Luxford v Sidhu and 3 Ors

[2007] NSWSC 1356

Reported Decision: (2008) NSW Conv R 56-203

New South Wales

Supreme Court

CITATION:	LUXFORD & ANOR v SIDHU & 3 ORS [2007] NSWSC 1356
HEARING DATE(S):	12-15/11/2007
JUDGMENT DATE :	3 December 2007
JURISDICTION:	EQUITY
JUDGMENT OF:	Bryson AJ at 1
CATCHWORDS:	VENDOR AND PURCHASER - vendors sue for damages and for deposit after purchaser fails to complete - purchaser's failure to complete arose from (1) discovery after exchange of SEPP53 providing for likely medium-density development of neighbouring property (but not of property sold) (2) discovery that agent misrepresented existence of rival purchaser and called for immediate exchange - purchaser cross-claims damages for fraudulent misrepresentation by agent about interest of supposed other prospective purchaser factual disputes between vendor and agent about responsibility for misrepresentation - on valuation evidence the property's value was equal to the sale price, hence no damages, cross-claimed failed and damages awarded to vendors for failure to complete - vendors' alternate claim against agent, purchaser's claim against her solicitor also dismissed.
LEGISLATION CITED:	Conveyancing Act 1919 Local Government Act
PARTIES:	Colin Robert Luxford and Ann Mary Luxford - Plaintiffs Evelyn Perpetual Sidhu - First Defendant PA & NA Johnson Pty Ltd - Second Defendant Johnson Prestige Realty Pty Ltd - Third Defendant David Michael Johnson - Fourth Defendant Peter Michael McBride and Anna Maria Bernadette Marano - Cross Defendants
FILE NUMBER(S):	SC 6058/2005
COUNSEL:	G.C. Lindsay SC and G. Lucarelli - Plaintiff D.E. Grieve QC and T. Lynch - First Defendant R. Sheldon - Second, Third and Fourth Defendants I.R. Pike - Cross-defendants
SOLICITORS:	MWA Lawyers Pty Ltd - Plaintiffs Blessington Judd - First Defendant TressCox Lawyers - Second, Third and Fourth Defendants Turtons Lawyers - Cross-defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON AJ

MONDAY 3 DECEMBER 2007

6058/05 LUXFORD & ANOR v E.P. SIDHU & 3 ORS

JUDGMENT

1 BRYSON AJ: This litigation arises out of a contract dated 2 May 2005 for the sale of the house property 10B Beechworth Rd Pymble. The land is Lot 111 Deposited Plan 778592 and is connected to Beechworth Road by a battleaxe strip which gives it its only street frontage. The plaintiffs Mr and Mrs Luxford were the vendors and the first defendant Mrs Sidhu was the purchaser. The contract price was $2,130,000 and a deposit of $106,500 was paid. The contract provided for completion on 25 July 2005; it was not completed and Mrs Sidhu did not comply with notice to complete served on 27 July 2005 requiring completion on 10 August 2005. On 11 August 2005 the Luxfords terminated the contract in accordance with its provisions. Soon after that the Luxfords caused Mrs Sidhu’s caveat to lapse. They resold the property to purchasers who are not involved in this litigation by a contract dated 2 November 2005 for $1,815,000; that contract was completed on 14 December 2005.

2 The Luxfords claimed against Mrs Sidhu damages of $421,845 for breach of her contractual obligation to complete the contract. There are other claims including a claim for interest. There was no debate before me about the quantum of damages; I understand the calculation is not contentious and I will leave it until I have published this decision. The Luxfords also claimed orders relating to the deposit.

3 Mrs Sidhu's substantial answer to the Luxfords’ claim is in her first cross-claim. She claims damages against the Luxfords based on allegations that she was induced to enter into the contract by a misrepresentation made to her husband Dr Sidhu by Mr Johnson an estate agent, on behalf of the Luxfords’ selling agent, LJ Hooker Pymble, on 2 May 2005, the date of exchange of contracts. The misrepresentation alleged was (para 9) “… that the Luxfords had received from another prospective buyer an offer to buy the property for a price that was higher than $2,130,000 but that it would be possible to forestall the sale of the property to that buyer if on that day [Mrs Sidhu] were to exchange contracts to purchase the property …". She alleged that on 2 May and for the foreseeable future the property was worth much less than $2,130,000. She claimed damages for Deceit against the Luxfords. So her substantial answer to the claim is that the damages she should recover are at least equal to any damages which the Luxfords should recover.

4 There is no doubt that Mr Johnson made a representation to Dr Sidhu on 2 May that the Luxfords had received an offer from another prospective buyer to buy the property for $2,130,000 or a higher price, and no doubt that this was not true. There was no other prospective buyer who had made an offer at a higher price: there was no other current offer at all. It is not enough to show a cause of action for Deceit under the Common Law to establish that the representation was made and that it was false; in one alternative it is necessary to show that Mr Johnson knew that it was false, or made it recklessly with indifference to whether or not it was false. In an alternative the tort of Deceit is established against Mr Luxford if Mr Luxford authorised Mr Johnson to make the false representation and Mr Luxford knew it was false or was reckless in making it and intended that Dr Sidhu and Mrs Sidhu should act on it. In another alternative both are liable because Mr Luxford is bound by conduct of Mr Johnson within the limits of his agency. Mrs Sidhu found out the facts which she claims show that the purchase was unsatisfactory on 19 May 2005 when she learnt some information about the property set out in a valuation obtained by National Australia Bank, in connection with an application for finance. At about the same time (and it is not clear when) Dr Sidhu found out, and told her, that what Mr Johnson had told Dr Sidhu on 2 May 2005 about another prospective buyer was not true.

5 Mrs Sidhu did not rescind the contract, as she would have been entitled to do if she had been induced to enter into it by fraud. Quite otherwise, she affirmed the contract, by statements made that she was not going to cancel it and other affirming conduct, most strikingly by lodging a caveat in June 2005 claiming an interest in the land, supported by a statutory declaration made by her on 11 June 2005. Her claim against the Luxfords for damages depends upon its being shown that the house property was not worth $2,130,000 when she agreed to buy it, but was worth less; this allegation is made in terms in her Amended Statement of Cross-claim, and is basal to her cause of action, as proof of damage is a necessary element. (It may be that the relevant time is the time at which the contract obliged her to pay the price and take title, on 25 July 2005; on the facts before me this is not important).

6 The only valuation by a qualified valuer which is in evidence is Exhibit 1 - a valuation dated 16 May 2005 by Mr Valuer Rory Gray of Advanced Valuation Pty Ltd prepared for National Australia Bank Ltd. The valuation refers in its terms to the sale now in question, gives its date and price and says that settlement is pending. The valuation also refers to some dealings between National Australia Bank and Dr Sidhu and was obviously prepared in contemplation that the bank would finance the purchase. Mr Gray's valuation states that on 16 May the fee simple vacant possession of the property had a market value of $2,130,000, apportioned $1,200,000 for the land and $930,000 for the improvements.

7 Observations by counsel adverse to my relying on this related principally to two aspects of Mr Gray's valuation. One was his risk analysis. The form used by Mr Gray required him to adopt a rating 1 to 5 for various aspects of risks associated with the property; (3) means medium, (4) means medium to high, and (5) means high. He adopted risk ratings of 4 for "Location and neighbourhood", 3 for "environmental issues", 5 for "reduced value next 2/3 yrs; and 3 for "market volatility".

8 Among Mr Gray's additional comments on page 3 of Exhibit 1 is the following:

COMMENTS RE REDUCED VALUE, LOCATION AND NEIGHBOURHOOD: The value of the subject is held that due to the large and medium density development site directly to the rear. This is a State government controlled site and accordingly high rise unit development is intended in the future, with the Minister for Planning and not Council being the consent authority. The conceptual plans show a 3 to 5 storey unit block a minimum of 5 metres from the subject site’s rear boundary – vide attached planning NSW drawings. We caution that the subject property’s future value will be diminished, but to what extent is depending on the final design and impact of medium density development to rear, however as building has yet to commence on the site and plans still in the design stage, it is difficult to judge the overall effect on value/future value at this juncture, however future resale could prove difficult and value could decrease significantly,
The purchase price of $2,130,000 would appear to reflect in part the above, being about a $200,000 discount to the unaffected value, but is still considered slightly bullish in view of the adjoining intended development. Our valuation is subject to the exchange of contracts being an arms length transaction with no special conditions attached which could impact on price.

9 On a whole view and notwithstanding his speaking of the purchase price as "slightly bullish in view of the adjoining intended development", Mr Gray's valuation means that in his opinion the property was worth $2,130,000 on 16 May 2005. It also means that the value it would have if unaffected by State Government controls would have been $2,330,000.

10 Mrs Sidhu's counsel contended that I should have regard to the price on resale by the Luxfords in November 2005 when the property was sold for $1,815,000. There is no expert evidence showing what influence this later sale should have on valuation of the property as of 2 May 2005. The later sale is six months removed from the relevant date and there has been no expert consideration of any events or circumstances which might have influenced the value during the interval. I am not in a position to come to a valuing conclusion myself without such evidence.

11 In my opinion the evidence requires me to find that at the time Mrs Sidhu agreed to purchase the house property it was worth the amount she agreed to pay for it; no other finding is reasonably available. This means that she did not suffer any loss whether or not a fraudulent misrepresentation caused her to buy the house. Any other items in her damages claim would be consequential on the proposition that she incurred loss by agreeing to buy the house. Whatever else may be established in respect of her claim for damages for Deceit against the Luxfords, it cannot in my opinion be established that she suffered any damages. For this reason Mrs Sidhu is not entitled to succeed against the Luxfords. The Luxfords are entitled to recover damages for breach of contract. Everything else in these reasons is of less importance. Other complex issues took up much more of the hearing, extending over four days. I will deal with them, but they do not decide the case.

12 As the contract was not rescinded there are no grounds upon which the contractual provisions relating to entitlement to the deposit should not be given effect: the Luxfords are entitled to the deposit. The Luxfords are also entitled to interest in accordance with the contract.

13 State Environmental Planning Policy No. 53 – Metropolitan Residential Development (SEPP 53) commenced on 26 September 1997 and impacts on town planning law by enhancing town planning powers conferred on the Executive Government of the State for the stated object of promoting more compact cities. With exceptions and qualifications, SEPP 53 applied to Ku-Ring-Gai Local Government Area. By cl 4 and Schd 1 the Policy applies in Ku-Ring-Gai, and some specific provisions deal with other local government areas. Part 4 is headed Targeted sites for multi unit housing. An objective stated in cl 22 is "to provide an opportunity to stimulate redevelopment of specific sites and localities that are suitable for multi unit housing …" Part 4 applies only to land identified in Schd 4; and Schd 4 para 1(1) specifies six sites, all in Ku-Ring-Gai Local Government Area, and one of them includes land adjoining the land on which 10B Beechworth Avenue stands. This is Site 2 described as: “(b) site 2 – the land comprising Nos 1A, 1, 5 and 7 Avon Road, No 1 Arilla Road, No 12 Mayfield Avenue and Nos 2-8 Beechworth Road, Pymble (being the land shown edged heavy black on Sheet 3 of the Ku-ring-gai Reference Plan),” The reference to Site 2 was introduced by Amendment No. 7 to SEPP 53.

14 Lot 111 DP 778592 is a small part of a suburban block bounded by Beechworth Road, Mayfield Avenue, Arilla Road, Avon Road, Pymble and the North Shore Railway. The rear or north-eastern boundary of Lot 111 has a common boundary with site 2. Site 2 is an irregularly shaped part of this block. Its shape is so irregular as to dispel comparison with a salamander or recollections of Governor Eldbridge Gerry. Amendment No 7 and its plans speak in planning concepts, not detailed town planning. Development in detail will be defined by decisions yet to be made on Development Applications which are yet to be made. However it is plain that when and if development is carried out there will be very large changes in the local environment, with potentially a large increase in housing density, traffic movement, bulk and location of buildings and impact on outlook and views.

15 Site 2 lies between Beechworth Road and Avon Road, Pymble, bounded on the north-east by the North Shore Railway, and there are nine sites referred to as building envelopes which in concept may be developed for multiunit housing, in accordance with further planning decisions which have not yet been made. None of the contemplated development has taken place but it must be seen as probable that at some time development will take place. One of the building envelopes shown is situated to the North East of the rear line of Lot 111, and the building envelope is shown as set back a minimum of 5 m from the rear line and as having 3, 4, 5, 6 and 7 storeys above natural ground level at different places. Mrs Sidhu's apprehension, which she spelt out in her evidence, is that this development when it takes place will very adversely affect the amenity of the house property; and also its value.

16 Dr Sidhu says (Affidavit 24):

24. On 19 May 2005 I spoke to Melissa Harvey at Medford and/National Australia Bank (Private bank) who said:
The valuer has come back with the valuation at $1.7-$1.8 million because of the zoning – SEPP53 - a large medium density development of 300 units is intended to be built about 5m from the back fence. We think the future value of the property will decrease significantly and any resale could prove difficult because of this development. Do not buy this house.
As I had not perused the Contract, I had not known of any reference in the Contract to SEPP 53 although I am now aware that there was such a reference to the s149 Certificate that had been at next to the contract document. Until 19 May 2005 had no knowledge of SEPP 53 or its ramifications.

17 What Dr Sidhu was told caused him concern; until 19 May he had not known anything about SEPP 53 nor of its effect. What he was told was not a correct account of what the valuation said; it did not put the value of the property at $1.7m or $1.8m. It does refer to SEPP 53 and development which could be carried out under it, with observations about the value of the property in the future. Dr Sidhu told Mrs Sidhu of this conversation. He says:

[Mrs Sidhu] later showed me some material she had obtained from the Internet regarding SEPP 53. I was appalled to find out about the development and the impact it would have on our use of the property - particularly the lack of privacy we would have and the impairment to the quietness and sense of security of the neighbourhood. I was extremely distressed at the fact that we have not been told about this before. Had I known of this earlier I would not have agreed to Evelyn proceeding with the purchase.

18 Within a few minutes Mrs Sidhu obtained from an Internet search some pages which appear to relate to a draft for Amendment No. 7 which was exposed for objections in 2002 and 2003. Amendment No.7 was gazetted on 9 May 2003; that is, it had taken effect about two years earlier than her enquiry. The documents which she obtained illustrate what was then then proposed and give an understanding of what actually took effect including provision for nine new buildings of three to seven storeys and provision for new streets. Draft sheets which appear substantially to have come to be adopted by the amendment show plans and elevations of proposed buildings (referred to as building envelopes as they had not been designed in detail) and locations of proposed new streets.

19 Mrs Sidhu's concern related to the value of No. 10B Beechworth Avenue but also and more deeply to the effect of SEPP 53 on nearby land. Until late in pre-trial preparation a prominent part of Mrs Sidhu's case and of her cross-claim was that there had been misrepresentations by or on behalf of the Luxfords in that the effect of SEPP 53 on the land and neighbouring land had not been made known to them; but amendments to her claim late in the course of preparation had the effect that this part of the case was not relied on against the Luxfords at the hearing. SEPP 53 was a prominent part of Mrs Sidhu's cross-claim against Mr McBride, the solicitor who looked at the contract and gave advice on 2 May, and also gave certificate under section 66W of the Conveyancing Act 1919 the effect of which was that there was no cooling off period after exchange of contracts.

20 Dr Sidhu gave evidence (Affidavit 29/11/06 para 11) of an inspection which he called the final viewing of the property on Saturday 30 April 2005; he was accompanied by Mrs Sidhu, their children and his parents. His affidavit evidence was to the effect that he told Mr Johnson that "we" meaning Mrs Sidhu and himself could offer $2.13 m but that was their final offer, and he asked that the property be held for about four to five days. He said "We need to get a building report done and have our solicitor look over the contract. We've been in other situations where we found a property, spent money on legal fees and building reports, only to be gazumped by another buyer offering a higher price. Can you hold off for four to five days?” Mr Johnson said "Okay, I will check with the vendors".

21 In oral evidence Dr Sidhu said that at the final inspection, it would seem on Saturday 30 April 2005, he and Mr Johnson agreed that the sale price would be $2,130,000, and shook hands on that. This evidence does not depart from the evidence that he needed to get a building report and legal advice. Nor does it depart from the statement that he wanted some time to exchange. Dr Sidhu had said much the same things in his e-mail message on 27 April. Unfortunately Mr Johnson's affidavit evidence did not show whether he had any conversation with Dr Sidhu on 30 April or 1 May in which it was established that exchange was to take place on Monday; or that that was contemplated.

22 Mrs Sidhu gave a closely similar accounts of the arrangements made on 30 April 2005 (Affidavit para 13); in her account she does not say there was a handshake agreement, and Mr Johnson said that he would refer the $2,130,000 to the owner.

23 In Dr Sidhu's affidavit para 13 he says that about 8:30 a.m. on Monday 2 May while he was working at Hornsby Hospital Mr Johnson telephoned him and said:

Johnson: There has been another offer on the property with another agent, Mark Blake from Luschwitz. The owners are prepared to take your Saturday offer as long as you exchange today.
Dr Sidhu: I will organise the exchange today.

24 In Mr Johnson's affidavit 16 February 2007 para 24 he gave this account of that conversation:

Johnson: there has been another offer on the property of $2.15m. The offer is the same amount made to the vendor as your offer of $2.13m but I have agreed to reduce my commission to get the deal done. The vendor or has instructed me to tell you that the first person to exchange contracts gets the property.

25 In oral evidence Mr Johnson accepted that he told Dr Sidhu that the other offer was with another agent, Mr Mark Blake.

26 Mrs Sidhu gave the following account of what she learnt from Dr Sidhu about the representation made by Mr Johnson to Dr Sidhu on 2 May 2005:

16. At approximately 9 15 a.m. on Monday 2 May 2005 Stan telephoned me and said:
David just phoned and said there is another interested party offering higher than $2.13 million. We have to move quickly if we want the house. I'll get Marie to courier contract out right away. Can you arrange an urgent building report?

27 It is in issue whether misrepresentation to Dr Sidhu caused Mrs Sidhu to enter into the contract. In my opinion there are substantial grounds for concluding that Mrs Sidhu would have entered into the contract in any event, and that Dr Sidhu would have decided in favour of the purchase and given her encouragement which led to her doing so. The Sidhus had already made the decision to purchase the property, expressed in a handshake between Dr Sidhu and Mr Johnson on Saturday 30 April; subject to being satisfied about what were referred to as legals, building and pest reports. Mrs Sidhu obtained a satisfactory building report on 2 May; she did not obtain a pest report, and there is no reason to think that if the Sidhus had obtained one it would have altered their course. They also obtained legal advice from Mr McBride solicitor, and this is the subject of a cross claim against him. They obtained that advice on 2 May; but I see no substantial reason to think that it had had taken several days to obtain advice, it would have been any different to the advice he did give, or that their course would have been altered.

28 Dr Sidhu's wishes and decisions had considerable influence on the purchase of the property. Dr Sidhu saw the position of Mrs Sidhu, the purchaser and future owner, as asset protection for him. He applied to NAB for finance. However though he was influential, he did not dominate Mrs Sidhu's decisions; they were her own.

29 Mrs Sidhu said in evidence (t71/46):

Q. You understood the effect of section 66W of the Conveyancing Act was upon exchange, the contract you would were exchanging would bind you to purchase the property, didn't you?
A. I did.

Q. Had you not signed that certificate you would have had a cooling- off period of seven days from the time of the exchange?
A. I believe it was five working days and it was our solicitor who signed the 66W.

Q. And if one were to hypothesize a position on 2 May 2005 where you didn't get a certificate from your solicitor under section 66W, as matters stood on 2 May up until 7 May, you wouldn't have done anything to have got out of the contract, would you?

OBJECTION (GRIEVE), ALLOWED

Q. As matters stood at 2 May 2005, if you had available to you the five-day cooling-off period, you would not have exercised any right between 2 and 7 May to get out of the contract, would you?
A. We had sought expert opinion on the purchase of the property. At that point we were happy with their opinion and intended to purchase the property.

Q. Nothing happened between 2 and 7 May 2005 to cause you to be unhappy with the purchase of the property, did it?
A. Not that I can recall.

30 Mrs Sidhu also said: (t88/33)

Q. And what I am suggesting to you is that you had decided, by this time, that whether or not there was really another interested party, you proposed to exchange contracts?
A. Because we were satisfied with the professional expertise that we had secured that day with regard to the property, yes.

Q. So, I think there are two parts to your answer?
A. No.

Q. I just want to break them up. Is it your answer that you had made that decision, but there was a reason why you had made the decision?
A. We had made an informed decision, yes. We thought we had made an informed decision based on the expertise of other professionals we had employed, yes.

Q. And the expertise you are referring to is the expertise of Mr McBride?
A. Correct.

Q. You also, I think, had a building inspection?
A. Correct, yes.

Q. From a friend?
A. From a person that we know as a builder, yes.

Q. And you had a pest report as well?
A. We hadn't had a pest report done at that point; we couldn't get one organised.

Q. So that - just so we are on the same wavelength. By the time you exchanged contracts you had made a decision that whether or not there was really another interested party you would exchange contracts?
A. We had made an informed decision, yes.

31 The effect of this passage (t.88) is that Mrs Sidhu (and she also refers to Dr Sidhu) were satisfied to exchange having regard the material available from Mr McBride and the building inspection; although they could not get a pest report organised. Her words were to the effect that they made an informed decision based on the expertise of the professionals they employed.

32 On causation Dr Sidhu’s evidence (Affidavit 29/11/2006 para 21) is that on Monday, soon after 3 p.m., he spoke to Mrs Sidhu.

21. I called Evelyn and told her about the inspection. Evidence it to me:
I'm really uncomfortable about proceeding so quickly.
I believed it was all right to proceed with the purchase as the contract had now been reviewed and given the all clear by Peter and the inspection had come out satisfactory.
I said:
Look we have experienced people on our side who have advised us that it is possible to proceed. Ev, what is wrong with you, this is a great house, we can afford it and am tired of looking and been gazumped.

33 Mrs Sidhu gave the following affidavit evidence about a conversation with Dr Sidhu in the afternoon of 2 May when Dr Sidhu told her that the building report had been obtained, and that everything was okay and "we can proceed".

I said: “Stan, aren’t we moving too hastily? I am apprehensive about everything proceeding so quickly.”
Stan said: “This is a great house and we have a lot of experienced people on our side who think it is okay to go ahead.”

34 Exchange of contracts was effected on 2 May; Mr Moraef who worked in Mr Johnson's office went to Dr and Mrs Sidhu's home to collect the contract from Mrs Sidhu, and after waiting some time Mrs Sidhu signed the contract and gave it to him with a deposit cheque and a Section 66W certificate. Mr Johnson went to the Luxfords’ home about 7:30 p.m., they signed a copy of the contract and were given a copy signed by Mrs Sidhu. This constituted exchange of contracts.

35 Mrs Sidhu also dealt with the event which she says was at 6 p.m. on 2 May when Mr Moraef brought papers to her house for signature. She says:

At 6 p.m. Imad arrived at my home with the papers for signature. I signed and initialled the special condition page, gave him the 66W Certificate which he asked for and a cheque for $106,500 made out to LJ Hooker Pymble.
I said to Imad: "Is there really another interested party?"
Imad said: "I don't know."
I felt concerned and pressured by the situation and although I was apprehensive about doing all this in such a hurry, I proceeded because we understood there was another interested buyer. Had it not been for those events I would have liked to have taken more time over the whole process.
Imad then said: "I will take the papers to David who is going to take them straight over to the vendors in Pymble for signature."

36 Whatever exactly was actually said by Mr Johnson to Dr Sidhu early on 2 May (that is, that the exchange had to take place that day or that the property would be sold to whichever offeror exchanged contracts first), the form in which Dr Sidhu relayed this reference to Mrs Sidhu was (her affidavit para 16): ".. there is another interested party offering higher than $2.13 million. We have to move quickly if we want the house …”. It was an actuality that the Sidhus did want the house, but also wanted to take the steps they regarded as appropriate before exchange of contracts. When I endeavour to address the question of causation of their exchanging contracts as a commonsense matter, I am of the view that the misrepresentation about the existence of another buyer who was in a competition to exchange contracts, or the call to make the exchange that day did not cause the Sidhus, or Mrs Sidhu to purchase the house. The Sidhus had already made up their minds to purchase the house, and would have adhered to that on 2 May or at the first opportunity, whether or not any misrepresentation of this kind had been made.

37 If no representations had been made about the existence of an alternative buyer, if no call had been made for exchange on 2 May or for a very prompt exchange so as to pre-empt some other buyer, the Sidhus would, in all probability, have proceeded with the expedition which they had already decided on and exchanged contracts within several days. It is unlikely that they would have pursued enquiries about town planning events and decisions relating to neighbouring properties, or that any steps they took would have altered their decision to purchase. The spur of their adverse action was the suggestion made by the bank officer on 19 May that the sale price was considerably in excess of value; this was a very different prompt to the standard advice which Mr McBride gave. If the Sidhus had had several more days available within which to consider the position and give advice, Mr McBride would not have dealt more fully or more specifically with SEPP53.

38 Dr Sidhu and Mrs Sidhu did not state expressly in evidence that reliance on the misrepresentation caused her to exchange contracts and to do so on that day. It was Dr Sidhu's evidence (t131-132), that what he was told about a competing purchaser was significant to him, and I accept that it was and contributed to the expedition with which matters were attended to on 2 May; however I find that it is highly probable that if that statement had not been made to him, or if he had not believed it, Mrs Sidhu would have entered into the contract either on that day or (more likely) within the next few days. Their later conduct tends to support finding that the misrepresentation was not the cause of her entering into the contract; when they made discoveries about the subjects of their concern, she continued to maintain the contract, going so far as to lodge a caveat. That she did so may well have been affected by counsel’s advice, the contents of which are not in evidence, only the brief effect of it; but whether or not it was affected by counsel's advice, it was her conduct. In the circumstances I would not make a finding that the misrepresentation caused Mrs Sidhu to enter into the contract for sale. If there had been no misrepresentation she probably would have exchanged contracts, either on 2 May or within a few days thereafter, and the outcome would be no different.

39 Counsel appropriately gave much attention to direct conflicts between Mr Luxford and Mr Johnson relating to responsibility for the statement made by Mr Johnson to Dr Sidhu on 2 May on the need to exchange contracts on that day. Decision on these issues would be based on assessment of the credit of both these men, to which very detailed attention was given by counsel. I do not think it is appropriate for me to consider fully and state reasons and conclusions which would necessarily be adverse to the character and conduct of one or both of these men. My findings would be largely the product of impression about probabilities and demeanour and there would be no objective certainty. The case would still be decided on other grounds.

40 There are no incontrovertible facts or objective circumstances which establish in a clear way which of them was responsible for Mr Johnson being in a state of mind where he felt able to tell Dr Sidhu, on 2 May, that (in accordance with Dr Sidhu's evidence) "There has been another offer on the property with another agent, Mark Blake from Luschwitz. The owners are prepared to take your Saturday offer as long as you exchange today." (There are differences in detail about the terms of this communication, but I do not regard them as presently important). In fact there had not been another offer on the property with Mark Blake or any other agent; nothing more than an expression of interest at a lower price, which had been made (at the very latest) a week or 10 days earlier; nothing had happened which could have been thought of as an offer. Mr Luxford knew this. It was naming to Mr Mark Blake which led to Dr Sidhu's finding out, several weeks later, that there had been a misrepresentation to him about the interest of another buyer; he made an enquiry of Mr Blake who told him that he had not had any such offer. It is clear that Mr Johnson introduced reference to Mr Mark Blake from Luschwitz and that Mr Luxford did not tell Mr Johnson that another offer came through Mr Blake; Mr Johnson attributes this to inference, and the basis for that inference appears to me to be inadequate; the only other agents Mr Johnson knew to have marketed the house were Mr Waller and Mr Blake, Mr Luxford told Mr Johnson it was not Mr Waller who was involved, and Mr Johnson guessed it was Mr Blake. What exactly Mr Luxford told Mr Johnson in a conversation on the telephone early on 2 May about whether there was at that time another person interested in purchasing, or another offer, and whether, as Mr Luxford’s case would suggest, Mr Johnson span that statement out of references by Mr Luxford to the interest of another person which fell far short of so stating, I leave unresolved.

41 Mr Luxford gave on affidavit an account at length of conversations with Mr Johnson on 30 April in the third of which Mr Johnson reported that Dr Sidhu would not increase his offer beyond $2.13 million and discussed this, and asked Mr Luxford to agree to $2.13 million if Mr Johnson reduced his commission. According to his affidavit Mr Luxford said:

CL: ok I’ll accept that along with the following conditions. We will have to document the reduction in you commission as soon as possible. Mr Sidhu must move to exchange contracts on Monday. I don’t want Mr Sidhu sitting around with my reduced price while he considers other properties on the market. Please offer your assistance with arranging building and pest inspections in order to get the exchange happening. You have already mentioned they had taken a copy of the contract. I don’t see why we can’t exchange on Monday.

42 Mr Luxford also said: “I really would like this sale to be finalised on Monday". Mr Luxford says that in a later conversation (also on Saturday 30 April) Mr Johnson told him "Stan Sidhu has agreed that he can exchange on Monday. The price is $2.13 million.” Mr Luxford gave evidence of a conversation between Mr Luxford and Mr Johnson on Sunday 1 May which seems to contemplate exchange on Monday 2 May.

43 In Mr Luxford’s evidence of his dealings with Mr Johnson he says (Aff.58) to the effect that on Sunday 1 May he told Mr Johnson that should Dr Sidhu fail to complete exchange of contracts on 2 May Mr Luxford would put the property back on the market at $2.15m; he told Mr Johnson that an offer of $2,000,000 had been submitted by another agent two to three weeks earlier that he had rejected, and that should the Sidhus not exchange on 2 May Mr Luxford would instruct that agent to contact the buyer and inform the buyer of the reduction in price to $2.15m. There was discussion about this in which Mr Johnson complained that he thought it unfair that another agent should be brought into the transaction, and discussed the offer of $2 million. Discussion was lengthy.

44 Mr Luxford also set out at length the terms of the conversation he had early on Monday 2 May 2005 by telephone with Mr Johnson, in the course of which Mr Luxford referred again to the previous offer of $2 million, there was discussion about what Mr Johnson had done to achieve a sale and what the involvement of other agents might be, and Mr Luxford said in conclusion "I agree that it's only fair that you have adequate opportunity to close this deal today. So long as we exchange today as we agreed then I will sell the property to the Sidhus."

45 Mr Johnson's affidavit evidence gave a markedly different account of the conversations which Mr Luxford attributes to 1 and 2 May. In Mr Johnson's evidence, the subject of a requirement to exchange contracts very promptly was introduced by Mr Luxford in a telephone conversation about 8 a.m. on 2 May, and Mr Luxford then told him, unequivocally, that there was another buyer interested in the property who was prepared to pay $2,150,000. Mr Luxford said "I have decided that the first person who exchanges contracts gets the property". There was discussion in which Mr Johnson explored whether the other buyer was genuine.

46 The effect overall is that it is Mr Johnson's evidence that he was expressly told by Mr Luxford on 2 May that there was another buyer who was prepared to pay $2,150,000 and that Mr Luxford would sell to the first person who exchanged contracts; whereas in Mr Luxfords’ evidence his reference was not to a person prepared to pay $2,150,000 but to a person who a week or more earlier had been prepared to pay $2 million. So if Mr Luxfords’ evidence is accepted, the offeror ready to buy and the offer of $2,150,000 which Mr Johnson spoke of to Dr Sidhu were invented by Mr Johnson. If Mr Johnson's evidence is accepted the alternative buyer must have been invented by Mr Luxford; there is no reasonably available view in which there actually was any such person. Mr Johnson's account differs from Dr Sidhu’s in that Dr Sidhu's evidence was that Mr Johnson said "The owners are prepared to take your Saturday offer as long as you exchange today" whereas Mr Johnson says "The vendor has instructed me to tell you that the first person to exchange contracts gets the property". On either view there was a call to Dr Sidhu for immediate action. In Dr Sidhu's evidence, Mr Johnson said that the other offer was with Mark Blake from Luschwitz; and in oral evidence Mr Johnson acknowledged that he had referred to Mr Blake when speaking to Dr Sidhu, although Mr Luxford had not mentioned Mr Blake when speaking to him.

47 Resolution of the conflict between Mr Luxford and Mr Johnson would lead on to a number of further issues and claims; whether Mr Johnson or Mr Luxford or both of them was a principal in making the misrepresentation or whether (in an unlikely development which the plaintiff’s counsel contended for) neither was and it was produced by honest mistakes all round. On these turns the question whether one or both is liable, whether Mr Luxford is liable as himself a principal tortfeasor, or is liable vicariously or on agency principles for a tort committed by Mr Johnson. These questions, and their effect on an indemnity clause in the written agreement by which the Luxfords retained Mr Johnson's company, need not be resolved.

48 The duties of a solicitor to his client are largely the product of the express and implied terms of his retainer: what the solicitor is asked to do and agrees to do.

49 When narrating what he told Mr McBride he wished Mr McBride to do Dr Sidhu used expressions to the effect that he wished to be told whether the contract was in order or whether everything was in order. That is to say, Mr McBride was not told anything specific which altered his ordinary responsibilities.

50 The form of contract proposed to be exchanged was given to Mr McBride in a context which shows that he was to advise on entering into the contract, but without any instructions that might define his responsibility or extend it beyond what a reasonable solicitor giving such advice with reasonable care would ordinarily do. Annexed to the contract was a Planning Certificate of Ku-Ring-gai Council under s 149(2) of the Local Government Act which stated (accurately) that the zoning of the property was Residential 2(C) under the provisions of the Ku-Ring-Gai Planning Scheme Ordinance. The Planning Certificate also contained much other information including para 7 the heading “What other planning instruments affect this property?” and a list of the names of 25 State Environmental Planning Policies all of which applied to Ku-Ring-Gai.

51 The respect in which SEPP 53 affects 10B Beechworth Avenue is (and is no more than) that the property is within Ku-Ring-gai Local Government Area and it is within power, by some future amendment to Schd 4, to make Part 4 and the planning controls under it apply to the land, and supervene other planning controls including planning powers of Ku-Ring-gai Council, restrictive covenants and other prior instruments; but none of this has happened.

52 Mr McBride had no particular knowledge of how SEPP 53 operated or what it said about parcels of land in Ku-Ring-Gai. If he had investigated the matter further (and he was not given time to do so) the most that it can be supposed he would have told Dr Sidhu is to this effect – that under SEPP 53 land in Ku-Ring-Gai can be brought under special powers relating to medium density development, but this land has not been. If he had found that out and told Dr Sidhu, it would have had no relevant effect.

53 The primary responsibility of a solicitor to a client who is purchasing a property relates to the property itself; and at the centre of that responsibility is that it is the solicitor's responsibility to see that the client gets title to the property which the client wishes to acquire. The solicitor’s responsibility extends beyond title to other matters which closely affect the land being acquired including its zoning under Town Planning law; the availability of the land under Town Planning law for use for the purpose for which the purchaser requires it. I do not accept that in reasonable practice of solicitors in New South Wales dealing with residential property, solicitors do or should investigate the impact of town planning on neighbouring or other nearby property. In doing this I accept and rely on the evidence of Mr Moses, a solicitor who gave expert evidence, and also on the evidence of Mr McBride, whose practice handles a very great number of property sales. I respectfully do not accept views expressed by Mr Bluth; notwithstanding Mr Bluth’s very wide experience, it seems to me that his views and evidence were affected by practice in dealing with commercial and development properties, which in turn should be taken to be affected by the purpose, known to the solicitor, for which purchasers wish to acquire property; attaining that purpose would often involve the client having some understanding of a wider town planning context than a person wishing to use the property as his residence would usually need. A solicitor's practice when acting for persons purchasing commercial property and development property is probably also affected by communication by clients of additional requirements, widening the scope of the retainer beyond what should ordinarily be taken to be the terms of a retainer relating to residential property. If a solicitor acting for a purchaser investigated the town planning controls applicable to properties other than the property being purchased, his conduct should be attributed to an indication by the client that a wider investigation was required, or to some general knowledge of the client’s purposes and requirements which indicated that that was so.

54 Mr McBride's usual practice, of which he gave evidence, is fairly highly defined in a routine which is followed in the large number of matters which he has handled and continues to handle. In his affidavit evidence about his practice he said that "I usually say to my clients words to the effect ‘We do not search with regards to surrounding properties but only the property you are buying. As to what goes on in the neighbourhood, you must make your own enquiries of Council.’” In two earlier transactions in which he had acted for Dr or Mrs Sidhu, he had given advice to this effect in writing; the probability that he observed his routine and gave advice to that effect while speaking to Dr Sidhu on 2 May 2005 is very high, in my view. In the two letters of advice about two purchases in December 2000 Mr McBride said:

We advise that all of the searches and enquiries that we do relate to the property that you are proposing to purchase and none of them relate to adjoining properties or the surrounding area. If you should wish to obtain details as to what is proposed or possible under current Council Zonings, it will be necessary for you to consult the local Council. We will take the opportunity to discuss this aspect with you.

55 In his letter of advice about a purchase in October 2003 Mr McBride said the same things, word for word.

56 It was Mrs Sidhu’s evidence that in the earlier transaction she did not see the letters in which Mr McBride gave this advice. Dr Sidhu said that he had not received one of them. I do not doubt that he received the other and saw what it said: and these letters are part of the proof of Mr McBride’s practice of advising in those terms. I do not accept Dr Sidhu's evidence that he was not told to that effect by Mr McBride on 2 May 2005. Dr Sidhu denied that Mr McBride said to him to the effect that Dr Sidhu should make sure that finance was right, that the builder's reports and pest reports were organised and that the Sidhus have done their enquiries with regard to the local area; he said "(t125/27) A. He said none of those three things". I find it markedly improbable that Mr McBride said none of them. In my finding, Dr Sidhu and Mrs Sidhu were very committed to acquiring the property, and pursued their object of an immediate exchange that day, and Mr McBride's advice had little effect on the course they took.

57 The evidence about value also shows that Mr McBride's advice, if it was negligent, did not cause Mrs Sidhu to suffer loss by entering into the contract, or in any other way. I am of opinion that Mr McBride was not negligent as alleged.

58 In my opinion the plaintiffs are entitled to the following remedies:

1. Declaration 1(a) claimed in the Third Amended Statement of Claim. This relates to entitlement to the deposit;

2. Order 2(a) there claimed. This relates to the payment to the plaintiffs of the deposit and accrued interest thereon.

3. Damages assessed as in Claim 2(b). This assessment requires the calculation of interest.

I will embark on assessments after publishing these reasons.

59 The plaintiffs alternatively made claims against the second, third and fourth defendants, the two estate agency companies and Mr Johnson, to deal with the event that Mrs Sidhu succeeded in the Amended First Cross-claim. It is not necessary to rule on the claims against these defendants and they are dismissed.

60 In the First Cross-claim Mrs Sidhu claims damages against the Luxfords and one of the estate agency companies. The First Cross-claim fails and is dismissed with costs.

61 In the Second Cross-claim Mrs Sidhu makes claims against Mr McBride and his professional partner. The Second Cross-claim fails and is dismissed with costs.

62 In the Third Cross-claim the estate agency companies and Mr Johnson make claims against the Luxfords. As these cross-claimants have incurred no liability, they are not entitled to any remedies. The Third Cross-claim is dismissed.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON AJ

MONDAY 3 DECEMBER 2007

6058/05 LUXFORD & ANOR v E.P. SIDHU & 3 ORS

Upon the plaintiffs’ claim:
1. Declaration 1(a) claimed in the Third Amended Statement of Claim.
2. Order 2(a) claimed in the Third Amended Statement of Claim.
3. Give judgment for the plaintiffs against the first defendant for damages to be assessed as in Claim 2(b), with costs.
4. The plaintiffs and the first defendant have liberty to apply to me for directions relating to the assessment.
5. Give judgment for the second, third and fourth defendants.
Upon the First Cross-claim:
6. Dismiss the Cross-claim with costs.
Upon the Second Cross-claim:
7. Dismiss the cross-claim with costs.
Upon the Third Cross-claim:
8. Dismiss the cross-claim.
General:
9. Liberty to apply with respect to any further orders as required.

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