Lee, D.G. v Cafred Pty Ltd and ors

Re: DOUGLAS GEORGE LEE
And: CAFRED PTY LTD; XATON NOMINEES PTY. LTD; COLRICH FINANCE PTY. LTD.; HILDA
DAGEL and NICHOLAS PEARSON
No. Q G208 of 1987
FED No. 227
Trade Practices - Equity
(1992) 14 ATPR 41-170

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Spender J.(1)

CATCHWORDS

Trade Practices - misleading or deceptive conduct - misrepresentations by agent as to attributes of land sold and nature of documents signed by purchaser - no belief in truth of representations - damages - loss included loss of enjoyment of money paid.

Equity - contract for sale of land - mortgage - unconscionable conduct - documents containing unusual features - purchaser without independent advice - purchaser functionally illiterate - misrepresentations.

Equity - contract for sale of land - mortgage - mistake - purchaser mistaken as to purchase price - purchaser not aware that he was executing a mortgage - vendor aware of purchaser's mistake - misrepresentation as to the effect of documents.

Trade Practices - misleading or deceptive conduct - representations made with regard to sale of land contract - initial contract causally connected to contract from which loss or damage flowed - whether respondent 'knowingly concerned in' contravention - knowledge of essential facts of contravention.

Trade Practices Act 1974 ss. 52, 75B.

Sanrod Pty Ltd v. Dainford Limited (1984) 54 ALR 179

Brown v. The Jam Factory Pty Ltd (1981) 53 FLR 340

Taylor v.Johnson (1983) 151 CLR 422

Yorke v. Ross Lucas Pty Ltd (1986) 85 FLR 143

Yorke v. Ross Lucas Pty Ltd (1985) 158 CLR 661

Commercial Bank of Australia Limited v. Amadio (1983) 151 CLR 447

Blomley v. Ryan (1956) 99 CLR 362

HEARING

BRISBANE

#DATE 13:3:1992

Counsel for the applicant: Mr R. Morton Shannon,

Instructed by: Nicholson and Co.

Counsel for the respondents: Miss A. Philipedes

Instructed by: Henderson Trout

ORDER

The Court declares that:

The Bill of Mortgage Registered No. J66381 dated 6 February 1987 be void ab initio.

THE COURT ORDERS THAT:
(1) Judgment be entered for the applicant against

the first, second and fifth respondents in the sum of $45,180.00.

(2) The first, second, third and fifth

respondents pay the applicant's costs of and incidental to the proceedings, including reserved costs, to be taxed if not agreed.

(3) The provisions of O. 62 r. 36A not apply to

the costs ordered to be paid.

(4) Liberty to apply within seven days.

THE COURT DIRECTS THAT:
The moneys held in Court, together with any
accretions, be paid to the solicitors for the
applicant in partial discharge of the order for
judgment in the sum of $45,180.00.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

This is a case of fraud.

In January 1987 Cafred Pty Ltd ("Cafred") was the owner and registered proprietor of land at Dalby in the State of Queensland including Lot 3 and Lot 7 on Registered Plan Number 205405. Cafred was engaged in marketing and selling that land, including Lot 3 and Lot 7.
In January 1987 Xaton Nominees Pty Ltd ("Xaton") caused to be placed in newspapers in Sydney advertisements for the sale of the land owned by Cafred, including Lot 3 and Lot 7. One of the advertisements, which appeared on 9 January 1987 was in these terms:

"OLD FARM

630 Ac $30,764

Run down property in need of work, large dams, tree studded, partly cleared GRAZING PASTURES, FULLY FENCED, easy drive to town, in the heart of The Darling Downs.

VENDOR ASSIST with FINANCE

PHONE TODAY]

QLD FINANCE and LAND

MARKETING..."

As a result of the advertisement, Mr Douglas George Lee ("Lee") contacted Xaton on about 16 January. The fourth respondent, Ms Hilda Dagel, attended at the applicant's residence at Mt. Druitt in Sydney. She spoke principally to Lee, although it appears that a Ms Couzins and Lee's brother-in-law were also present for some parts of the conversation.
Lee says that he told Ms Dagel that he wanted to run horses, turkeys, and a few poddy calves on the property and that she had said that it was "ideal" country for those purposes and that the land had plenty of feed and water on it. He says that before the contract was signed he told her he had about 200 turkeys and 16 horses. He also says that Ms Dagel represented that the land was suitable for growing avocados as a friend of hers near the property had started growing them and was going very well. Lee says that Ms Dagel recommended he purchase the property known as "Lot 3", and that no other lot was discussed so that the conversation was directed to the attributes of that particular lot.
Ms Dagel allegedly produced certain photographs which she said were of Lot 3. Those photographs became Exhibit 6 in these proceedings and consist of ten photographs, most of which have a caption underneath which purports to state what each of the photographs are showing. Two of the photographs are said to be the boundary between Lot 1 and Lot 3; two show the boundary between Lot 3 and Lot 4; one shows a general view of the centre of Lot 3; and another is said to be a rear shot of Lot 3. What these photographs show of Lot 3 is a fairly densely wooded property. There is then another photograph which shows about 50 sheep grazing in a clearing and is captioned "SHEEP ON LOT 3", and another shows four horses near a dam in an open area. This photograph does not have a caption. The other two photographs do not purport to be of Lot 3.
None of the photographs of Lot 3 shows any fences and Lee says that he asked Ms Dagel where the fences were and that Ms Dagel had answered: "That's on the line of the fences. The fences are just going up now" and that the property would be fully fenced. Lee says that Ms Dagel told him that the land had at least one dam on it.
Lee says that his brother-in-law asked whether there was any chance of seeing the land before purchasing it, and that Ms Dagel had said that if they flew up to see the land it would be a waste of a trip because the land was selling so fast that it would be gone. Further, Lee was told that if he purchased the property sight unseen then they could drop the price to $30,000.00 as a portion of the purchase price included the cost of transporting Lee to Dalby to inspect the property.
Lee says that after discussing the above matters and looking at the photographs he decided to go ahead with the purchase of Lot 3 and he signed a contract for its purchase on that afternoon. That contract is dated 20 January 1987, although it appears that the parties have proceeded on the basis that Lee signed the contract on or around 16 January 1987. He then paid a deposit of $2,900.00 cash on the afternoon of signing, and $27,000.00 was paid a few days after. Settlement of the contract was to be on 6 February 1987. Lee understood Ms Dagel as saying that this amount included $1,000.00 in solicitors' fees "to draw up the contract" and that the solicitor was "our", that is the vendor's, solicitor.
There was a discussion about in whose name the property would be put as Ms Dagel had suggested that for taxation purposes it should be bought by Lee as trustee for his children. Lee says that he had to ring through to her the next day to give her the proper spelling of his children's names as, being illiterate, he could not give them to her on that afternoon.
The fourth respondent did not give evidence and her absence was unexplained. While in some respects Lee's version of events is erroneous, I accept him as an honest man trying to give an honest account of events to the best of his ability. There is no doubt that the representations contained in the advertisement were made and I am satisfied that representations were made by the fourth respondent concerning Lot 3, namely, that it was fully fenced, had at least one dam on it, was suitable for growing avocados, raising turkeys and the keeping of horses and that, if Lee bought Lot 3 without seeing the property, the price would be reduced to $30,000.00. I am satisfied that those representations concerning Lot 3 were false and were made by the fourth respondent without any belief in their truth.
Evidence from a licensed surveyor, Mr B. J. Booth, is that Lot 3 is fenced on the western boundary only and that there is no fencing on the northern, eastern or southern boundaries and there are no dams on it. He stated:
"It would take quite a lot of diligent
searching to find the boundaries of Lot 3 and Lot 7."
I accept that the quality of Lots 3 and 7 is as described in a report by Stephen Davis, a registered valuer.
Lee travelled with his de facto spouse, Ms Kerri Couzins, and his four children to Dalby. He arranged for a number of horses and dogs to be transported to Dalby. After his arrival, he could not locate the land at first but, with the aid of local police, he eventually found Lot 3. He was unhappy with the property. It had no fences or dams and was very heavily timbered. After inspecting the property, he contacted a solicitor from Messrs Michael Quinn and Company, a Brisbane firm of solicitors who had performed the conveyance of Lot 3. Lee says that he complained "the land was no good" and he wanted out. "I wanted my money back." He says he told the solicitors specifically why he was not happy with the land, namely, "that it was heavily timbered, no water, no dams, no fences". Lee says that after complaining about the land, he threatened to go to the Willesee program and the solicitor then told him that he could not get out of the contract, that there was nothing he could do about it.
There is a diary note made by a solicitor, Mr Ryan, of Michael Quinn and Company dated 2 February which states:

"Mr Lee rang not proceeding as land is valueless he claims. I tried to explain his contractual position but he said he was going to Mike Willissee (sic) and rang off. "

On the same page and immediately under that diary note is a further diary note dated 2 February:

"Raised matter with P. Sissons. Lee alleges no fences. "

Mr Sissons is associated with the second respondent.

Lee says he then phoned Queensland Land and Finance and, after again complaining bitterly that he was not happy with the land, was told that somebody would be sent out to talk to him about it.
The fifth respondent, Mr Pearson ("Pearson"), visited Lee in Dalby and had various dealings with him. There are significant differences between Pearson's version and Lee's version of what occurred in early February 1987.
Lee's account is that he first met Pearson on 5 February, which was the day before a contract for Lot 7 was signed. The meeting occurred at his sister-in-law's house in Dalby at about noon and later Lee, Pearson and Lee's brother-in-law, Mr Bernie Couzins, drove in Pearson's car to look for the dam on Lot 3. Lee says that they drove over the property but could not find the dam and on the way back Lee asked Pearson about other lots. According to Lee, Pearson made a call at Dalby but did not say anything to Lee about it and left saying he would return the next day. Lee says that Pearson returned on the following day, 6 February, at about 10 or 11 o'clock and they went to look at Lot 7. Pearson told him that Lot 7 was fenced and had dams. According to Lee they were unable to inspect Lot 7. In his first version he said the reason was because it was raining pretty heavily but later he said that that account was wrong and the position was that there were storm clouds threatening and they left for that reason and the rain did not start until they had got to Kogan.
Lee says that as they headed back to Dalby there was a discussion concerning swapping Lot 3 for Lot 7. While driving back Pearson handed Lee some documents. Lee said he could not read. Pearson asked Lee if he knew where a Justice of the Peace was and was told that there was a Justice of the Peace at the chemist and that Lee signed some documents there. According to Lee, Pearson did not say Lot 7 was $8,000.00 dearer nor tell him that he was executing the mortgage. Lee says that he later found out there were no fences and dams on Lot 7. He received a letter from Queensland Land and Finance. He dictated a letter to his spouse which was forwarded to Colrich Finance Pty Ltd, the mortgagee in respect of Lot 7. The letter, uncorrected, is reproduced:

" To Whome It May Consern.

I wasn't shore how to fill in the form you sent me. I sined and filled it out to the best of my nologe. Because I still owe eight thousand dollars on it I thought I would be better to put it back on the market because only being on unimployment benifits I just can't find the money to pay for it. I would like to get $39,500.00 dollars for it if possable. that is for Lot 7. there is 260.4 ha. thanking you very much for your interest. If you need any more information I will send it to you If I can.

(Sgd.) D G L "

On 16 February a notification of change of ownership in respect of Lot 7 was received by the Chinchilla Shire Council from Michael Quinn and Company and on the following day the Council received a notification of change of ownership from Cafred. The one received from Michael Quinn and Company showed the address of the purchaser as 66 Patrick Street, Dalby Qld. 4405.
Rates were not paid in respect of Lot 7 and in November 1990 and in June 1991 a notice of sale in respect of unpaid rates of $703.53 was sent to Douglas George Lee as trustee for Rebecca Louise Lee, Lucrecia Rosie Lee, Patricia Ann Lee and Sandra Maree Lee at an address of 56 Patrick Street, Dalby. Not surprisingly, given the incorrect address, those envelopes were returned unclaimed. Mr Edward William Hoffman, the Deputy Shire Clerk of the Chinchilla Shire Council says that he became aware that Colrich Finance Pty Ltd held a registered mortgage over Lot 7 and he says he forwarded a further copy of the notice of sale sent by prepaid post to Colrich Finance Pty Ltd at 30th Floor, M.L.C. Centre, 239 George Street, Brisbane, on the same occasion as letters had been sent to Lee. Neither envelope sent to Colrich Finance Pty Ltd was returned unclaimed to the Council.
On 5 July 1991 Lot 7 was sold by the Chinchilla Shire Council for arrears of rates at a price of $20,100.00. The net amount after payment of outstanding land taxes and expenses of sale amounts to $18,493.98. That sum has been placed in an interest bearing account since 9 November 1991.
Pearson's account of the events of early February 1987 is significantly different from the account of Lee. Pearson describes himself as a lister with the Q.F.L. group of companies, which occupation entails mainly searching out development properties for the company to develop and put on the market for sale. He is not a real estate agent. Pearson says he was told by Queensland Land and Finance that Lee was unhappy with Lot 3 because he could not find any dams on the property. On his account he visited Lee on 4 February at about 9.00 a.m. at Dalby and he went with Lee to Lee's friend's house and Pearson, Lee, Lee's friend and their sons went with Pearson to look for a dam on Lot 3. According to Pearson, on the way out to the property Lee said he had been over the estate and could not find a dam on Lot 3. Pearson says that they were unable to find a dam on Lot 3 and headed back. Pearson says that on the way he asked "What about one of the other blocks?" and Lee mentioned Lot 7. According to Pearson, Lee said that he thought Lot 7 was the best block of the lot because it had more clearing on it. Pearson said that in response to that observation:
" I indicated to him that, as I understood
it, I had been told, he had signed a cash
unconditional contract, so he was committed, so maybe
he could transfer his funds across to lot 7. "
Pearson said that he made a reverse charges call from Kogan from a public telephone booth outside the post office and spoke to Mr Ron Morrison ("Morrison") and made enquiries about the availability of Lot 7 and its price. He said that he had to wait a little while. He then rang back a short time later and was told that the lot was available and there was a price difference of approximately $8,000.00. He says that after those two telephone calls they went back to the property and, according to Pearson, spent a lot of time going over Lot 7. They saw the dam on Lot 8, walked the watercourse south from Lot 8 into Lot 7 and there was a conversation concerning a good dam site. He then said he tore the speedo cable of his car while driving on the estate. They then left for Dalby and went to Lee's friend's house where Pearson made another reverse charges call to Morrison. Pearson said that he enquired as to how much the finance would be monthly and that Lee indicated he was happy with Lot 7 and wished to transfer to it. Pearson says he asked Morrison to prepare the documents. He says that on the following day he picked up an envelope containing documents in Brisbane. He says:
" There was an envelope there with some
documents which explained to me what had to be fixed
up. "
He says he went out again to Lee on 6 February, leaving at approximately 10 o'clock. He went to Lee's friend's house where he showed the documents to Lee. He says he put them on the kitchen table and explained them, the contract was signed by Lee and witnessed by Pearson. Lee also signed the application for finance documents. Because the mortgage needed witnessing by a Justice of the Peace, this was done at the chemist. He says that after the documents were signed he made a reverse charges call to Morrison from a public telephone booth outside the post office in Dalby to let Morrison know he was on his way back.
Morrison gave evidence that on or about 4 February he received a reverse charges telephone call during the morning about prices and finance for Lot 7 and that he received a reverse charges call later that afternoon as a result of which he started preparing the contract for Lot 7 and finance for $8,000.00. He says that he received another reverse charges call on or about 6 February about midday when Pearson said all the documents had been signed.
I do not accept Pearson as a truthful witness.
A record from Telecom Business Services of national operator assisted calls to Xaton Nominees Pty Ltd shows that there were three phone calls from Dalby on 4 February to that company, the first of them from a public telephone booth at 10.16 a.m. and the second from the same public telephone booth at 10.50 a.m. and the third at 4.34 p.m, not from a public telephone booth. There is a record on 6 February at 12.15 p.m. from a public telephone booth in Dalby. Accepting that the first two telephone calls were the calls to Morrison concerning prices and finance for Lot 7, it cannot be that those conversations occurred after Pearson had driven with Lee to search for a dam on Lot 3. The estate is approximately 84 kms from Dalby over bitumen and earth roads. Pearson says he arrived at Dalby at around 9 o'clock, so it would not be possible to drive to the estate, inspect Lot 3, and drive back to Dalby in time to make the telephone calls which are recorded as occurring before 10.50 a.m. on the 4th. In my opinion Pearson was engaged in very serious damage control, particularly in the light of threats to complain on television and I am satisfied that events of 4-6 February did not occur as he claims. I am also sure that Lee's account is unreliable in a number of respects. I am satisfied that the first visit to the property was on 4 February and that Pearson returned with documents for signature on 6 February.
Pearson admitted that two of his sworn answers to interrogatories were incorrect. He swore that prior to the inspection with Lee, he had a discussion with him by telephone on 4 February in order to arrange a meeting to facilitate the inspection of Lot 3. This he says now is false. He also said in answer to an interrogatory "that Lot 7 did have water on it, and to the best of my knowledge the water situated in it as (sic) located in a dam and partially in a watercourse".

Apart from the confusion as to days on which events occurred I prefer Lee's version of events to that of Pearson's. I do this paying full regard to the evidence of Pearson, Lee and Justine Bond, concerning conversations which occurred outside the courtroom after Pearson had given his evidence.
I am satisfied that Pearson went to Dalby because of the serious complaints that Lee had made and that he was aware that Lee had threatened to go to the media. I am satisfied that he told Lee that Lee could not get his money back, and I am satisfied that there was a conversation in the vehicle to the effect of Lee's evidence where he said:

" `I did not see a fence.' and he said 'Neither did I' and I said `Well, what's a man got to do?' And I said `It looks like I am going to lose out here?' And he said `The only way you are going to get anything out of it is to take lot 7. "

I am satisfied that he asked Pearson whether Lot 7 was fully fenced and had dams and that Pearson replied "Yes. If it is advertised that way, it would be." Lee says that after that answer he asked "Well, how come lot 3 was advertised that way?" and Pearson replied "That's exceptional. That is run by the Sydney mob."
It seems improbable that a man complaining about the absence of dams and fences on Lot 3 would describe Lot 7 as the best of the lot. This is particularly so if, as Pearson says, Lee told him he had looked over the whole estate and had found other land with dams on it. It seems incredible that, if Lee was aware that there were no dams or fences on Lot 7, he would agree to pay $8,000.00 more for it, that lot suffering from precisely the deficiencies which led to his bitter complaints concerning Lot 3. I am satisfied that there was no inspection of Lot 7, or any mention of an increased price for Lot 7, or any mention of a mortgage. I am satisfied that Lee was informed by Pearson that "they looked like transferring from lot 3 to lot 7", and that when Lee asked Pearson whether the price would rise or be less, Pearson said "No. this is a clean swap. It is a swap over." I believe Lee when he said that Pearson told him that Lot 7 was fully fenced and had dams. Having seen both Pearson and Lee, I am satisfied that, contrary to his assertion, it was obvious to Pearson that Lee was uneducated, quite unsophisticated and wholly inexperienced in business matters.
It is admitted that the second respondent is the agent of the first respondent and the fourth and fifth respondents were employees and agents of the second respondent. I am satisfied also that Pearson was Colrich's agent for the purpose of having the mortgage executed. I am satisfied that the conduct of Pearson was misleading and deceptive as alleged in the statement of claim and that conduct in contravention of s. 52 of the Trade Practices Act 1974 ("the Act") has been established against the first, second and third respondents, it being admitted that they are corporations and that the conduct was in trade or commerce.
The fifth respondent is a party knowingly concerned in that contravention of s. 52.
The conduct of the fourth respondent in respect of Lot 3 was conduct on behalf of the first and second respondents and was misleading and deceptive. It was submitted on behalf of the respondents that the Lot 7 sale was distinct from the Lot 3 sale and that, once Lee discovered that the representations concerning Lot 3 were false, he did not proceed with the sale of Lot 3. In the view I take of the matter, the events have to be looked at in their entirety, particularly in the light of Lee's evidence that he was told by Pearson:
" The only way you are going to get
anything out of it is to take Lot 7."
and the statement by Pearson in evidence that:
" He was not happy with Lot 3. I indicated

to him that, as I understood it, I had been told, he had signed a cash unconditional contract so he was committed so maybe he could transfer his funds across to Lot 7. "

Notwithstanding that the misrepresentations by the fourth respondent induced Lee to enter into a contract to purchase Lot 3 and that the entry into the contract for Lot 3 is connected in a causal way with the purchase by Lee of Lot 7, I am unable to conclude that the fourth respondent is a person who has "been in any way, directly or indirectly, knowingly concerned in, or party to, the contravention" of the Act in respect of which Mr Lee has suffered loss or damage, within the terms of s. 75B(c) of the Act. Any loss or damage flows from the acquisition of Lot 7. In my opinion, the fourth respondent is not by virtue of the provisions of s. 75B a person involved in that contravention.
In Yorke v. Ross Lucas Pty Ltd (1983) 68 FLR 268, Fisher J. at first instance said at 272:
" In my opinion the authorities establish

that it must be proved that Mr Lucas was aware or should have been aware of the relevant facts before he can be said to have been involved in the contravention. "

In the Full Court of the Federal Court (Bowen C.J., Lockhart and Beaumont JJ.) (1985) 80 FLR 143, the Court said at 152:
" The phrase 'knowingly concerned in' (s

75B(c)) plainly requires a mental element, namely, knowledge of the relevant facts: see Mallan v Lee

(1949) 80 CLR 198 at 211. "

And later:

" The words 'party to the contravention' necessarily connote, in our view, that a person assents to or concurs in the conduct which constitutes the contravention. He must therefore know or be aware of the essential facts or matters which must be proved to establish the contravention. "

And the court said at 153:

" In our opinion, the words 'party to the contravention' refer to a person who participates in, or assents to the contravention in question. To be regarded as participating in or assenting, such a person must actually or constructively be aware of the elements constituting the contravention. To our minds, it is not sufficient to render an individual liable if he is shown to be aware of some only of those elements. Where the contravention in question relates to engaging in trade or commerce in conduct that is misleading, one of the elements involved is that the conduct is misleading. If a person sued under s 82 for damages as a person involved in the contravention is unaware of the essential facts and matters constituting the contravention, then he lacks knowledge of an essential element of the contravention. He cannot, in our view, in those circumstances, be regarded as a party to the contravention (cf Guthrie v. Doyle Dane and Bernbach Pty Ltd (1977) 30 FLR 116 at 119-120, but see Taperell, Vermeesch and Harland Trade Practices and Consumer Protection (2nd ed), p 604). "

In the High Court (1985) 158 CLR 661, Mason A.C.J., Wilson, Deane and Dawson JJ. said at 670:
" There can be no question that a person

cannot be knowingly concerned in a contravention unless he has knowledge of the essential facts constituting the contravention. "

And later:

" In our view, the proper construction of

par. (c) requires a party to a contravention to be an intentional participant, the necessary intent being based upon knowledge of the essential elements of the contravention. "

There is no evidence to suggest that the fourth respondent was aware in any way of the matters touching the purchase of Lot 7. It follows in my opinion that the fourth respondent is not a person involved in the contravention of the Act which caused loss or damage to Lee.
On the facts as found I am also satisfied that relief should be granted on the ground of unconscionable conduct in respect of the purchase of Lot 7. In The Commercial Bank of Australia Limited v. Amadio (1983) 151 CLR 447 at 461, Mason J. said:
" Relief on the ground of unconscionable

conduct will be granted when unconscientious advantage is taken of an

innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgment as to what is in his best interest. "

In Blomley v. Ryan (1956) 99 CLR 362 at 405 Fullagar J. said:
" The circumstances adversely affecting a party, which may induce a

court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other. "

And Kitto J. said at 415:

" ...whenever one party to a transaction is at a special

disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands. "

On 6 February 1987 Lee could not repay anything. He had no income and was unlikely to have any for some time. The documents which Pearson caused Lee to sign that day have a number of very curious features: the contract is one subject to finance on the same day as it is entered into; there was approval of finance by a lender which in effect is a company controlled by the same people as the vendor; there was approval of finance by Colrich before the contract was signed; there was an approval of finance without any application or investigation of finances; a bill of mortgage was signed forthwith and the lender paid the stamp duty and costs of the mortgage and the vendor paid not only the extra outlays on the contract but also the balance of fees owing to the solicitor who, nominally in any event, was acting for the purchaser. The initial payment of $29,900.00 was as a consequence of the clear misrepresentations by Ms Dagel.
Lee made it plain to Pearson and to Ryan that he wanted to get his money back. I find that he was told by each of them that the contract was an unconditional cash contract and he was therefore unable to get his money back. Pearson knew that Lee had a solicitor who was purporting to act for him yet had Lee sign documentation without there being any reference to that solicitor for any independent advice.
I am satisfied that both Pearson and Morrison were aware that, if Lee obtained truly independent competent advice, he would be able to avoid the contract for Lot 3. For practical purposes Lee is illiterate. As at 4 and 6 February 1987 he was in a cruel predicament: he had spent nearly $30,000.00 on land that was worthless for any practical purpose he had in mind. He was persuaded by Pearson to the wrong belief that he had no prospect of recovery of his money and that his only alternative was to take Lot 7. Lee was deceived as to the attributes of Lot 7 by Pearson and the circumstances under which the document came to be executed were such that, in my opinion, Lee was unable to make a worthwhile judgment as to what was in his best interest.
I am satisfied that the execution of those documents occurred when Lee was under a serious mistake about the contents and nature of those documents. I am satisfied that he was not aware that he was executing a mortgage or accepting a loan. His belief was that the purchase price was no more than he had already paid for Lot 3 and that the documentation that he signed was that which was merely necessary to effect a "swap" of Lot 7 for Lot 3.
In Taylor v. Johnson (1983) 151 CLR 422, Mason A.C.J., Murphy and Deane JJ. said at 432:
" ...a party who has entered into a written

contract under a serious mistake about its contents in relation to a fundamental term will be entitled in equity to an order rescinding the contract if the other party is aware that circumstances exist which indicate that the first party is entering the contract under some serious mistake or misapprehension about either the content or subject matter of that term and deliberately sets out to ensure that the first party does not become aware of the existence of his mistake or misapprehension. "

On this basis also the transaction should be set aside in equity.
As to the measure of damages to which the applicant is entitled, Fox J. in Brown v. The Jam Factory Pty Ltd (1981) 53 FLR 340 at 351 said:
" The correct way to approach the

assessment of damages in this case in my view is to compare the position in which the applicants might have been expected to be if the misleading conduct had not occurred with the situation they were in as a result of acting in reliance on that conduct (see Esso Petroleum Co. Ltd v. Mardon (1976) 1 QB 801). This is the same, or analogous to, the general principle respecting the measure of damages in tort. There was not anything promissory in the statements relied upon, and no basis exists for adopting the measure of damages applicable in contract. As an action based on s. 52 is more appropriately classified as one of tort, it is possible that the measure of damages will always, fundamentally, be based on principles affecting torts. "

In this case Lee has paid $29,900.00 in respect of a block of land which, through no fault of his, he no longer has. Whether a further amount of $241.29 referred to in a letter of 5 February 1987 from Michael Quinn and Company has been paid is not clear from the evidence.
It seems to me that where money is paid as a consequence of misleading conduct, the loss suffered by that conduct includes not only the money paid but also the loss from the use of that money.
In Sanrod Pty Ltd v. Dainford Limited (1984) 54 ALR 179, Fitzgerald J. said at 191:
" I can myself perceive no difficulty in

accepting that, when money is paid in consequence of misleading conduct, the loss suffered by that conduct includes not only the money paid but also the cost of borrowing that money or the loss from its investment, as the case may be: cf Frith v. Gold Coast Mineral Springs Pty Ltd (1983) ATPR 40-339; affirmed (1983) ATPR 40-394; 47 ALR 547. Interest awarded as a component of damages in such circumstances is not for loss of the use of the money awarded as damages, but for loss of the use of the money paid over in consequence of the misleading conduct and is directly related to the misleading conduct. "

Lee has lost not only the purchase price but the enjoyment of that which was represented to him and in my opinion interest on the sum of $29,900.00 should be paid from 1 February 1987. Having regard to Lee's intention in respect of the purchase of land, it seems to me that the rate of interest to be adopted should be conservative. I propose to allow interest on the sum of $29,900.00 from 1 February 1987 to judgment at ten percent, which, with some rounding off, amounts to $15,280.00.
The moneys held in Court which represent the net realisation of the sale of Lot 7 have been accumulating some interest. I propose to give judgment for the applicant against the first, second and fifth respondents in the sum of $45,180.00. I direct that the moneys held by the Court, together with any accretions, be paid to the solicitors for the applicant in partial discharge of the order for judgment in the sum of $45,180.00.
So far as the third respondent is concerned I think it right, notwithstanding the sale of Lot 7 for arrears of rates, to make a declaration that the bill of mortgage registered number J66381 given by the applicant in favour of the third respondent and dated 6 February 1987 be void ab initio.
For the reasons earlier indicated, I make no order against the fourth respondent.
I order that the first, second, third and fifth respondents pay the applicant's costs of and incidental to these proceedings including reserved costs, to be taxed if not agreed. I further order that the provisions of O. 62 r. 36A not be applied in taxation of the costs hereby ordered. I grant liberty to apply.

[1992] FCA 227

13 MARCH 1992