ alternative claim (see [205] above) must fail.
Interest
I propose to allow pre-judgment interest at the rate of 8% per annum as follows:
(a)on the loss of capital value of the property ($355,000) from 13 July 2003 to date (approximately 17 months) – $40,233;
(b)on the trading losses ($259,206) incurred between 12 June 2001 and 30 June 2003, calculated approximately from a midpoint of 21 June 2002 (29.6 months) – $51,150.
The total amount of interest is $91,383. I add this sum to the earlier items of $355,000 and $259,206, to assess total damages at $705,589.
Disposition
Judgment should be entered in favour of Lawson Hill Estate against Tovegold, Mr O’Brien, Mr Grace and Mr Dalton, in the sum of $705,589. Orders should also be made that these respondents pay the costs incurred by Lawson Hill Estate, but excluding any costs that are solely referable to the claims of the second to fifteenth applicants.
As no damages are recoverable by the second to fifteenth applicants, their claims ought to be dismissed with costs. However, the costs should be limited to costs (if any) that the relevant respondent would not, in any event, have incurred in relation to the claim of Lawson Hill Estate.
The applicants’ and Mr Dalton’s claims against Mrs Grace should also be dismissed with costs, but limited to such costs (if any) that would not, in any event, have been incurred in relation to the conduct of the proceeding on behalf of Mr Grace.
Orders should be made on each of the cross-claims that have the effect of permitting any cross-claimant who has paid more than his or its proper share of the judgment sum, and of Lawson Hill Estate’s costs, to recover contribution from any cross-respondent who has paid less than his or its proper share. The ‘proper share’ of each respondent is the percentage of total burden set out in [197] above; viz
(i)the agent     – 10%;
(ii)Mr Grace    – 65%; and
(iii)Mr Dalton   – 25%.
There should be liberty to apply in respect of any further order necessary to achieve the contribution set out in the preceding paragraph.
There will be no costs order in respect of the cross-claims between the respondents named in [268].

I certify that the preceding two hundred and seventy (270) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.
Associate:
Dated: 10 December 2004

Counsel for the Applicants: Mr M Ashhurst

Solicitor for the Applicants: Henderson Workplace Lawyers

Counsel for the First and Second Respondents: Mr D Fagan SC, Mr B McManus

Solicitor for the First and Second Respondents: Colin Biggers & Paisley

Counsel for the Third and Fourth Respondents: Mr J Johnson

Solicitor for the Third and Fourth Respondents: Doyle Wilson

Counsel for the Fifth Respondent: Mr R Toner SC, Mr J Gruzman

Solicitor for the Fifth Respondent: Pike & Associates Solicitors

Date of Hearing: 30 August 2004 – 3 September 2004,
16 September 2004

Date of Judgment: 10 December 2004

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 1303 of 2003

BETWEEN:	LAWSON HILL ESTATE PTY LTD as trustee of the Lawson Hill Estate Trust FIRST APPLICANT PAUL HOULIHAN SECOND APPLICANT MARY HOULIHAN THIRD APPLICANT LESLEY EVANS FOURTH APPLICANT PETER ROCHFORT FIFTH APPLICANT ANTHONY FLEMING SIXTH APPLICANT MARGARET FLEMING SEVENTH APPLICANT PATRICK HOULIHAN EIGHTH APPLICANT MARIE HOULIHAN NINTH APPLICANT NOEL MAGEE TENTH APPLICANT ANNE MAGEE ELEVENTH APPLICANT RUPERT NEWTON TWELFTH APPLICANT BARBARA NEWTON THIRTEENTH APPLICANT CLIVE POOLMAN FOURTEENTH APPLICANT CREMORNE HOLDING PTY LTD FIFTEENTH APPLICANT
AND:	TOVEGOLD PTY LTD trading as O’Brien McGregor First National Real Estate as trustee for O'Brien McGregor Trust Fund FIRST RESPONDENT TIMOTHY BRUCE O'BRIEN SECOND RESPONDENT JOSE JOHN HAROLD GRACE THIRD RESPONDENT JUNE MARGARET GRACE FOURTH RESPONDENT JOHN MICHAEL DALTON FIFTH RESPONDENT
JUDGE:	WILCOX J
DATE OF ORDER:	10 DECEMBER 2004
WHERE MADE:	SYDNEY

JUDGE:	WILCOX J
DATE:	10 DECEMBER 2004
PLACE:	SYDNEY

Land
Vineyard	8.09	ha @	$40,000	/ha	$323,600
Vineyard Development Land	3.44	ha @	$7,500	/ha	$25,800
Cellar Door Sales /Homesite Value	5.00	ha @	$25,000	/ha	$125,000
Residual Timbered hill	34.98	ha @	$2,500	/ha	$87,450	$561,850
51.51
Improvements
Main Dwelling
-Main	287.89	m2
-Garage	49.33	m2
-Pergola	26.80	m2	$235,000
Cellar Door Sales Outlet	51.2	m2	$25,000
Winery	113.89	m2	$17,500
Cottage
-Main	85.83	m2
-Verandah	20.42	m2	$65,000
Site Improvements	$10,000
Summatted Value	$914,350
Round To	$915,000

Land
Vineyard	5.75	ha @	$15,000	/ha	$86,250
Vineyard Development Land	3.44	ha @	$3,750	/ha	$12,900
Cellar Door Sales/Homesite Value	5.00	ha @	$12,500	/ha	$62,500
Residual Timbered hill	37.34	ha @	$2,500	/ha	$93,300	$254,950
51.51 [sic]
Improvements
Main Dwelling
-Main
-Garage
-Pergola	$195,000
Cellar Door Sales Outlet	$10,000
Winery	$10,000
Cottage
-Main
-Verandah	$55,000
Site Improvements	$10,000
Summatted Value	$534,950
Round To	$535,000

Counsel for the Applicants:	Mr M Ashhurst
Solicitor for the Applicants:	Henderson Workplace Lawyers
Counsel for the First and Second Respondents:	Mr D Fagan SC, Mr B McManus
Solicitor for the First and Second Respondents:	Colin Biggers & Paisley
Counsel for the Third and Fourth Respondents:	Mr J Johnson
Solicitor for the Third and Fourth Respondents:	Doyle Wilson
Counsel for the Fifth Respondent:	Mr R Toner SC, Mr J Gruzman
Solicitor for the Fifth Respondent:	Pike & Associates Solicitors
Date of Hearing:	30 August 2004 – 3 September 2004, 16 September 2004
Date of Judgment:	10 December 2004