Lymquartz Pty Limited v 2 Elizabeth Bay Road Pty Limited
[2007] NSWSC 457
•9 May 2007
CITATION: Lymquartz Pty Limited v 2 Elizabeth Bay Road Pty Limited [2007] NSWSC 457 HEARING DATE(S): 13-15/11/06; 21-22/11/06
JUDGMENT DATE :
9 May 2007JUDGMENT OF: Biscoe AJ DECISION: Plaintiff's claim dismissed. Cross-claim for specific performance and enforcement of guarantees upheld. CATCHWORDS: Trade Practices - claim of misleading or deceptive conduct in contravention of s 52 Trade Practices Act 1974 (Cth) - purchase of apartments in hotel undergoing redevelopment into apartment building - whether selling agent's representation that it would be a "one bedroom" apartment was misleading or deceptive because bedroom wall not fixed but sliding - whether selling agent represented that bedroom wall would be brick, that apartment would have a kitchen in a separate room and that all walls would be brick - whether "sense of space" statement in marketing brochure mere puffery or actionable as misleading or deceptive conduct. LEGISLATION CITED: Trade Practices Act 1974 (Cth), ss 52, 51A, 82, 87
Fair Trading Act 1987 (NSW), ss 42, 68, 72
Conveyancing (Sale of Land) Regulation 2000 (NSW) Sch 3 Pt 1cl 1CASES CITED: Australian Competition and Consumer Commisison v Kaye [2004] FCA 1363
Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31
Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189
Overlook Management BV v Foxtel Management Pty Ltd [2002] NSWSC 17
Hanave Pty Ltd v LFOT Pty Ltd (1998) ATPR 41 – 658
Mitchell v Valherie (2005) 93 SASR 76
John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41 – 249
Morrow v Tucker [No 2] [2006] NSWSC 1358PARTIES: Lymquartz Pty Limited (Plaintiff)
2 Elizabeth Bay Road Pty Limited (Defendant/Cross-Claimant)
Lymquartz Pty Limited (First Cross-Defendant)
Laura Goltsman (Second Cross-Defendant)
Joseph Goltsman (Third Cross-Defendant)
FILE NUMBER(S): SC 6376/05 COUNSEL: Mr M Speakman (Plaintiff/Cross Defendants)
Dr C J Birch SC with Ms K M Richardson (Defendant/Cross-Claimant)SOLICITORS: Paul Bard (Plaintiff/Cross Defendants)
Speed & Stracey (Defendant/Cross-Claimant)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISIONBISCOE AJ
9 May 2007
6376/05 LYMQUARTZ PTY LIMITED v 2 ELIZABETH BAY ROAD PTY LIMITED
JUDGMENT
INTRODUCTION
1 HIS HONOUR : This is a claim for relief for alleged misleading and deceptive conduct under the Trade Practices Act 1974 (Cth) ( TPA ), which is said to have induced the plaintiff to enter into contracts to purchase two residential apartments from the defendant. There is a cross-claim for specific performance of the contracts, enforcement of guarantees and other relief.
2 On 6 November 2003, the plaintiff, Lymquartz Pty Ltd, entered into separate contracts with the defendant, 2 Elizabeth Bay Road Pty Ltd, to purchase apartments T1204 and C904, in the Gazebo buildings at 2 Elizabeth Bay Road, Elizabeth Bay. The plaintiff’s directors, Mrs Laura Goltsman and her husband Mr Joseph Goltsman, guaranteed its obligations. The purchase price was $677,500 for apartment T1204 and $615,000 for apartment C904. A deposit in the form of a bank guarantee was paid under each contract. At the time of contract, these apartments were part of a redevelopment being undertaken by the defendant that involved conversion of the existing Gazebo Hotel buildings into residential units. The site has two buildings. Apartment T1204 was on the twelfth floor of the building known as the Tower Building. Apartment C904 was on the ninth floor of the other building, known as the Court Building.
3 The alleged misleading and deceptive conduct relates only to apartment T1204. It is alleged to comprise five pre-contract representations made by Mr Christian Cirillo, a real estate agent employed by the defendant’s selling agent, Colliers International Pty Ltd.
4 The plaintiff makes no complaint in respect of apartment C904. However, it is common ground that if the plaintiff is successful in striking down the contract for T1204, it is likewise entitled to succeed in respect of the contract for C904, having regard to a provision in each contract that completion is dependent upon completion of the other contract.
5 The plaintiff claims that the representations were misleading and deceptive in contravention of s 52 of the TPA . Insofar as they relate to future matters, it relies on s 51A. The plaintiff claims an order under s 87 that the contracts be declared void ab initio or refusing to enforce their conditions, and orders that the defendant return the deposits in the form of bank guarantees and not call upon them. A claim for damages under ss 82 or 87 is only pressed if the primary relief is refused. The claimed measure of damages is the difference between the contract prices of both apartments and the current lower values in a fallen market. An alternative pleaded claim for negligent misrepresentations is not pressed.
7 The relevant provisions of the TPA and the FTA are in substantially the same terms. Section 52 of the TPA and s 42 of the FTA are in the same terms except that s 52 is restricted to a corporation. Sections 52 and 51A of the TPA relevantly provide:6 The defendant cross-claims against the plaintiff and the Goltsmans seeking specific performance of the contracts, a declaration that the Goltsmans are liable under their guarantees for payment of the money due under the contracts and the due and punctual performance by the plaintiff of all its obligations thereunder, and an order that they pay the sums payable on completion of the sale contracts. Damages are also claimed under s 82 of the TPA and, as against the Goltsmans under s 68 of the Fair Trading Act 1987 (NSW) ( FTA ) for alleged misleading or deceptive conduct contrary to s 52 of the TPA and s 42 of the FTA . Orders are also sought under s 87 of the TPA and s 72 of the FTA to the effect of specific performance, including that any judgment or order in favour of the plaintiff be set off against any judgment or order in favour of the cross-claimant. The defence to the cross-claim is the same as the plaintiff’s TPA claim.
52 (1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
(2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1).
(2) For the purposes of the application of subsection (1) in relation to a proceeding concerning a representation made by a corporation with respect to any future matter, the corporation shall, unless it adduces evidence to the contrary, be deemed not to have had reasonable grounds for making the representation.51A (1) For the purposes of this Division, where a corporation makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act) and the corporation does not have reasonable grounds for making the representation, the representation shall be taken to be misleading.
…
8 The Tower building was completed in July 2005. On 29 November 2005, the plaintiff purported to rescind both contracts on the basis that the ceiling heights in T1204 did not comply with Part F3 of the Building Code of Australia, and therefore there was a breach of the statutory warranty in cl 1 Pt 1 of Sch 3 of the Conveyancing (Sale of Land) Regulation 2000 (now repealed) because it was a matter which would justify the making of an upgrading or demolition order. On 20 December 2005, the plaintiff commenced these proceedings seeking a declaration that the contracts had been lawfully rescinded on that contractual basis and a consequential order for the return of the deposits. This contractual claim was later abandoned in favour of claims under the TPA . The TPA claims were introduced at various times, some at a late stage of the proceedings.
ALLEGED REPRESENTATIONS
9 The five alleged misleading and deceptive representations are said to have been oral, contained in a brochure or plans which Mr Cirillo gave the Goltsmans, or implied.
10 The first alleged representation was an oral representation by Mr Cirillo that apartment T1204 would be a one-bedroom apartment ( one- bedroom apartment representation ). The plaintiff submits that it is not a one-bedroom apartment but a studio (or bed-sit) because a one- bedroom apartment requires a fixed wall between the bedroom and living areas whereas this apartment has a sliding two part timber wall. The defendant admits that the one-bedroom apartment representation was made, but submits that it is a one-bedroom apartment. Alternatively, it submits that the sliding wall can be converted to a fixed wall and a door for approximately $2,656 and, if the plaintiff is entitled to relief, that is the measure.
12 The third representation is alleged to have been in a colour brochure, which Mr Cirillo gave to the Goltsmans on their first inspection. The brochure stated the units would have “ interiors with a sense of space ” and be “ comfortable and easy and very liveable ”. The plaintiff particularly emphasises the words “ sense of space ”. The plaintiff also alleges that three related representations arise as a naturally corollary of those statements in the brochure:11 The second alleged representation was an oral representation by Mr Cirillo that there would be a brick wall between the bedroom and living areas ( brick bedroom wall representation ). Mr Cirillo denies making this representation. This issue is closely related to the first issue. Evidence of this representation was introduced in the Goltsmans’ affidavits of 27 September 2006 (her third and his first affidavit). There Mrs Goltsman swore that at the second meeting her husband asked what kind of wall would be between the living and bedroom areas and that Mr Cirillo replied “ a brick wall ”. Mr Goltsman’s version is that at the second meeting Mrs Goltsman asked “ Is it going to be a proper one bedroom unit with walls ”, Mr Cirillo said “ yes ”, Mr Goltsman asked “ are the walls going to be brick ”, and Mr Cirillo said “ yes ”. The difference in their evidence appears to be that Mrs Goltsman limits the express brick representation to the dividing wall between the bedroom and living room areas; Mr Goltsman says it referred to all walls.
(a) a representation that the existing structure of the Tower Building would enable it to permit the conversion of the building into residential units that would have “interiors with a sense of space” and be “comfortable and easy and very liveable” ;
(b) the defendant was not aware of any matters that might have the effect that the residential units would not have “interiors with a sense of space” and be “comfortable and easy and very liveable” ; and
(c) the units in the Gazebo development, including apartment T1204, would have no significant undisclosed unusual features which would affect the sense of space.(Collectively, sense of space representations )
14 The defendant says in reply to the sense of space representations that:13 The plaintiff pleaded that, contrary to the sense of space representations, the apartment has excessively low ceiling heights that do not meet the minimum height prescribed by F3.1 of the Building Code of Australia.
(a) the statements in the brochure are puffery and that nobody would reasonably rely upon them as providing a hard representation about specific ceiling requirements;
(b) in any case, the apartment fulfils the descriptions in the brochure, particularly having regard to the fact that the apartment was on the twelfth floor with views over Sydney Harbour and had two balconies;
(c) the ceilings comply with the Building Code of Australia’s requirement that habitable rooms must have sufficient height that does not unduly interfere with its intended function; and
(d) the plaintiff apparently has no concern about apartment C904 yet apartment C904 has roughly comparable ceiling heights.15 The fourth alleged representation is that apartment T1204 would have a kitchen in a room separate from other rooms ( separate kitchen representation ). As built, the kitchen is a walk-through kitchen leading from the main door to the living room, with the kitchen facilities on each side. The separate kitchen representation was introduced late in the proceedings, in the Goltsmans’ affidavits of 30 October 2006, a few weeks before the trial commenced. In Mrs Goltsman’s affidavit she said that based on Plans B, C, D and E, “ especially ” D, she believed that apartment T1204 would have a separate kitchen when causing the plaintiff to contract. Mr Goltsman’s affidavit evidence was different. He swore that during the second visit Mr Cirillo told his wife “ there will be a separate kitchen ” . He said that he believed it would have a separate kitchen because this is what Mr Cirillo said and because of what was shown on Plans E and A. He said that except for this belief he would not have agreed to the plaintiff purchasing apartment T1204.
16 Mr Cirillo denied making the separate kitchen representation. He testified that he was confident that he discussed the kitchen and that he pointed to where it was on a laminated plan which showed apartment T1204 as built. The defendant also states that (a) in any case the kitchen is separate from the other rooms albeit the entrance way passes through it; (b) two of the plans which the Goltsmans or one of them claim to have received and relied upon prior to contract were not in fact received until after contract; (c) the plans which the Goltsmans say they received prior to contract, and on which they claim to rely, relate to larger apartments; and (d) the Goltsmans saw prior to contract a laminated plan on display at the selling agent’s site sales office which accurately showed apartment T1204 as it was later built.
17 The fifth alleged representation is that all the walls in the apartment would be brick ( brick walls representation ). The representation is pleaded as partly oral and partly implied. The defendant denies making the representation. Mrs Goltsman’s affidavit evidence was that she inferred from what Mr Cirillo had said about the bedroom wall being brick, that all walls in apartment T1204 would be brick. Mr Goltsman’s affidavit evidence was different. He claimed that Mr Cirillo said that all the walls would be brick. The inter-apartment walls are gyprock.
PRE-CONTRACT MEETINGS
18 The Goltsmans attended the Gazebo site on three occasions in September and October 2003, prior to executing the contracts. On each occasion they met Mr Cirillo. Mrs Goltsman did most of the talking for her husband and herself.
19 In September 2003, the floor and ceiling concrete slabs and structural concrete columns or walls were in existence in the Tower Building but no internal walls or ceilings had yet been constructed in apartment T1204.
21 The second visit to the site was approximately one week after the first visit. Mr Cirillo showed the Goltsmans the shell of apartment T1204. He says, and I accept, that he also showed them the shells of T1004, 1104 and 1304. Mrs Goltsman described the shell of apartment T1204 as:20 The Goltsmans’ first meeting with Mr Cirillo was in September 2003. They met him in the agent’s site office. He gave them a brochure and a plan. I will call this Plan A. He also gave them a price list either on this occasion or later. Mrs Goltsman asked what one-bedroom apartments were available with harbour views. Mr Cirillo, having ascertained the price range that might interest them, indicated that only apartments in the north-west of the Tower Building on levels 11, 12 and 13 had those views. Either on this occasion or later he indicated that apartment T1204, which had harbour views, was available.
Essentially an open concrete space but with the outer building walls, windows and balconies in place. Some of the windows had glass in them and others had been boarded over. There were no inside walls, although there were some vertical concrete piers and, possibly (I do not now recall), some half walls. There was a concrete ceiling above us.
23 According to Mr Goltsman, he asked Mr Cirillo whether he had a floor plan for the apartment they had just looked at and Mr Cirillo replied:
22 According to Mrs Goltsman’s first affidavit, during the second visit Mr Cirillo said: “ This will be a one bedroom unit and there will be a wall between the living area and the bedroom so as to separate those two areas ”. The account in her third affidavit was that Mr Cirillo said there would be a “ wall between the living area and the bedroom area so as to separate those two areas ”, that Mr Goltsman asked Mr Cirillo what kind of wall it would be, and that Mr Cirillo said “ a brick wall ”. Mr Goltsman gave similar evidence. Mr Cirillo denies this.
Not for that exact unit, but the layout will be similar to the typical floor plan I have given you
This was a reference to Plan A. Mr Cirillo denies this.
24 Mr Cirillo indicated, in response to Mrs Goltsman’s expression of interest in purchasing a second apartment with water views, that apartment C904 in the Court Building would provide harbour views.
26 The third visit to the site occurred a few weeks later. Mr Cirillo again showed the Goltsmans the shell of apartment T1204. According to Mrs Goltsman, she asked Mr Cirillo “ May I get floor plans for each of the units we are buying ” and Mr Cirillo handed her a floor plan for C904 and gave her three other floor plans for units in the Tower Building. I will call them Plans B, C and D. According to Mrs Goltsman, he said:25 Mr Goltsman claimed in his second affidavit of 30 October 2006 that during the second visit Mr Cirillo said to his wife “ There will be a separate kitchen ”. Mr Cirillo denies this.
We do not have a floor plan for 1204. Unit 1204 won’t look exactly like this but will look something like this.
27 This evidence is contentious. In fact, there was a laminated floor plan for apartment T1204 on display at the Colliers sales office, as explained below. Mrs Goltsman swore in her fourth affidavit of 30 October 2006 that during the third visit Mr Cirillo in her presence handed to her husband a further plan. I will call it Plan E. Mr Goltsman in his affidavit of that date says that it was during the second visit that Mr Cirillo handed him Plan E.28 The defendant disputes that the Goltsmans received plans D and E prior to contract.
29 There were a number of documents at the selling agent’s site office that a prospective purchaser could view. They included floor plans for a “ typical ” one-bedroom unit in the Tower building or for a “typical” two bedroom unit, a B3 sized laminated booklet entitled “ Elizabeth Bay Road Plans ” which contained floor plans for each level or each set of identical levels showing the layout of each apartment when complete, and a price list showing apartments sold and not sold and the prices of the remaining apartments.
30 Mr Cirillo’s practice, I accept, was to provide copies of the “ typical ” apartment plans to all prospective purchasers and, when a prospective purchase showed an interest in a particular apartment, to show the purchaser the laminated booklet of floor plans and direct the purchaser’s attention to the page on which the apartment they were interested in was located. He testified that he followed this practice with the Goltsmans. He recalled showing Mrs Goltsman the relevant laminated plan entitled “ Levels 11 to 13 Tower ” which showed apartment T1304 and explaining to her that apartment T1204 is the same as apartment T1304. She denied seeing the laminated plan and denied this conversation. If the Goltsmans saw this laminated plan it is damaging to their case because it shows apartment T1204 as later built, except that it does not directly impact on the sense of space representations, which are based on the brochure.
31 Mr Cirillo indicated that he had been told prior to contract that the Goltsmans were buying for investment purposes. He entered details to that effect in Colliers’ business records after the contracts were exchanged. In cross-examination he said that he was told this at the first meeting. Mrs Goltsman, in her fifth affidavit, said that prior to contract Mr Cirillo asked her whether they were buying for investment purposes and that she said no, they were buying for their two sons.
REAL ESTATE EXPERIENCE
32 The extensive real estate investment experience (including contractual experience) of the plaintiff company and its directors, the Goltsmans, should be taken into account. The matters on which it bears include the Goltsmans’ understanding of the sale contract for apartment T1204; their ability to read the floor plans shown by the defendant; their understanding of the size and nature of apartment T1204; and whether they relied on a statement in the colour brochure that apartments in the Gazebo development would have a “ sense of space ” as a representation of fact concerning apartment T1204.
33 At the time of the purchase, Mrs Goltsman, who was the person with principal responsibility for real estate investment transactions undertaken by the plaintiff, was a licensed real estate agent, was working as a licensed real estate agent and property officer at McGrath's Real Estate, and had extensive experience in developing, investing in, buying, selling and leasing real estate.
34 In order to obtain her real estate licence, she completed a three year part-time course which involved instruction in the various aspects of real estate business. She had extensive experience in relation to real estate transactions, which included working as a licensed real estate agent at Vantage Real Estate and working as a licensed real estate agent and property officer for McGrath's Real Estate. That experience included leasing residential units, apartments and houses; negotiating leases on behalf of landlords; inspecting properties with landlords to assess them before they were put on the market; taking prospective tenants and showing them the properties; preparing promotional literature about the properties that were available for lease; and ensuring that leases were properly filled out and had been properly executed. She also handled the paperwork in regard to subdivisional applications undertaken in relation to the plaintiff's investment properties.
36 The properties invested in and traded by the plaintiff have included:35 Since 1985, Mrs Goltsman has been involved via the plaintiff in some eight or nine real estate transactions including buying, selling and developing investment properties. This involved causing significant building work to be done on apartments; engaging and supervising subcontractors to carry out building work including attending to fire safety works involving changing the doors and a couple of ceilings for fire protection; applying to council to subdivide and strata buildings; retaining draftsmen in relation to building works; examining the plans that the draftsman prepared; registering strata plans for buildings; liaising with real estate agents; instructing solicitors; and signing contracts containing “ no reliance clauses” which she understood set out all that the plaintiff as vendor was promising to sell to purchasers.
(a) the purchase of a whole building of six units for more than $2.8 million in Randwick in late 2003, about one month after entering into the subject contracts. The plaintiff then (after registering the strata plan) sold four of the units (with two units retained by the plaintiff); and
(b) the purchase in 1998, before the negotiations in the present case, of a whole building of apartments in Alexandria, which the plaintiff then (after registering the strata plan) sold within the next three years.
37 Accordingly, the plaintiff company can be described as a vehicle through which the Goltsmans have invested in real estate.38 Mr Goltsman bought properties with his wife before the subject purchases in 2003. He supervised the building works on the investment properties which the plaintiff company bought and subdivided.
39 In my view, Mrs Goltsman was well able to assess promotional literature, apartment sizes, floor plans, strata plans and to understand to a significant degree contracts in relation to land. Mr Goltsman had less real estate experience than his wife but sufficient, in my view, to be attributed with the same powers of assessment except that I think he probably would need legal advice to understand most aspects of contracts in relation to land.
40 In Mrs Goltsman’s first affidavit she described herself as a real estate agent. But in later affidavits she described herself as a company director and said that she had never practiced as a real estate agent and, although she is a licensed real estate agent it is a formal qualification only. Mr Cirillo became aware that she worked at McGrath’s Real Estate. In cross-examination, she denied that she had worked as a real estate agent because she drew a distinction between buying and selling real estate (which she said was acting as a real estate agent), on the one hand, and leasing real estate (which she said was not acting as a real estate agent), on the other hand. I do not think that there is substance in this distinction. It was because she had a real estate licence that she was able to work at McGrath Real Estate. In my view, her later affidavit evidence on this point was not frank and was likely to mislead.
UNDERSTANDING OF CONTRACT OF SALE
41 The Goltsmans signed the sale contracts on behalf of the plaintiff. The contract for apartment T1204 attached a draft strata plan which showed that it would have two balconies and that its total floor area would be 55m2. The Goltsmans, in my view, knew when they signed the contract that the total area revealed by the strata plan was 55m2. They now take no issue in relation to the size of the apartment, or the number of balconies in apartment T1204, notwithstanding that was raised in the plaintiff’s lawyer’s initial letter of complaint in March 2005.
42 The Goltsmans had legal advice before they signed the contracts. The contract for apartment T1204 had attached a section 66W certificate in which a solicitor confirmed that he had explained the effect of the contract to the directors of the plaintiff. The contract contained a covenant by the plaintiff that it had “obtained appropriate independent advice on” and was “satisfied about...the [plaintiff's] obligations and rights under” the contract.
43 The contract imposed an obligation on the defendant to cause apartment T1204 to be finished as specified in the attached Schedule of Finishes. There was no contractual obligation on the defendant in relation to the layout. There was no floor plan of apartment T1204 attached to the contract, something that Mrs Goltsman admitted that she knew when she signed it.
44 Mr Goltsman conceded that he knew it was the contract and not any advertising brochure which set out the nature of the subject apartment.
EVOLUTION OF PLAINTIFF’S CASE
45 The defendant submitted that the evolution of the plaintiff’s case was shifting and opportunistic and driven by a drop in the market value of apartment T1204, and that it is damaging to the Goltsmans’ credit.
46 When the contracts were exchanged in November 2003, Mr Cirillo made an entry in Colliers’ records indicating that the apartments had been purchased for investment purposes. He testified that this could only have come from the Goltsmans, which I accept.
47 On 7 July 2004, Mrs Goltsman sent an email to Mr Cirillo asking if he had any “demand on 1 bedroom with a view”. The defendant submits that this suggests an interest in selling the apartment for a profit.
48 The Tower Building (including T1204) was completed in July 2005.
50 The first version of the plaintiff’s complaints appeared in a letter from their lawyers of 29 March 2005 to the defendant’s lawyer. There were four complaints:49 In March 2005, Mrs Goltsman inspected the apartment. The only difference from the apartment as it appears today was the absence of the dividing bedroom wall and minor finishes. Thus, from this time she knew the finished ceiling heights and knew there would not be a kitchen in a separate room.
(a) the unit was substantially smaller than anticipated. It was noted that the draft strata plan attached to the contract indicated it would be 55m2;(b) there was “ no separate walled off space for a bedroom ” contrary to pre-contract representations when they were given Plan A;
(c) Plan A indicated three separate balconies, not two; and
(d) the draft strata plan did not show the location or dimension of the car space.52 On 30 March 2005, the defendant’s lawyers responded:51 There was no complaint in the letter about ceiling heights, the kitchen not being in a separate room or brick walls. The first, third and fourth complaints outlined in the letter are no longer pressed.
(a) enclosing the updated strata plan which showed the apartment was 56m2, one square metre larger than the draft plan provided in the contract;
(b) stating that the apartment was not completed and the walls separating the bedroom from the living area would be constructed prior to completion; and
(c) stating that the apartment was not the “ typical ” one-bedroom apartment (in Plan A) which showed three balconies. The draft strata plan showed two balconies and that had not been changed.
53 On 6 May 2005, the defendant’s lawyers sent the plaintiff’s lawyer notices of extension of the defined sunset dates for both contracts. The letter stated that the defendant had encountered delays in completing the buildings and registering the strata plan.54 On 12 August 2005, the defendant’s lawyers notified the plaintiff’s lawyers of registration of the Tower Building strata plan. Attached was an occupation certificate which certified that “ The building is suitable for occupation or use in accordance with its classification under the Building Code of Australia ”. The letter invited inspection.
55 On 17 August 2005, the defendant’s lawyers sent the plaintiff’s lawyers a number of documents for settlement.
56 In August 2005, Mr Goltsman inspected another apartment, T1104.
57 In September 2005, Mr and Mrs Goltsman inspected apartment T1204. At that time it had all of the features that it presently possesses but for the need to improve some finishes. In cross-examination, Mr Goltsman said that he tapped the walls, they sounded hollow and he therefore inferred they were not made of brick. Thus, from this time, he too knew the finished ceiling heights, knew there would not be a kitchen in a separate room, and knew the walls were not brick.
59 The second version of the plaintiff’s complaints appeared in their lawyer’s letter of 20 September 2005, to the defendant’s lawyer. This letter:58 In September 2005, the plaintiff commissioned Mr Robert Whelan to do a building inspection of T1204. Mr Whelan inspected the property and compiled a report.
(a) asked why the client was given Plan A showing three balconies when the strata plan in the contract showed two balconies;
(b) asked “ Why wasn’t the appropriate floor plan provided to our clients at that time ”;
(c) contended that the client was getting a bed-sitter not a one- bedroom apartment;
(d) alleged representations by the agent that T1204 was “ the last available unit ”, that the client instructed that T1104 was available and “ our instructions are that our client only entered into the contract to purchase unit 1204 at the time based on the agent’s representations that all other units had been sold ”;
(e) attached Mr Whelan’s report and said that it appears there had been substantial departures from the requirements of the Building Code of Australia in relation to ceiling heights, which may possibly render the “ unit as not habitable under the Building Code of Australia ”;
(f) stated that pursuant to cl 7 of the contract, the purchaser claimed a reduction of the purchase price by at least $150,000; and
(g) complained about departures from the standards of the finishes and defects in the finishes.60 This letter did not complain about any walls not being brick, the bedroom wall not being fixed or the kitchen not being in a separate room. Nor was there any complaint regarding a sense of space. The only plan referred to was Plan A.
61 On 22 September 2005, the defendant’s lawyer responded stating that (a) as previously advised, the apartment was not a “ typical ” one- bedroom (which is what Plan A depicted); (b) T1104 was under contract but had been rescinded; (c) as the purchaser was aware, ceiling heights were determined by the fact that the apartment was within an existing building that was being redeveloped (reliance was placed on the interim occupation certificate); and (d) if the purchaser considered that there were departures from finishes then cl 35 of the contract should be looked at and the defendant would investigate and rectify any defects. The compensation claim was not accepted and completion was required.
62 On 26 September 2005, the defendant’s lawyer sent a letter to the plaintiff’s lawyer seeking replacement of the bank guarantees. On 8 November 2005, the defendant’s lawyers notified the plaintiff’s lawyers of registration of the Court Building strata plan and attached an occupation certificate.
64 On 22 November 2005, an e-mail was sent to Mr Wood, an employee of the defendant’s agent Colliers, from another Colliers employee, stating that the purchasers had visited the properties on a few occasions and that:63 On 8 November 2005, the defendant’s lawyer notified the plaintiff’s lawyer of a date for settlement for both contracts on 29 November 2005.
today both were very distressed in tears, and have stated they cannot complete on the purchase in particular T1204, this was purchased in late 03 at $678,000. Independent valuers have valued the property at $520,000 shortfall of $150,000, to add further problems the Banks won’t lend, as the apartment is 49 m2 in size, smaller than Bank criteria for city apartments….
65 At around the same time as the receipt of that email, Mr Wood received a telephone call from Mrs Goltsman in which, according to Mr Wood, she made a complaint that Mr Cirillo had told her that there was only one unit available on the north west face of the Tower building but she had become aware that others were now available. That complaint is no longer pressed in the proceedings. According to Mr Wood she also said:
I do not want to settle on the purchase of our apartments because the market price for the apartments has decreased significantly
Although Mrs Goltsman’s version of this conversation was different, I prefer Mr Wood’s evidence. It is consistent with the email that he received and I formed a favourable impression of his reliability as a witness.
66 On 29 November 2005, the plaintiff purported to rescind the sale contracts for both T1204 and C904, on the following basis:
(a) in respect of apartment T1204 - that the ceiling heights did not comply with Part F3 of the Building Code of Australia. This was said to be a breach of the warranty in cl 1 Pt 1 of Sch 3 of the Conveyancing (Sale of Land) Regulation 2000 because it was a matter that would justify the making of an upgrading or demolition order; and
(b) in respect of apartment C904 - that under clause 70.2 of the sale contract an entitlement to rescind allegedly arose because of the interdependency of the Sale Contracts67 There was no complaint about the bedroom wall not being fixed, any of the walls not being brick, or the kitchen not being in a separate room. There was no reference to a sense of space.
68 On 30 November 2005, the defendant’s lawyers wrote to the plaintiff’s lawyer denying any breach of the statutory warranty. The letter rejected the validity of the purported rescission and served notices to complete on or before the 19 December 2005.
69 On 8 December 2005, the plaintiff’s lawyer wrote to the defendant’s lawyers reiterating the contention that the statutory warranty was breached due to ceiling heights; stating “ accordingly our client regards its rescission of the contracts as valid and binding on the vendor ”; and requiring the bank guarantee to be returned for cancellation by 9 December 2005 otherwise appropriate court orders might be sought.
70 On 12 December 2005, the defendant’s lawyers wrote to the plaintiff’s lawyers enclosing documents for settlement on 19 December 2005.
71 On 13 December 2005, the plaintiff’s lawyers wrote to the defendant’s lawyers stating that they had been instructed to approach the Supreme Court to seek orders on an interlocutory basis to restrain the defendant from dealing with the bank guarantees until the dispute regarding the validity of the notices of rescission was resolved either by way of a negotiated settlement or pursuant to an application to the Land and Environment Court seeking a declaratory order in relation to the defendant’s non-compliance with conditions of council consent. A written undertaking not to deal with the bank guarantees until the substantive dispute was resolved was sought.
72 On 14 December 2005, the defendant’s lawyers by letter rejected the validity of the purported rescission and indicated that specific performance would be sought or the contract terminated.
73 On 15 December 2005, the plaintiff’s lawyers wrote to the defendant’s lawyers saying that they were instructed to commence Land and Environment Court proceedings seeking an order for breach of development consent concerning apartment T1204 due to the ceiling heights. On 16 December 2005, the plaintiff’s lawyers sent another letter to the defendant’s lawyers stating that unless they got an undertaking not to deal with the bank guarantees they would seek an interlocutory injunction in the Supreme Court.
75 On 11 January 2006, Mrs Goltsman made a complaint to the NSW Office of Fair Trading about the selling agent, Colliers International (NSW) Pty Ltd. The Office of Fair Trading wrote to Colliers on 30 January 2006, communicating Mrs Goltsman’s complaints:74 On 20 December 2005, the plaintiff commenced these proceedings by summons. The summons sought a declaration that the plaintiff had lawfully rescinded the contracts for apartments T1204 and C904 by notices of rescission dated 29 November 2005; a declaration that the defendant had breached the warranty contained in cl 1(d) of Pt 1 of Sch 3 of the Conveyancing (Sale of Land) Regulation 2000 ; an order that the defendant return the deposits to the plaintiff; and an order prohibiting the defendant from calling on or using the bank guarantees. A supporting affidavit by the plaintiff’s solicitor indicated that as a result of the disclosure in Mr Whelan’s report of 13 September 2005, of possible Building Code of Australia breaches in relation to ceiling heights, he was instructed to point out departures from the Building Code of Australia to the defendant’s solicitor and seek a reduction of the purchase price accordingly. There was no other complaint in the proceedings at this initial stage.
Mrs Goltsman alleges that when she was introduced to the above property by Mr Christian Cirillo, it was represented as being a one bedroom apartment and the only one currently remaining available on the north-west section of the building.
Mrs Goltsman alleges to validate this, she was issued with a pamphlet (with shadowed distinctions) from Mr Cirillo indicating that all the other units were previously sold (copy enclosed). Mrs Goltsman stated this information influenced her to purchase the above-named unit.
In order to progress our enquiries please provide your views on this matter, in writing, at your earliest convenience.However, Mrs Goltsman stated that she subsequently discovered all the other units (on the north side) were not sold and further, she had actually purchased a studio apartment, the dimensions and features of which, were not consistent with the information provided by Mr Cirillo.
76 The letter did not refer to any other complaints that are now pressed and there was no indication of reliance upon any plans. I accept Mrs Goltsman’s evidence in cross-examination that she was told by the Office of Fair Trading that she could lodge an application about being misled by the selling agent but could not do anything through that office about the contract or the developer. Later, the allegation in the letter of a misleading representation that T1204 was the only one-bedroom unit in the north-west corner of the Tower Building that had not been sold was introduced into the plaintiff’s pleadings. Ultimately it was abandoned.77 As at December 2005/January 2006, it appears that there was a dichotomy in the plaintiff’s approach. First, it was pursuing contractual relief in relation to ceiling heights in these proceedings against the defendant. Secondly, it was separately advancing complaints of false and misleading conduct against the selling agent through the Office of Fair Trading.
78 On 14 February 2006, Colliers replied to the letter from the NSW Office of Fair Trading rejecting the allegations and stating that if Mr Cirillo represented that it was the only one-bedroom apartment available in the north-west section of the building, that was factually correct.
79 On 9 February 2006, Mr Whelan, the expert retained by the plaintiff wrote to the plaintiff’s lawyers with measurements of the ceiling heights in apartment T1204 and confirming his previous advice that they were below the Building Code of Australia minimums.
80 On 9 February 2006, the plaintiff filed a statement of claim. On 8 February 2006, Mrs Goltsman swore her first affidavit and Mr Whelan swore an affidavit. The pleading included a new allegation that Mr Cirillo had made a misleading or deceptive representation in contravention of s 52 of the TPA , namely, that apartment T1204 was a one-bedroom unit and the only one-bedroom apartment in the Tower Building that had not been sold in the north-western side of the building. The latter contention was later abandoned.
81 Mrs Goltsman’s first affidavit of 8 February 2006, said that during their first inspection Mr Cirillo handed them Plan A and a price list, both of which were annexed to her affidavit. She also said that he handed them “ brochures and other advertising material ”: they were not attached to her affidavit. She gave no indication at that point that she had relied upon them. She said in this affidavit that at the second inspection they were shown the shell of apartment T1204 and Mr Cirillo said, “ This will be a one bedroom unit and there will be a wall between the living area and the bedroom so as to separate those two areas ”. Her affidavit attached photographs inside apartment T1204 showing her husband, who is 192 cm tall, and her son Michael, who is 197 cm tall, and the proximity of their heads to the ceilings inside the apartment. She asserted that apartment T1204 was not a one-bedroom unit but a bed-sitter.
83 In late February and March 2006, the defendant served affidavit evidence, including that of Mr Cirillo. It also included an affidavit of Mr Murray Wood, a Colliers employee, in which he said that in late 2005 Mrs Goltsman told him:82 The statement of claim and supporting affidavit of Mrs Goltsman contained no complaints regarding the kitchen being in a separate room, “ a sense of space ” representation in the brochure, or a representation that any walls would be brick. There was no reference to any plan other than Plan A. There was no contention that there had been communicated to Mr Cirillo an intention that her two sons were the intended occupants of the two units which the plaintiff had purchased, a contention which was made in one of Mrs Goltsman’s later affidavits.
I do not want to settle on the purchase of our apartments because the market price for the apartments has decreased significantly.
Mrs Goltsman denied this evidence but it is consistent with the email of 22 November 2005 and I accept Mr Wood’s evidence.
84 One of the defendant’s affidavits was from Mr Mark Cogo, an accredited building certifier, which said that the performance requirement of the Building Code of Australia in relation to ceiling heights had been complied with.
85 On 8 May 2006, Mrs Goltsman’s second affidavit was sworn which contained a further version of the plaintiff’s complaints. Among the new material was an allegation that she had told Mr Cirillo that she was purchasing the apartments for her sons to live in. She said that she had never been provided with a floor plan for apartment T1204 and denied having been provided with or having seen the laminated plans to which Mr Cirillo referred in his affidavit. She denied Mr Wood’s evidence to which I have referred as to why she did not want to settle on the purchase.
86 She said in her second affidavit that she had never been told that there would be a sliding wall between the living and bedroom areas. She made no mention of brick walls. She said that had she known that there was an issue of reduced ceiling heights in the Court and Tower Building she would not have purchased the apartments or would have paid substantially less for them. There was no complaint in her second affidavit regarding a brick bedroom wall, brick inter-apartment walls, a “ sense of space ” representation, or the kitchen being in a separate room.
88 On 30 October 2006, there was a further amended statement of claim, Mrs Goltsman swore her fourth affidavit and Mr Goltsman swore his second affidavit. The further amended statement of claim contained new allegations, namely, the separate kitchen representation and the brick walls representation. Mrs Goltsman’s new evidence in this affidavit included the following:87 On 27 September 2006, the plaintiff filed an amended statement of claim, Mrs Goltsman swore her third affidavit and Mr Goltsman swore his first affidavit. The amended statement of claim contained new allegations, namely, the sense of space representations, the bedroom brick wall representation and a representation that it was a “ fantastic investment opportunity ”. The last was later abandoned. The sense of space representations were based on the colour brochure. Mrs Goltsman’s third affidavit of 27 September 2006, included new allegations that prior to contract Mr Cirillo had said that the Gazebo development “ is a fantastic investment opportunity ” and that the wall between the bedroom and the living area would be a brick wall. There was also a new allegation that Plans B, C and D were given to the Goltsmans and that Mr Cirillo said, “ We do not have a floor plan for 1204. Unit 1204 won’t look exactly like this but it will look something like this ”. She added to her reliance evidence, saying that she would not have permitted the plaintiff to enter either of the sale contracts had she known that T1204 would have ceiling heights as low as they are or that the ceiling heights would fail to satisfy the minimum requirements prescribed by the Building Code of Australia, or that the apartment would feel oppressively cramped and confined, or that the bedroom would not have a wall separating it from the living area, or that the unit was a studio (or bed-sit) and not a one-bedroom apartment.
(a) she inferred from what Mr Cirillo had said about the bedroom brick wall that all walls in apartment T1204 would be brick. She relied upon this belief in causing the plaintiff to enter into the contracts and there was a fair prospect that she would not have permitted the plaintiff to enter into the sale contracts, if she had known that no walls in the apartment would be brick;
89 Mr Goltsman in his second affidavit of 30 October 2006, gave the following new evidence:(b) Mr Cirillo in her presence handed to her husband Plan E; and
(c) when causing the plaintiff to enter into the contract she believed that apartment T1204 would have a kitchen in a separate room, based upon Plans B to D, “ especially ” Plan D, and Plan E.
(a) when Mr Cirillo gave the Goltsmans Plan A, he put his hand on it so that it obscured most of bedroom area shown on the plan and said “ that apartment will look something like this ”;
(b) on their second visit to the site Mr Cirillo handed to him Plan E and said to them “ there will be a separate kitchen ”;(d) he believed that T1204 would have a kitchen in a separate room because Mr Cirillo said that there will be a separate kitchen, and because of what was shown on Plans E and A. Had he thought it was not going to have a separate kitchen, he would not have agreed to the plaintiff purchasing the unit; and
(e) Mr Cirillo had said during the pre-contract inspections that all the walls were going to be brick, if Mr Goltsman had thought that none of the walls would be brick he would not have permitted the plaintiff to purchase T1204.90 Mr and Mrs Goltsman swore their final affidavits on 10 November 2006, less than one week before the hearing began. Here, Mrs Goltsman said that before signing the contract she told Mr Cirillo that she was not buying for investment purposes but had two sons and was purchasing the units for them; that it was her intention that her son Michael would live in apartment T1204 and David in C904 and that they were respectively 197 cm and 196 cm tall; that the fire sprinklers in the ceilings touched the hair on the top of Michael’s head and the bottom of the sprinkler in the kitchen almost touched the hair on top of his head; and that when she inspected the shell of T1204 prior to contract she estimated that the concrete ceiling was about a metre above her head.
91 Mr Goltsman in his final affidavit indicated that he had a conversation with his wife after the second visit in which she said that they had two sons and that they should buy one unit for each of them. He said that he expected the ceilings to have heights of around 2.4 metres because that is what he understood from the brochure where it said that the units had a “ sense of space ”. He also said that he expected the kitchen facilities to be in a separate room.
92 The defendant’s submission is that the evolution of the plaintiff’s case was shifting and opportunistic and driven by a drop in the market value of apartment T1204. The Goltsmans’ concern with the drop in market value is apparent. The evidence in that regard included the entry made by Mr Cirillo in Colliers’ records when contracts were exchanged recording that the apartments had been purchased for investment purposes and his logical evidence that that information could only have come from the Goltsmans; Mrs Goltsman’s email of 7 July 2004 to Mr Cirillo enquiring whether there was any demand for one-bedroom apartments with a view; the letter of 20 September 2005 from the plaintiff’s lawyers stating that they would complete the purchase of T1204 if the defendant gave them a reduction in the purchase price of at least $150,000; the email from the Colliers agent in November 2005 describing the Goltsmans as very distressed and in tears and indicating that they said that on the current market valuation there was a shortfall of $150,000 from the price they had contracted to pay; and the evidence of Mr Wood that Mrs Goltsman told him around the same time that she did not want to settle on T1204 because the market price had decreased significantly.
93 On the other hand, it is understandable that a drop in the market price might drive the plaintiff to press its claims. That does not necessarily mean that the claims themselves are not sound. The Goltsmans did not take their sons, who were at that time living at home, to see the apartments prior to contract. This tends to suggest that they were not buying them for their sons in the sense that the sons were to be the beneficial owners. I have decided that they probably did tell Mr Cirillo that they were buying the apartments for investment purposes and did not tell him that they were buying them for their sons. However, I accept their evidence that they intended their sons to live in the apartments after they left home, for some time. In addition to that being their intention, I think that they saw the apartments as investment opportunities.
94 After the inspection in March 2005, when most of the features of T1204 were in the form in which they now appear (other than the moveable wall) the only expressed matters of concern to the plaintiff were those identified in the plaintiff’s lawyer’s letter of 29 March 2005, namely, that the area was supposed to be 55m2, there was no separate walled-off space for a bedroom (at that time the dividing wall had not yet been constructed), and there were two balconies and not three as indicated in Plan A. Mrs Goltsman agreed in cross-examination that at the time of making this complaint she had observed the finished ceiling heights and had observed that there was not a kitchen in a separate room. When the letter of 29 March 2005 was sent, the plaintiff did not make any complaint or reference to two matters which are now pressed. The first was ceiling heights or the reference to a “ sense of space ” in the colour brochure. The suggestion that there had been reliance on the colour brochure was first made 18 months later in the amended statement of claim dated 27 September 2006. Secondly, no complaint or reference was made in the 29 March 2005 letter to a complaint that there was not a kitchen in the separate room. This was first alleged some 19 months later in the further amended statement of claim dated 30 October 2006.
95 This criticism should be discounted to some extent because the matter of ceiling heights was raised in the plaintiff’s solicitor’s letter of 20 September 2005. Nevertheless, the fact remains that the kitchen complaint and the complaint that she or her husband relied on the colour brochure, in a sense which is relevant to ceiling heights, were introduced into the proceedings at a very late stage. I think that this casts a shadow over the Goltsmans’ evidence, particularly those aspects.
96 The plaintiff submitted that it was explicable why all the complaints were not made from the outset and cautioned that litigation is a product not only of a client’s instructions but the input of legal advisers in identifying issues and proofing witnesses. The plaintiff’s case was being handled in 2005 with an emphasis on the contractual right of rescission based on ceiling height, which was understandable given expert advice at the time that there was a breach of the Building Code of Australia. It was this which led to the purported rescissions of 29 November 2005. Therefore, the plaintiff submitted, it is understandable if the Goltsmans thought that it was unnecessary or inappropriate to make another complaint. Mrs Goltsman said she thought from the outset that the floor plan was wrong but indicated that she received advice that the absence of a floor plan in the contract impeded other complaints. In any case, the plaintiff submitted, the one-bedroom apartment complaint had been agitated since January 2006, inspection was in March 2005 and the complaint about ceiling heights was made after measurements were taken in September 2005.
97 There is force in the plaintiff’s submissions. Nevertheless, I do not think that they entirely explain the shifting of ground in the plaintiff’s case, or the lateness of certain complaints. In my view, the way that the plaintiff’s case evolved casts a shadow of doubt over it.
CREDIT
98 The resolution of the case depends largely upon an assessment of the credit of Mr and Mrs Goltsman and Mr Cirillo.
Credit of Mr and Mrs Goltsman
99 The plaintiff submitted that the evidence of the Goltsmans should generally be accepted. It submitted that the Goltsmans had particular reason to remember the events of September to November 2003, because the transactions were very important to them, especially if their evidence is accepted that they were purchasing the apartments for their two sons. Mrs Goltsman referred in her cross-examination to that being her “dream” . I have earlier concluded that they purchased the apartments with the intention that their sons would live in them when they left home, for a time, but also as an investment.
100 The plaintiff’s submissions acknowledged that Mrs Goltsman was a “ passionate and at times fiery witness in the course of her cross-examination ”. That is true. It was submitted that she could not have feigned such passion to conceal a real motivation (as the defendant contends) to escape contracts in a fallen market. It was submitted that Mr Goltsman’s demeanour in the witness box demonstrates that his evidence also should be accepted. Fire and passion may or may not be indicative of an honest or reliable witness. However, in this case, they had the unfortunate consequence that in cross-examination Mrs Goltsman tended to be argumentative and at times non-responsive which did not assist, and at times damaged, the plaintiff’s case. Mr Goltsman also was sometimes argumentative and non-responsive.
101 The plaintiff submitted that when assessing the Goltsmans’ evidence, it should be borne in mind that although they were said to be fluent in English, English was not their first language and that they are unfamiliar with Court processes. I accept that is so. In my assessment, Mrs Goltsman’s spoken English and English comprehension was good. Mr Goltsman’s spoken English was not as good, although his comprehension of spoken English appeared to be good.
102 The plaintiff submitted that an adequate explanation had been given for Mrs Goltsman’s “mistaken” evidence that Plan D had been given to her prior to contract. I do not accept that submission for reasons explained later in this judgment.
103 The defendant submitted that the Goltsmans should not be accepted as reliable witnesses for a number of reasons. The first reason was that their evidence was in large part argumentative and non-responsive. This is so, as I said earlier.
104 The second reason was that the evolution of the complaints made in Mrs Goltsman’s evidence and by the plaintiff of which Mr Goltsman was a director, was shifting, opportunistic and driven by a drop in the market value. In my earlier analysis of the evolution of the plaintiff’s case, I concluded that the evolution does cast a shadow of doubt over the plaintiff’s case and, more specifically, the Goltsmans’ evidence.
105 The third reason why the defendant submitted that Mrs Goltsman’s evidence should not be accepted is that, it is said, she lied about her experience as a real estate agent in order to create a false impression that she was less experienced in real estate than she in fact was. I have earlier found that her evidence in that regard was misleading. Her considerable experience professionally and personally in real estate, disclosed through cross-examination, is a significant consideration when assessing the plaintiff’s case and her evidence. Mr Goltsman’s real estate experience, and his access to his wife’s experience, is similarly a significant consideration.
107 The fifth reason is said to be that the Goltsmans gave contradictory affidavit evidence about receiving or being shown a plan of apartment T1204 before contracting. That is true. I address that issue when discussing Plan E later in this judgment.106 The fourth reason is said to be that Mrs Goltsman lied about receiving Plan D from Mr Cirillo at the time of one of the pre-purchase inspections. I find below that she gave false evidence in relation to Plan D. The defendant submitted that Mr Goltsman gave contradictory evidence about Plan D. That is true, as I find below.
108 The sixth reason is said to be that large parts of Mrs Goltsman’s evidence were inherently unbelievable. I do not accept the submission in those sweeping terms. However, her evidence did strain credulity at times. For example, her evidence:
(a) she did not call upon the experience that she had gained as a leasing consultant of residential apartments in deciding whether to buy these apartments;
(b) she fully trusted and deferred to Mr Cirillo’s statement as to where the real estate market was going; and
(c) she was not experienced in sales of real estate. However, she later conceded the extent of her real estate experience.109 The cumulative effect of these matters is that the credit of Mr and Mrs Goltsman has been damaged.
Credit of Mr Cirillo
110 The plaintiff submitted that Mr Cirillo’s evidence should be rejected as unreliable or false where it contradicted the evidence of Mr and Mrs Goltsman.
112 Thirdly, reference was made to a number of inconsistencies in Mr Cirillo’s evidence in cross-examination including the following:111 First, it was pointed out that although his dealings with the Goltsmans were in September to November 2003, he was not asked to recollect his dealings until March 2006. He had no personal file notes or notes of conversations with which to refresh his memory. It was suggested that there was no apparent reason why he would have tried, prior to March 2006, to remember the events of late 2003. Secondly, between 2000 and 2005, acting as a real estate agent, he showed properties to hundreds of people. The plaintiff submitted that it was inherently implausible that given the above matters, he could recollect events of late 2003 in the kind of detail to which he referred.
(a) In cross-examination he said that he showed apartment C904 to the Goltsmans. Mrs Goltsman in her affidavit said that they were told by him that apartment C904 could not be inspected. Mr Cirillo did not in his affidavit dispute that evidence of Mrs Goltsman.
(b) In his first affidavit Mr Cirillo said that he took the Goltsmans to the shells of certain apartments in addition to T1204. However, in cross-examination he could not recall which apartments he showed them.
(c) In his affidavit evidence he denied telling the Goltsmans that there would be a brick wall separating the bedroom area from the living room. He did not in his affidavits say that he told them that there would be a sliding wall. However, in cross-examination he said that he did tell them that there would be a sliding or moveable wall. At other points in his cross-examination he was unclear in his recollection and said that it was “ likely ” he told them that there would be a moveable wall but that he could not “ specifically pinpoint” if he said that.
(d) In his second affidavit he said that in his experience “ internal walls in modern high-rise apartment developments such as 2 Elizabeth Bay Road are rarely, if ever, constructed using bricks ”. In cross-examination, he said that he was unable to give an opinion as to the prevalence of use of brick in internal walls in apartments built in the last ten years.113 Fourthly, the plaintiff criticised Mr Cirillo’s evidence in cross-examination in relation to his affidavit evidence that following the signing of the contracts he completed a “ buyer profile ”, which was an electronic schedule maintained by Colliers in order to have a profile of the persons buying apartments at the site and their reasons for doing so. Next to the two entries for the plaintiff’s name in respect of T1204 and C904 appear the words “ INV ” and “ think the location is worth investing in ”. He said that the only source of that information would have been the Goltsmans. He said he inserted the word “ INV ” because he understood that the Goltsmans through the plaintiff were buying as investors and were not intending to be owners/occupiers (which were denoted by the symbol “ O/O ” in the schedule). The plaintiff’s criticism is that in cross-examination, he claimed for the first time that in his first conversation with Mrs Goltsman she said that she was looking for an investment property.
114 I accept that the above matters suggest that his evidence should be addressed cautiously. Nevertheless, he impressed me as an honest and generally careful witness.
115 The plaintiff also submitted that Mr Cirillo had a powerful monetary incentive “ to push the envelope ” as far as possible with the Goltsmans. That was said to be because he understood Colliers was earning a commission of 3 percent of the sales price and Mr Cirillo earned 23 percent of whatever fee Colliers earned on the transaction (or alternatively this was credited towards his base retainer). Thus on a price of $682,500 for T1204 he stood to earn approximately $4,700 commission (or have it credited towards his base retainer). Further, he was a new employee still on probation and he understood that to become a permanent employee he would need to get some runs on the board by way of sales. It was said that his keen interest in remuneration was evident from the fact that he had a reasonably good recollection about it. I do not accept that the commission incentive motivated Mr Cirillo to misrepresent relevant matters to the Goltsmans.
116 I take into account my assessment of the credit of Mr and Mrs Goltsman and Mr Cirillo when making findings as to contentious facts later in this judgment
PLANS
117 The plans which the Goltsmans saw prior to contract are important to the determination of the issues, except that they do not bear directly upon the sense of space representations which are based on the brochure.
118 Annexed to the contract of sale for apartment T1204 was a copy of the draft strata plan. It showed the footprint of T1204 and that it had an area of 55m2 and two balconies.
119 Mrs Goltsman testified that Mr Cirillo gave them five plans prior to contract as well as a coloured brochure and a price list. It is convenient to refer to them as Plans A, B, C, D and E. She says that she relied on Plans B, C, D and E, “ especially D”, as well as the brochure and Mr Cirillo’s oral representations. Mr Goltsman referred in his affidavit evidence only to Plans A and E. He said that he relied on Plans A and E as well as the brochure and Mr Cirillo’s oral representations.
120 Only Plan E depicts apartment T1204. Plans A, B and C depict larger apartments with three balconies and a different footprint from that on the strata plan attached to the contract which showed only two balconies. Plans B, C, D and E each contained a scale; Plan A did not.
122 Plans A, C and D each contained the following note or disclaimer:121 It is not in issue that the Goltsmans received Plans A, B and C prior to contract. In final submissions it was conceded for the plaintiff that Mrs Goltsman was mistaken in saying that the plaintiff received Plan D prior to contract. The defendant submitted that they did not receive Plans D and E prior to contract.
These drawings are preliminary drawings and are subject to change without notice during the course of the proposed development. Submission of the drawings does not constitute a representation or warranty by the developer or its servants, agents or contractors that the drawings are final nor that the proposed development will take place in accordance with these drawings. No binding obligations on the part of the developer, its servants, agents or contractors will exist before formal and binding legal obligations are entered into.
Plan B contained a similar note. Plan E contained the following note:
This information is provided to you on the basis that it has been supplied in good faith and we make no warranty as to the accuracy of the information. This drawing is indicative only and may change during the construction phase. You must rely on your own enquiries and the information provided in the contract of sale.
Plan A
123 Plan A is entitled “ Typical 1 bedroom tower ”. This plan was given to every prospective purchaser. Mr Cirillo gave both Plan A and a brochure to the Goltsmans during their first inspection. It shows three balconies, a fixed wall between the dining and bedroom areas with no indication of a door, and a separate kitchen off the dining area. It has a different footprint from the strata plan attached to the contract, which shows only two balconies. A copy was attached to the plaintiff’s lawyer’s initial letter of complaint of 29 March 2005 and was the only plan attached to Mrs Goltsman’s first affidavit.
124 Mr Goltsman testified that at the first inspection Mr Cirillo put his hand on top of plan A so that he obscured most of the bedroom area and said, “ The apartment would look something like this ”. I am not satisfied that this happened. There was no such evidence from Mrs Goltsman. Mr Cirillo denied it. The plaintiff submitted that it is significant that in cross-examination Mr Cirillo agreed that if he had covered the bottom one third with his hand, apartment T1204 could roughly be about that size. I think that this is of little significance.
125 The Goltsmans were aware that T1204 was not a “ typical 1 bedroom ” apartment. Mr Goltsman (but not Mrs Goltsman) said he relied on Plan A (as well as Plan E and what Mr Cirillo said) in forming a belief that T1204 would have a separate kitchen.
Plans B and C
126 Plans B and C relate to different, larger apartments. Plan B is entitled “ Apartment T1103 – T1303 ”. Plan C is entitled “ Apartment T202 – T1002 ”. Both show three balconies, a fixed wall with a hinged door between the dining and bedroom area, and a separate kitchen off the dining area. The defendant submits that the Goltsmans would not have relied upon them because they have a different footprint from the strata plan attached to the contract, which shows only two balconies.
127 Mrs Goltsman said that Mr Cirillo gave them Plans B and C on their third visit. Mr Goltsman in his affidavits did not refer to Plans B and C. Mr Cirillo said that he gave them Plans B and C, but could not recall on which occasion. He said that it was likely that he had provided these plans to the Goltsmans either during the initial meeting or during the inspection of apartment 1204.
128 Plan D related to a different apartment. Plan D is entitled “ Apartment T8 – 04 ”. It shows three balconies, a separate kitchen off the entry way (rather than a walk-through kitchen) and a wall which is half fixed and half sliding between the bedroom and the living/dining room. Mrs Goltsman testified, in her third affidavit of 27 September 2006, that on their third inspection Mr Cirillo handed her Plans B, C and D and saidPlan D
129 Mr Goltsman in his two affidavits did not refer to Plans B, C or D or to this conversation. However, he did say that on their second inspection Mr Cirillo gave them some brochures or documents but he did not recall what they were. He also said that on the second inspection he asked Mr Cirillo whether he had a floor plan for apartment T1204 which they had just inspected and that Mr Cirillo said:
We do not have a floor plan for 1204. Unit 1204 won’t look exactly like this but will look something like this.
Not for that exact unit, but the layout will be similar to the typical floor plan I have given you
This was a reference to Plan A which he gave them on their first inspection. Mr Cirillo disputed giving the Goltsmans Plan D and the words they attributed to him.
130 Plan D was introduced into evidence as an annexure to Mrs Goltsman’s third affidavit where it has the bedroom area crossed out. She was unable to explain the crossing out in cross-examination. The Goltsmans were subject to a deal of cross-examination concerning plan D. In final submissions their senior counsel conceded it had not been received prior to contract. That was also the defendant’s submission.132 Plan D has written on it:131 The Goltsmans’ evidence in relation to Plan D raises a substantial question as to the reliability of their evidence.
133 It was established in the cross-examination of the Goltsmans that Plan D is an altered photocopy of a plan which Mr Goltsman obtained from someone other than Mr Cirillo in August 2005, when he visited the Gazebo site. The plan which he obtained on that occasion became Exhibit 7 and has written on it the following:
# 1204
49 + 7M2
1.8.05
# 1104
49 + 7M2
$525,000134 The Exhibit 7 plan was altered by one or other of the Goltsmans by deleting the reference to the date “ 1.8.05 ”, changing “ 1104 ” to “ 1204 ”, deleting the price of “ $525,000 ” and then photocopying the document with those deletions and alterations. It was then annexed to Mrs Goltsman’s affidavit as a plan received prior to contract on which she “ especially ” relied in relation to the kitchen representation.
135 Mrs Goltsman’s evidence in cross-examination in relation to Plan D appeared to be that it had the crossing out on it when it was handed to her. When confronted with the Exhibit 7 plan, her answers became unresponsive. However, she conceded that her husband was given the Exhibit 7 plan by a salesperson after 1 August 2005, and that Plan D appears to be the same document as the Exhibit 7 plan. She said that she did not alter “ 1104 ” to become “ 1204 ”.
136 Mr Goltsman in cross-examination indicated that the Exhibit 7 plan was given to him in about August 2005, at an inspection of another apartment, apartment T1104; the reference to “ $525,000 ” on it was the asking price of that apartment (because at the time of his inspection it was not then sold); he brought the Exhibit 7 plan home after the inspection and gave it to his wife to add to the documents that she had in assisting her for preparing her case; he altered “ 1104 ” on the plan to read “ 1204 ” probably on the same day he brought it home; he removed the asking price of $525,000 with white-out (liquid paper); after he whited out the price of $525,000 he photocopied the document; and he had also made copies of the 1104 plan prior to altering it.
138 Mr Goltsman’s explanation in cross-examination for altering the Exhibit 7 plan was:137 Mr Goltsman said in cross-examination that he did not write the date “ 1.8.2005 ” on the Exhibit 7 plan. He said: “ The date wasn’t there. Date, my wife put it there. The date wasn’t there. When I made a copy date wasn’t there at all ”. I accept this evidence. This confirms that Mrs Goltsman knew that the Exhibit 7 plan was first received in August 2005.
139 Notwithstanding that Mr Goltsman said in cross-examination that he gave the Exhibit 7 plan to his wife, in re-examination he denied doing so. I reject his denial. He gave the following evidence in re-examination:
Just to think about, because I was told that they’re the same, identical apartments, 1104, 1204, 1304. I wasn’t concerned about that. That’s why I wanted to see and see what’s different between them, just for me. I done for me.
Q. In making the copy that is at page 53 of the tender bundle [i.e. Plan D] did you also remove the date that is at the top of the last page?
A. The date wasn't there. Date, my wife put it there. The date wasn't there. When I make a copy date wasn't there at all.Q. The price that is shown underneath 49 plus 7 m2?
A. That's not the price. It's the metres, 49.Q. Yes, underneath that at the top right hand corner what is written?
A. Yes.Q. What is written under 49 plus?
A. The asking price for the unit 1104.Q. When you made the copy that appears at page 53 did you remove that asking price in making the copy?
A. Of course, because I want to see what was the difference between them. So I put there and prepare for me to do some writings, whatever, notes.Q. Why did you make a copy in the form of page 53 that didn't show the price that is referred to on the last page of exhibit 7?
A. That's exactly what I said, because it's to me, I put, it's different flat, it's different price and I just want to make my notes on there.Q. And did you give a copy of this document to Mrs Goltsman?
A. No, I'm not.Q. What was your answer, sorry?
A. I am not. It was in my room. In my study. You know, in my room.Q. I'm sorry?Q. The question might have been unclear as to which document. Did you give a copy of the document at page 53 to Mrs Goltsman?
A. I'm not.
A. I'm not. I didn't give. I left there in the office.
140 I make the following findings in relation to Plan D. Mr Goltsman received the Exhibit 7 plan in August 2005, almost two years after the subject contracts. Mrs Goltsman knew that was when he received it. The Exhibit 7 plan was altered in the way described earlier and became Plan D. Mrs Goltsman swore in an affidavit that it had been received from Mr Cirillo at a pre-contract inspection. That evidence was false. Mr Goltsman’s explanation for altering the Exhibit 7 Plan was unclear and unsatisfactory.Plan E
141 Plan E is entitled “ Apartment T1104 – T1204 ”. This is the only plan which the Goltsmans say they received prior to contract which depicts apartment T1204. Mr Cirillo did not recall giving it to them. The defendant submitted that the Court should find that they did not receive it prior to contract.
142 Plan E shows two balconies and a separate kitchen area off the entry way. It was introduced into evidence in the Goltsmans’ affidavits of 30 October 2006, a few weeks before the trial, apparently to support a new claim that the Goltsmans were induced to believe the kitchen would be in a separate room. However, it also shows what appears to me to be a two part sliding wall between the dining and bedroom areas. The plaintiff submits that one of the sliding parts is shown as fixed. Be that as it may, it plainly does not indicate a brick wall, as Mr Goltsman conceded in cross-examination. Nevertheless, he said in re-examination that he did not understand this when he signed the contract and that he understood at that time that the bedroom wall would be brick. In earlier affidavits the Goltsmans had sworn to the bedroom brick wall representation without mentioning that they had a plan of apartment T1204, namely Plan E.
143 In their 30 October 2006 affidavits, Mrs Goltsman testified that Mr Cirillo handed Plan E to her husband during their third visit to the site; Mr Goltsman testified that Mr Cirillo handed it to him during their second visit. That evidence was inconsistent with their earlier affidavit evidence. In Mrs Goltsman’s second affidavit of 8 May 2006, she said, “ I had never been provided with a floor plan for apartment 1204 ”. I was unpersuaded by Mrs Goltsman’s explanation in cross-examination that she was there referring to an architectural plan by which I understood her to be seeking to distinguish Plan E. In Mrs Goltsman’s third affidavit, of 27 September 2006, she contended that during the third visit Mr Cirillo handed her Plans B, C and D and said, “ We do not have a floor plan for 1204. Unit 1204 won’t look exactly like this but it will look something like this ”. Mr Goltsman said in his first affidavit, of 27 September 2006, that during the second visit he asked Mr Cirillo whether he had a floor plan for T1204 and Mr Cirillo responded, “ Not for that exact unit but the layout will be similar to ” Plan A. As their evidence stood until 30 October 2006, they were clearly indicating that they had received no plan of apartment T1204 prior to contract. This suggests that they either did not receive Plan E prior to contract or, if they did, that it had no relevant operative effect on their minds.
144 Mr Goltsman admitted in cross-examination that Plan E showed a sliding door and a bedroom wall that was plainly not brick. He also appeared to admit that he did not know whether he relied on Plan E because he said “ Here I got sliding door, so I don’t know, believe in that plan or not believe in the plan ”. Mrs Goltsman said in cross-examination that Plan E was with her all the time from her early meetings with Mr Cirillo, and that it indicated to her the nature of apartment T1204. Later she said it indicated to her what they were getting “ kitchen wise” , and agreed that she understood it was not a typical one-bedroom apartment plan but one that gave a precise size and shape of T1204.
145 Plan E is a copy of the defendant’s plan as it existed in May 2003. In July 2003 the defendant changed the kitchen to a walk-through kitchen in the entrance-way. The change was reflected in a laminated plan entitled “ Level 11 to 13 Tower ” located in the sales room in the Tower Building when the Goltsmans visited it in September, to which I refer below. It seems unlikely that Mr Cirillo would give them a copy of a superseded plan when the current plan was on display and (as I find below) shown to them.
173 Under the BCA there were two alternative ways to satisfy its requirements. The first way was to meet the BCA’s minimum ceiling height requirement for a building of this class set out in F3.1. These minimum requirements were not met to a small extent. The ceiling height measurements of the parties’ experts, Mr Whelan for the plaintiff and Mr Doyle for the defendant, were as follows (in metres):172 In considering this claim, it should be kept in mind that the ceiling height of the apartment was predetermined by the fact that this was a redevelopment of an existing hotel into apartments, and prior to contract the Goltsmans stood on the concrete floor slab of apartment T1204 and saw the concrete ceiling slab above.
Room BCA minimum Whelan actual Doyle actual Kitchen 2.1 2.075 2.080 Lounge room 2.4 2.365 2.34-2.38 Bedroom 2.4 2.365 2.37-2.38 Bathroom 2.1 2.07 2.07-2.085 174 Those ceiling heights are measured from the top of the floor covering. That is also how ceiling heights are measured in the Residential Flat Design Code referred to below.
175 The alternative way to comply with the BCA was to satisfy its performance requirement that a habitable room “ must have sufficient height that does not unduly interfere with its intended function ”. Mr Mark Cogo advised the defendant in writing in 2001 that the proposed ceiling heights within the apartment building complied with the performance standard. In July 2005, he issued an interim occupation certificate certifying, amongst other things, that the Tower Building was suitable for occupation or use in accordance with its classification under the BCA.
176 The plaintiff submitted that the sense of space representations were misleading and deceptive because apartment T1204 was intended to be built (and was later built), and could only be built, with excessively low ceiling heights even if it complied with the BCA performance requirement. The plaintiff submitted that even if the ceiling heights complied with the BCA performance standard, that only meant that they did not "unduly interfere " with intended function - a much lower threshold to satisfy than the representations associated with the sales brochure.
177 It is true that the ceilings are lower than the minimum ceiling heights set out in F3.1 of the BCA, even though they comply with its performance requirements.
178 It is also true, as the plaintiff submitted, that the ceiling heights are lower than the Residential Flat Design Code, which was published in September 2002. State Environmental Planning Policy 65 “ Design Quality of Residential Flat Development ” was an environmental planning instrument under the Environmental Planning and Assessment Act 1979 (NSW) gazetted on 26 July 2002. The Residential Flat Design Code “ provides additional detail and guidance for applying the design quality principles outlined in SEPP 65.... ”. It sets “ broad parameters within which good design of residential flat buildings can occur... ”. Under the Residential Flat Design Code, recommended minimum ceiling heights for “ all habitable rooms ” is 2.7 metres, with 2.4 metres “ the preferred minimum for all non-habitable rooms, however 2.25 metres is permitted ”. Habitable room is defined as, “ any room or area used for normal domestic activities, including living, dining, family, lounge, bedrooms, study, kitchen, sun room and play room ”. Non-habitable room is defined as, “spaces of a specialised nature not occupied frequently or for extended periods, including bathrooms, toilets, pantries, walk-in wardrobes, corridors, lobbies, photographic darkrooms and clothes drying rooms ”
179 The plaintiff’s submissions referred to the evidence in cross-examination of Mr Cogo, which I accept, that typically the heights of ceilings in kitchens in new buildings which he has certified over the last five years have been at least 2.2 metres and that in bathrooms which he has certified in new developments over the last five years, ceiling heights in the bathrooms are often greater than 2.1 metres. This is typically the case in new buildings. The photographs taken of the Goltsmans' son Michael in apartment TI204 show that the ceilings are low for someone tall.
181 The plaintiff submitted that there were no reasonable grounds for representing (by silence or impliedly) that there were no unusual significant features affecting spaciousness so far as ceiling heights were concerned. By September 2003, the defendant had already received an Alternative Solution Report by McKenzie Group dated 16 June 2003, which indicated that it was impossible to comply with the minimum height provisions of the BCA in relation to bathroom ceilings. In Demagogue Pty Ltd v Ramensky (1992) 39 FCR 31 at 32, Black CJ stated that silence was to be assessed as a circumstance like any other and there was no general duty of disclosure. The question was whether having regard to all the circumstances there had been misleading or deceptive conduct. Black CJ said:180 I accept that the ceilings in apartment T2104 are unusually low.
182 It is necessary to consider:
Although ‘ mere silence’ is a convenient way of describing some fact situations, there is in truth no such thing as ‘ mere silence’ because the significance of silence always falls to be considered in the context in which it occurs. That context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.
(a) whether the statements in the brochure received at the initial visit to the property is mere puffery or whether it is actionable as misleading or deceptive conduct concerning ceiling heights; and
(b) if so, whether the plaintiff relied on such conduct.Sense of Space - puffery?
184 “ Puffery ” refers to exaggeration in the context of advertising to attract potential purchasers. Puffery often accompanies the sale of real property. Whether pre-contractual representations are actionable or merely in the nature of puffery depends on the particular facts, considered “ in the light of the ordinary incidents and character of commercial behaviour ”: Australian Competition and Consumer Commission v Kaye [2004] FCA 1363 at [122] per Kenny J. In OverlookManagement BV v Foxtel Management Pty Ltd [2002] NSWSC 17 at [118] – [120] , Barrett J set out the general principles regarding when a statement is caught by the prohibition in s 52 of the TPA:183 The statements concerning a sense of space were made in a colour brochure received by the Goltsmans at their first visit to the Gazebo redevelopment site. The defendant submits that the words in the colour brochure do not convey a representation of fact but are mere puffery.
185 In Hanave Pty Ltd v LFOT Pty Ltd (1998) ATPR 41 – 658 at 41,320 , Moore J observed:
(a) latitude is allowed in commercial dealing by way of puffery;
(b) “statements alleged to be caught by s 52 must always be assessed in their context” ;
(c) “ the reality is that a certain amount of hyperbole is permissible and to be expected in business without attracting legal sanctions ”; and
(d) “Section 52 does not subject commercial enterprises to a regime of enforced modesty in relation to their achievements and skills….That is not the way business works. ”186 In Mitchell v Valherie (2005) 93 SASR 76 (CA) at [71] – [73], White J summarized the principles governing when a statement by a seller is caught by the prohibition in s 52 of the TPA:
When looking at the conduct of the alleged infringer of s 52, one must look at the whole of the conduct not the particular matter on which the plaintiff has focused attention in isolation: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 199 and Pappas v Soulac Pty Ltd (1983) 50 ALR 231. In that last mentioned case at 234, Fisher, J said, in the context of an agent making statements about the ‘ commercial’ viability of a shopping centre which the agent was selling,
... Many of the statements ... were also essentially the type of introductory comments , in the nature of puffery, made at the start of negotiations, for the purpose of attracting the interest of a possible 'purchaser'. As such they became irrelevant or of little, if any, significance when detailed information is subsequently given a fortiori, to a potential ‘ purchaser with commercial’ experience. To the extent that they are essentially puffery, it is proper to be reluctant to elevate them to the status of potentially misleading conduct.
(a) “It is clear enough that it is not every statement made in contractual negotiations, or as a prelude to contractual negotiations, which will be regarded as conveying a representation. To constitute a representation, the statement must be a representation of fact.”
(b) “Statements that are so vague as to be incapable of being given any reasonably precise meaning or because they are exaggerated commendatory opinion rather than a statement of any factual matter do not give rise to an actionable misrepresentation.”
(c) “There are some introductory comments made at the start of negotiations for the purpose of attracting the interest of possible purchasers which are not reasonably to be understood as conveying a representation of fact. ”
(d) “The more specific the words used, the less likely it is that they will be regarded as mere puffery.”
(e) “In each case the statements have to be considered in their own context so as to determine what both the speaker and hearer would have understood them to mean.”187 In considering whether the words complained of in the colour brochure could be considered to convey a representation of fact, the following may be taken into account, substantially as submitted by the defendant.
188 First, the words appear in a conceptual glossy brochure which is pitched at a high level of generality. The brochure contains an express disclaimer that the information it contains is subject to change without notice and any interested party must undertake its own enquiries to confirm the accuracy of the information in the brochure. There are no statements in the brochure about apartment T1204 or about any particular apartment. The brochure contains no statements of hard facts about the property. Mr Goltsman conceded that the brochure contains only general statements about the development that could apply to any apartment in the development.
189 The brochure was, I think, a device to attract the attention of potential purchasers. It contained promotional catchwords. In Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189 at 15,205, Young J said: “ It seems to me very difficult to allege that a newspaper advertisement which is designed primarily to tell people that a house is open for inspection should be construed as giving information other than preliminary information upon which a person should rely in order to enter into a contract. If one expects puffery anywhere it would be in such a newspaper advertisement.” Similarly , it seems to me that the brochure gave preliminary information, that puffery is to be expected in brochures of this type, and that it is difficult to elevate the words in this brochure to the status of misleading or deceptive conduct or to say that they gave information upon which a person should rely in order to enter into a contract.
190 The second consideration is that the words about the aesthetic quality of apartments in the building - that they will have a “ sense of space” and “ be comfortable and easy and very liveable” - contain a subjective element. The plaintiff’s case is that such words containing a subjective element convey a representation of hard fact. The Full Federal Court in John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) ATPR 41 – 249 at 41,359 referred to a representation of “ hard physical fact” such as the net lettable area of a building which was an essential factor in determining the likely profitability and, in turn, the value of a building. The Full Court observed that information concerning “ the net lettable area of a building, stands on a different footing from the puffery which often accompanies the sale of real property ” because the matter of the size of the net lettable area of the building was “ one of hard physical fact ”.
191 It is difficult to convert statements such as “ a sense of space ” in a brochure into meaningful representations of fact. What is viewed as having a “sense of space” or being “easy and comfortable” by one person may not be so regarded by another. This is illustrated by the fact that witnesses in these proceedings have given evidence that sliding walls and a kitchen which is not enclosed in a separate room would add to the “ sense of space ” in the apartment. Mrs Goltsman conceded that sliding doors (as opposed to doors on hinges) save space when the door is open.
192 The third consideration is that the circumstances in which the brochure was issued suggest that readers would, as in fact occurred, enter the apartment and make their own observations. Before proceeding the Goltsmans saw for themselves the height of the concrete slabs in apartment T1204 during their inspections. The Gazebo project was a redevelopment of an existing hotel, something the Goltsmans knew. The height between the concrete slabs substantially dictated the final ceiling heights. The height between the concrete slabs, which the Goltsmans saw upon their inspection, was between 2.415 and 2.435 metres (that fact may be contrasted with their evidence that the concrete ceilings appeared on their inspection to be over 0.5 metres or about 1 metre above them). The heights between the concrete slabs were already close to the minimum heights under the BCA; that is, before any of the redevelopment work on the apartment had taken place. The final ceiling heights in the “habitable areas” of apartment T1204, which were dictated by the need for plasterboard ceilings to accommodate services in the ceiling and carpet in the living/dining room and bedroom areas, were only approximately 5.5 to 7.5 cm lower than that concrete slab height. That is, the height went from between 2.415 and 2.435 metres to between 2.34 to 2.38 metres.
193 Given the Goltsmans’ experience in the redevelopment of existing buildings into apartments for sale, when they saw the concrete slabs, they must have understood, or ought reasonably to have understood, that the ceiling height would be less than the observed height because of the redevelopment work that was yet to take place in the apartment. Mr Goltsman admitted he had experience (gained in relation to the investment properties he had developed) of the need to change ceilings of an existing building for fire protection.
194 The fourth consideration is that statements in a high-level colour brochure become of little significance when detailed information is subsequently given, particularly to a potential purchaser with commercial experience. The plaintiff signed a sale contract, which included a strata plan of the apartment, and was shown the laminated plan showing the sliding door and the ultimate floor plan of the kitchen.
195 Those considerations lead me to the conclusion that the statements that apartments in the redevelopment would have “ a sense of space” and be “ comfortable and easy and very liveable” are mere puffery and are not actionable as misleading or deceptive conduct.
Sense of space – misleading or deceptive, reliance?
196 If I am in error it becomes necessary to consider whether the statements in the brochure were misleading or deceptive and, if so, whether the Goltsmans relevantly relied on them. The only basis upon which the plaintiff asserts that apartment T1204 does not possess the sense of space quality is its allegation in relation to ceiling heights. The Goltsmans testified that they would not have permitted the plaintiff to enter into the sale contracts if they had known that the ceiling heights would be as low as they are.
197 The Goltsmans inspected the shell of apartment T1204 prior to the purchase and, in doing so, observed its size including the spacing between the existing floor and ceiling concrete slabs. With their experience, they must have known that the ultimate spacing would be lower due to carpets on the floors and services in the ceiling. The ceiling heights were predetermined by the distance between the existing structural concrete floor slabs of the building. Installation of services required plasterboard ceilings approximately 10 mm thick to be affixed to a 13 mm furring channel. In addition, the proposed carpet and underlay thickness was approximately 15 mm, leaving the floor to ceiling heights in the habitable rooms up to 25 mm (about one inch) less than 2.4 metes.
198 Given this context, I have difficulty in seeing how the statements in the brochure were misleading or deceptive in relation to ceiling heights or how the Goltsmans could have relied upon them so far as concerns ceiling heights.
199 Mrs Goltsman is familiar with the sorts of statements used by real estate agents in promotional material. She introduced people to luxurious single bedroom apartments to lease in the same area as this apartment in the time prior to 2003. She was familiar with the available properties in this area of the city. She has experience preparing promotional literature about the properties she leased. Mrs Goltsman has promoted a number of residential units while working as a real estate agent at McGrath's in which the language used to describe them contained typical words of puffery used by real estate agents. In relation to these advertisements, she knew the way in which those properties were being publicly advertised by McGrath's to prospective tenants. She acknowledged a property she offered for lease was “ shocking ”, that she “ did not like the position of it ” and that “ wasn't a very nice area ”, even though the promotional literature for the property described it as “ conveniently located near transport and shops ”. She offered for lease a property which was 41m2 which was promoted as “ separate spacious lounge, dining/study area ”.
200 Notwithstanding this experience, Mrs Goltsman asserted in relation to the colour brochure that she did not understand the style of language it used as typical advertising words used by real estate people seeking to sell real estate. In my view, that evidence was implausible.
201 A linkage between ceiling heights and the words in the brochure was not alleged until a late stage of the proceedings. Whatever the Goltsmans’ assumption may have been about the ultimate ceiling heights, I am unable to attribute it to reliance on the words in the brochure.
202 Accordingly, I reject the sense of space representations claim.
Separate Kitchen Representation
203 The plaintiff’s pleaded representation is that apartment T1204 would have a kitchen in a room separate from other rooms. The defendant denies making the representation.
204 This alleged representation was first raised on 30 October 2006, about two weeks before the hearing began, about 18 months after Mrs Goltsman first inspected the kitchen in its nearly final form, and about a year after Mr Goltsman first inspected the finished apartment.
205 Mrs Goltsman swore in her fourth affidavit, dated 30 October 2006, that based on plans B, C, D and E, “ especially D ”, she believed that the apartment would have a separate kitchen. Mr Goltsman’s different evidence in his second affidavit, dated 30 October 2006, was that he believed there would be a separate kitchen because during the second meeting Mr Cirillo told his wife and him that “ there will be a separate kitchen ” and because of what was shown on Plans A and E.
206 A month before this was first alleged as a representation, Mrs Goltsman swore her third affidavit annexing Plans B, C and D, which show kitchens with different floor plans but made no reference to a kitchen representation. In her earlier and second affidavit she exhibited a photograph of the kitchen but made no complaint in relation to the kitchen. In Mr Goltsman’s first affidavit sworn on 27 September 2006, he listed the reasons why he would not have permitted the plaintiff to buy the apartment, but they did not include reference to the kitchen.
207 The words attributed by Mr Goltsman to Mr Cirillo are “ there will be a separate kitchen ”. This is not in the same terms as the pleaded representation that the kitchen would be “ in a room separate from others ”. Assuming Mr Cirillo uttered these words, the defendant submits that in fact there is a “ separate kitchen ” albeit not “ in a room separate from others ”. It is unnecessary to decide that point because the issue can be decided on other grounds.
208 I have earlier found that the Goltsmans did not receive Plan D prior to contract, that I am not satisfied that they received Plan E prior to contract, that they saw the relevant laminated plan and would have understood it, and that they were given a similar A4 architectural plan. The laminated plan showed the apartment as it was built, including the kitchen. Mr Cirillo denied making the alleged oral statement and testified that he is confident that he discussed the kitchen with the Goltsmans and that he pointed to where it was on the laminated plan. I accept his evidence.
209 These findings remove most of the substratum of the Goltsmans’ alleged belief. There remain Plans B and C on which Mrs Goltsman (but not Mr Goltsman) said she relied. They showed larger apartments. I do not accept that they contained a representation that apartment T1204 would have a kitchen in a separate room or that the plaintiff relied upon them in that respect. Accordingly, I reject the separate kitchen representation claim.
Brick Walls Representation
210 This allegation was first made at a very late stage of the proceedings. The inter-apartment walls are not brick but gyprock. Insofar as the brick walls representation is alleged to be implied from Mr Cirillo’s representation that the bedroom wall would be brick, as I have not accepted that that representation was made, the allegation fails. Even if the brick bedroom wall representation had been made, I do not agree that it necessarily implied that all walls would be brick. Insofar as it is alleged by Mr Goltsman that Mr Cirillo made an express oral representation that all the walls would be brick, I am not satisfied that he did.
CONCLUSION AND ORDERS
212 I make the following orders:211 I propose to dismiss the plaintiff’s claim for the reasons set out above. Consequently, the defendant is entitled to orders for specific performance of the sale contracts and to relief in relation to the guarantees, as sought in the cross-claim. Liberty to apply will be granted which, if necessary, will enable application to be made for the purpose of dealing with any matter involved in or arising in the course of working out the orders for specific performance: Morrow v Tucker [No 2] [2006] NSWSC 1358 at [22].
1. The plaintiff’s claim is dismissed with costs.
2. Declaration that the cross-claimant is entitled to have the contract dated 6 November 2003 for the sale of apartment T1204, 2 Elizabeth Bay Road, Elizabeth Bay, New South Wales, being part Lot 10 in Deposited Plan 635300 and being Lot 48 in Strata Plan 73943, for the amount of $677,500 (“ the T1204 Contract ”) specifically performed by the first cross-defendant.
3. Declaration that the cross-claimant is entitled to have the contract dated 6 November 2003 for the sale of apartment C904, 2 Elizabeth Bay Road, Elizabeth Bay, New South Wales, being part Lot 10 in Deposited Plan 635300 and being Lot 153 in Strata Plan 75363, for the amount of $615,000 (‘ the C904 Contract ”) specifically performed by the first cross-defendant.
3. Order that the first cross-defendant specifically perform the T1204 Contract.
4. Order that the first cross-defendant specifically perform the C904 Contract.
5. Declaration that each of the second cross-defendant and the third cross-defendant is liable to the cross-claimant for:6. Order
(a) payment to the cross-claimant of all monies due to the cross-claimant under the T1204 Contract and the C904 Contract; and
(b) the due and punctual performance by the first cross-defendant of all the first cross-defendant’s obligations under the T1204 Contract and the C904 Contract.7. Order that the cross-defendants pay the costs of the cross-claim.
(a) that a registrar fix a time and place for completion of the T1204 Contract and the C904 Contract;
(b) that a registrar certify the sums which should be paid by the first cross-defendant to the cross-claimant on completion of the T1204 Contract and the C904 Contract;
(c) that the cross-claimant and the cross-defendants attend at the time and place fixed for completion of the T1204 Contract and the C904 Contract;
(d) that the cross-defendants pay to the cross-claimant the sums certified pursuant to order 6(b) above; and
(e) that the cross-claimant and the first cross-defendant execute all such documents and do all such things necessary in order to enable the sales to be completed.
8. Grant liberty to apply on three days notice.
9. The exhibits may be returned.
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