McArdle v Manton
[1999] TASSC 132
•2 December 1999
[1999] TASSC 132
CITATION: McArdle v Manton & Anor [1999] TASSC 132
PARTIES: McARDLE, Tomas
McARDLE, Christine
v
MANTON, David Robert
MANTON, Marie Lavinia
HEIRS PTY LTD (ACN 009 547 184)
trading as PETRUSMA REEVES FIRST
NATIONAL REAL ESTATE
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 1914/1997
DELIVERED ON: 2 December 1999
DELIVERED AT: Hobart
HEARING DATES: 24 - 26 November 1999
JUDGMENT OF: Wright J
CATCHWORDS:
Conveyancing - Vendor and purchaser - Contrct for sale of land - Recission for misrepresentation - Damages for deceptive or misleading conduct - Alleged misdescription of easements by estate agent.
Trade Practices Act (1974) (Cth), ss52, 53A and 87.
Fair Trading Act (1990) (Tas), ss14, 17, 37 and 41.
Aust Dig Conveyancing [19 - 103]
REPRESENTATION:
Counsel:
Plaintiffs: A R Spence
First and Second Defendants: K B Procter
Third Defendant: D R Wallace
Solicitors:
Plaintiffs: Page Seager
First and Second Defendants: Murdoch Clarke
Third Defendant: Wallace Wilkinson & Webster
Judgment Number: [1999] TASSC 132
Number of Paragraphs: 30
Serial No 132/1999
File No 1914/1997
TOMAS McARDLE, CHRISTINE McARDLE v DAVID ROBERT MANTON
MARIE LAVINIA MANTON and HEIRS PTY LTD (ACN 009 547 184)
trading as PETRUSMA REEVES FIRST NATIONAL REAL ESTATE
REASONS FOR JUDGMENT WRIGHT J
2 December 1999
This action came on for trial of all issues, with the exception of damages, on 24, 25 and 26 November 1999. The key issue in this case is whether or not the third defendant's employee, as agent of the first and second defendants, engaged in deceptive or misleading conduct, or misrepresented a material attribute of real property during the course of a transaction which culminated in the plaintiffs' agreement to purchase a residential dwelling at 97A Derwent Avenue, Lindisfarne.
The plaintiffs claim that, having decided to make an offer to purchase the first and second defendants' property at that address, but before signing a copy of the proposed contract for submission to the vendors, they were advised by Regina Vietz, a real estate consultant employed by Petrusma Reeves First National Real Estate, that the property was subject only to a drainage easement, whereas, in reality, it was subject to both a drainage easement and a coextensive right of carriage way in favour of two neighbouring properties.
The plaintiffs claim to have lawfully rescinded the contract of sale which was entered into between themselves and the first and second defendants, and they now seek a return of the deposit of $21,000 which they paid to the third defendant, as stakeholder pending completion, shortly after signing the contract. The also seek damages. Their claims are based upon innocent misrepresentation or, alternatively, negligent misrepresentation and they also invoke the Trade Practices Act (1974) (Cth), ss52, 53A(1) and 87 and the Fair Trading Act 1990, ss14, 17(1)(b), 37 and 41.
The first and second defendants claim that the contract of sale was wrongly repudiated by the plaintiffs and they counterclaim a declaration that the said deposit of $21,000 is forfeited to them and that they are entitled to give a good receipt therefor, to the third defendant. They also claim liquidated damages, pursuant to par9 of the contract of sale, and damages at large for breach of contract.
The third defendant claims no substantive relief, but denies any misleading or wrongful conduct on the part of Ms Vietz.
The plaintiffs' evidence is that during the morning of Saturday 19 July 1997, they attended an open house showing of the premises at 97A Derwent Avenue, Lindisfarne. They had been searching for a new family home for about two months. They were quickly attracted to the property at Derwent Avenue, as it appeared to meet most, if not all, their criteria, which included a spacious residence, a large and beautiful garden and a view of the Derwent River. Almost immediately, they resolved to purchase the property provided they could do so within their price range. The asking price for the property was $225,000. Whilst at the open home showing, the male plaintiff had access to, and in fact inspected, a photocopy of at least pages 1 and 3 of the relevant certificate of title, which was on display in the kitchen area. Pages 1 and 3 of the certificate of title were as follows:
Later that afternoon at about 3.30pm, by arrangement with Ms Vietz, the plaintiffs inspected the premises again. They inspected the garden and also the house over a considerable period of time and then, after a brief discussion as to the price with Ms Vietz, they requested her to submit their offer of $215,000 to the vendors, the first and second defendants. Ms Vietz told them that in order for her to do this, they would need to sign a draft contract incorporating the price and other pertinent details which she could then submit for acceptance and execution by the vendors if they were prepared to sell at that price. To that end, she prepared a contract of sale on a Law Society approved form which she had in her possession at the time. Prior to the plaintiffs' signature of this document, Ms Vietz drew their attention to the copy certificate of title which she produced from her file.
Thus far, the facts as stated, are not in dispute. The plaintiffs claim that when shown the copy certificate of title, they noticed, for the first time, the right of way and drainage easement marked upon the plan. It is plain from the evidence given by them during cross-examination that both plaintiffs knew, in general terms, the nature and purpose of a right of way and they were also aware of some of the general incidents of an easement. The plaintiffs said that they asked Ms Vietz about the right of way. The male plaintiff said that he and his wife referred to the area in question as an "easement", whereas his wife, in her evidence, said that the area was referred to by them as a "right of way". In normal circumstances, this difference in terminology would be unremarkable, but in the circumstances of this case, Mr Procter, counsel for the first and second defendants, submitted that it was illustrative of a clear tendency by the plaintiffs to reconstruct and rationalise, rather than to give their evidence of relevant events based solely upon memory. Several illustrations of this tendency were referred to by Mr Procter in his final address and I must say that in respect of nearly every example which he gave, I am in agreement with his submission.
The particulars in par4 of the statement of claim allege that Ms Vietz told the plaintiffs that the marked area on the plan was "a drainage easement for the purposes of repair of drains and sewerage", that one of the plaintiffs then asked her who was entitled to use the area and she said words to the effect, "only Council workers for the purpose of repairing the drains", and that the female plaintiff then said, "so it is not a public right of way", to which Ms Vietz replied, "no". This conversation is alleged to constitute the relevant misrepresentation or deceptive or misleading conduct, entitling the plaintiffs to the relief sought. The plaintiffs did not claim to remember the precise words used but, even so, their version of events changed fairly significantly from those alleged, both in their examinations-in-chief and when they were cross-examined by opposing counsel. As I have already observed, it was apparent to me that many of their answers were based, not upon recollection, but rather upon reconstruction in accordance with their own perceived best advantage relative to the issues in the case.
It may be noted that the misrepresentation alleged to have been made by Ms Vietz consisted essentially in her failing to explain to the McArdles that, in addition to the drainage easement, there was a private right of way which could be enjoyed by the owners of the adjoining lots 2 and 3, the relevant boundaries of which are both shown on the survey plan. If Ms Vietz had said that the drainage easement would allow Council workers to repair the drains, and if she said that the marked area was not a public right of way as alleged, these assertions, on their own, would have been true and would have been incapable of constituting misleading conduct. The plaintiffs' complaint, however, is that Ms Vietz did not tell the whole truth, as she omitted to point out the dual nature of the easement marked on the title plan and by saying that "only" Council workers had access to the property, she was implying that no other easement of any kind was in existence at that time.
It must be observed that during the course of their evidence, the plaintiffs were at pains to explain how enchanted and delighted they were to find a property which suited their requirements so well and how sad they were to lose the property once they felt that they could no longer proceed with the contract. They said that but for the existence of the right of way in favour of lots 2 and 3, they would have proceeded with the purchase. They said as much in their solicitor's letter of 26 August 1997 which was written to the first and second defendants' solicitor, in which they offered to proceed with the purchase if a condition precedent were incorporated in a fresh agreement obliging the vendors to eliminate the right of way from the title. It is clear enough that the plaintiffs would not have been hampered by a lack of finance if they had chosen to proceed with the purchase and, no doubt, it should therefore be concluded that it was not just a loss of interest on their part which caused them to seek rescission of the contract of sale, but was rather, as they claimed, their unwillingness to purchase a property, subject to an onerous right of way which they had not originally contemplated.
At first, I found it difficult to accept that this reason constituted their sole motivation for deciding to rescind or repudiate the contract for sale. The drainage easement and the right of way are coextensive as the plan illustrates The right of way showed little or no evidence of heavy use by adjoining landowners and Mr Manton's evidence tended to confirm this, although he pointed out that there was a defined track over the right of way. It may be observed that if Council workmen were to come onto the land to attend to the drains, they could wreak considerable havoc on the lovely garden area which, from the plaintiffs' point of view, was such an appealing feature of the property. The plaintiffs knew of the existence of the drainage easement at the time they signed the contract, yet the prospect of workmen entering to dig up pipes appears to have occasioned them not a moment's pause. No evidence was given to suggest that the plaintiffs wanted to build an extension over this part of the property or to utilise it for purposes inconsistent with either form of easement. The right of way was clearly inappropriate for vehicular traffic and, having regard to the permanent structures already on lots 2 and 3, and the Esplanade at the end of the right of way, it was practically impossible that the right of way could have been used then or in the future for vehicular movements. In short, it is unlikely that continued use of the right of way would have added much to the limitations imposed by the drainage easement of which the plaintiffs were well aware. At most, it could have diminished their privacy to some extent and reduced their security by permitting the movement of strangers through their backyard.
For the plaintiffs to recover, they must, of course, establish a causative link between any claimed misrepresentation or deception and their entry into the relevant contract. This was conceded by Mr Spence. In this context, the following features of the transaction require comment. Their inspection of the property had disclosed to each of them at least one large gate in the common boundary on No 97A with lot 3. They knew, in general terms, what a right of way consisted of. They had before them a clear plan showing both a right of way and a drainage easement. There was also a written notation of these two easements in the second schedule on page 1 of the copy certificate of title. They were keenly interested in the property and they had mutually resolved to offer to purchase it, at a particular price, before taking any notice whatsoever of the plan. They did not ask to inspect the plan; Ms Vietz proffered it to them. One is entitled to surmise that if the nature and extent of the right of way had been explained to them in crystal clear terms, they may well have agreed to the purchase of the property upon the terms and for the price embodied in the contract, without objection.
If Ms Vietz had not been so conscientious as to show them the plan before they signed the contract for sale, they would have had no ground whatsoever for complaint. They did not ask to see the certificate of title before signing, as I have already observed. Their infatuation with the property was apparently of such a degree as to cause them to rely solely upon their visual inspection of the house and grounds before committing themselves to the purchase. It is quite clear that it was only Ms Vietz's actions which brought the plan to their attention. There is some obvious irony in this situation, but its existence does not resolve the current problem.
The plaintiffs actually saw the plan and they say that they asked questions about it. If their questions elicited the responses to which they deposed, the only problems remaining can be:
(1)whether or not the responses received by them can be characterised as misrepresentation or deceptive or misleading conduct; and
(2)if so, whether or not they were thereby induced to proceed with the transaction.
From what I have said, it is clear that I entertain some doubt upon the latter of these issues for the reasons already discussed, but I am not prepared to base my conclusion on issues of causation. The allegations in the pleadings, particulars and answers to interrogatories emanating from the plaintiffs, stress that the plan shown to them by Ms Vietz on the afternoon of 19 July 1997 had the easement area upon it accentuated by green highlighter pen marking. Under cross-examination, both plaintiffs tended to resile somewhat from this stance and in fact each of them agreed that they may have been mistaken, but, as Mr Wallace, counsel for the third defendant, pointed out in his final address, the question whether or not the plan was marked in this way was not a matter of only minor importance. It was indeed of very considerable significance in the sequence of events relied upon by the plaintiffs because both plaintiffs claimed that it was the distinctive green marking on the plan which alerted them to the possible significance of the nature and extent of the easement and caused them to question Ms Vietz about it. I agree with Mr Wallace's observations and submissions in this respect.
The evidence of Mr Manton, coupled with the evidence of Ms Vietz herself, makes it perfectly clear that the copy of the certificate of title which was viewed, both by visitors to the open house in the morning and by the plaintiffs on the afternoon of 19 July 1997, was not marked green. I accept the evidence of Mr Manton and Ms Vietz on this issue. I am completely satisfied that the relevant plan was not marked green or, indeed, with any other coloured highlighter or pen. I think that on the most charitable interpretation of the plaintiffs' evidence, it must be said that they have an imperfect memory of relevant events and that they have both assumed that the plan produced by Ms Vietz had green markings upon it because the plan which they were subsequently sent by their solicitor had the easement marked upon it with green highlighter pen. Their error in transposing the colour from one plan to the other in this way, whether subconscious or deliberate, in my opinion, tends to undermine their reliability.
I think there is much to be said for Mr Wallace's submission that in all probability the plaintiffs received a shock when they received Ms Tregenza's letter of 18 August 1997 (Exhibit P1, pages 29 - 31). Paragraph 2 of that letter ("Title to the Property") states:
"There is a Right of Drainage (coloured green) at the side of the property which would contain the drain for stormwater and sewerage and this area of land should not be built over or upon. The Title provides that people may enter upon the land to lay, repair and maintain any of the pipes or drains thereunder. Furthermore, there is a Right of Way over the strip of land (coloured green) to the block of land behind. The residents can pass freely over the road and you must allow them free access."
Enclosed with that letter was a copy of the survey plan which, although in essential respects identical to the plan endorsed on the copy certificate of title in Ms Vietz's possession, was marked with green highlighter and had somewhat different printing or writing upon it. This, coupled with Ms Tregenza's reference to the right of way as giving free passage by residents of the block of land behind to "pass freely over the road" [my emphasis], caused them to envisage a substantial loss of exclusive possession and privacy which they had not previously contemplated. This had become a matter of no small significance to them in light of Mrs McArdle's desire to use the property as a day care centre. It should be noted that no evidence was given to suggest that this intended purpose for the property had been made known to Ms Vietz during her dealings with the plaintiffs.
Mr Wallace's submission can also be tested against the further circumstance that Ms Vietz was an experienced real estate agent and, in particular, the fact that she had attended the Manton's property at 97A Derwent Avenue in company with Mr Brian Reeves, a principal of the third defendant, only a few days previously. During this visit, Mr Manton showed both of them over the block and fully explained the nature and extent of the right of way giving access to the two neighbouring properties. Ms Vietz was the listing agent for 97A Derwent Avenue and, as such, had full responsibility for overseeing the marketing of the property through the third defendant's agency. I am quite satisfied that Ms Vietz was completely familiar with the true nature of the right of way, both from her initial visit and at least one subsequent visit before the open house took place. These are matters of significance, in my opinion. One could understand that someone unfamiliar with the block in question might, on seeing just a copy of the plan on the title, fail to appreciate that the right of way, superimposed as it was on the drainage easement, constituted an encumbrance on the title of a different and additional kind. I consider that there is no reasonable prospect that Ms Vietz made such a mistake. Ms Vietz was familiar, not only with the plan, but also the block itself and with Mr Manton's description of the extent of the right of way. She said that she is familiar with plans showing a double easement and she said that this is by no means uncommon in her experience as a real estate agent. If, as claimed by the defendants and Ms Vietz in her evidence, she did not give the description and assurances alleged by the McArdles in their statement of claim just preparatory to their signing the contract, and if the plaintiffs failed upon inspection of the plan to appreciate the dual nature of the easement, and also failed to appreciate the significance of the gates connecting 97A with lots 2 and 3 on the plan, it is easy to see that they may have failed also to appreciate the existence of the right of way or to distinguish it from the drainage easement and only realised their error upon receipt of Ms Tregenza's letter.
The plaintiffs were dismayed to find out the extent of the easements when notified of the same by their solicitors and their initial enthusiasm and plans were no doubt deflated, but they have failed to show to me on the balance of probabilities that Ms Vietz was instrumental in any of this. The plaintiffs may well have had an impression that the block was subject to a drainage easement only, but they have not persuaded me to the requisite degree that this was in any way attributable to false or misleading information provided by Ms Vietz. I find that she gave no false information, either by misstating a fact or by omitting to provide a clear and unequivocal statement of any relevant fact.
The plaintiffs' misconception or misunderstanding does not establish a breach of the relevant provisions of the Trade Practices Act and does not provide a foundation for their action for rescission, either at common law or equity. It must be conduct on the part of the defendant which amounts to misrepresentation or is likely to mislead or deceive which is decisive. Whether there has been such conduct is a question of fact.
It was not suggested that this was a case in which mere silence by Ms Vietz as to the effect or nature of an easement over the property constituted any part of the actionable conduct complained of (cf Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 79 ALR 83 and 95, per Lockhart J. I make this point because, as I have already mentioned, the misleading conduct alleged against Ms Vietz is not that she told the plaintiffs that the drainage easement allowed access to the property for repair to drains and that there was no public right of way over the relevant section of land. Standing alone, these two representations are unexceptionable as they contain no erroneous information and could not be understood to do so. It was not contended that this was a case where Ms Vietz was under a duty to describe the attributes of the property in full and misled by telling only a half truth or that what she said was ambiguous ¾(Sterling Winthrop Pty Ltd v The Boots Co (Aus) Pty Ltd [1995] ATPR 41-433 and Duracell Australia Pty Ltd v Union Carbide Australia Ltd [1988] ATPR 40-918).
The essence of the plaintiffs' complaint is that they were told that the drainage easement was the only easement to which the property was subject. They do not claim that it was stated in specific terms that there was no right of way of any kind. They say that what was shown on the plan was identified to them as the "only" easement over the property. If this was said it would constitute a misrepresentation, regardless of what was written on the title and plan and regardless of how the schedule and plan may have been understood by an estate agent or lawyer, but it is important to bear in mind that it is the incorporation of this one word into the conversation which is claimed to convert a representation into a misrepresentation.. Obviously, therefore, it is of critical importance to consider the plaintiffs' reliability as witnesses in their claimed recollection of exactly what was said.
I paid close attention to what both told me from the witness box. Neither claimed to have made a contemporaneous note of what was said. Mrs McArdle was euphoric at the prospect of owning a "magical" property. Between 11.30am and about 5pm, they had gone from being causal visitors to the threshold of acquisition. The house was within their range and the remaining negotiations as to the $10,000 differential between the asking price and their first offer and the minor issue of the dishwasher were unlikely to prevent a sale.
There is no evidence to suggest, or upon which I would be prepared to find, that Ms Vietz was unduly anxious for a sale. Nothing had been said to her to suggest that the plaintiffs would find a private right of way of the kind depicted on the plan to be a dampener on their enthusiasm or an impediment to the sale. They had not told her of their child minding plans. Ms Vietz had adopted the prudent and fair course of exhibiting the plan at the open house and bringing it to the plaintiffs' attention before they signed the contract of sale. It has not been suggested that she exerted pressure of any kind upon the plaintiffs, beyond telling them that the open house had engendered interest from other potential buyers, a claim which she repeated in the witness box and upon which she was not challenged.
During the course of her evidence, Ms Vietz showed obvious concern as to the allegations which had been made against her. Had she been so minded, she could have pretended to have a much better recollection of some of the events than she frankly admitted she had. I do not regard her claimed lack of memory on some matters as diminishing her credibility. I found her to be a careful witness, who gave her evidence to the best extent permitted by the genuine limitations of her recollection.
I have no need to deal with the many interesting issues of law raised by counsel in their final addresses. The outcome of this case depends entirely upon my findings of fact. The onus of proof is upon the plaintiffs to satisfy me that they are entitled to the relief sought by establishing that the false statements allegedly made were in fact made. They have not discharged this onus. Ms Vietz's evidence was supported in some important respects by Mr Manton's evidence. His evidence was not impeached to the slightest degree and I accept it without reservation. There were a couple of small areas in respect of which his evidence and that of Ms Vietz did not coincide, but I do not regard these minor conflicts as being of significance. I accept the evidence of Ms Vietz in all material respects where it conflicts with the evidence of either or both of the plaintiffs. I have a certain amount of sympathy for the predicament in which the plaintiffs found themselves after receiving and digesting the contents of Ms Treganza's letter, but it may be observed that they rushed into a purchase in a state of euphoria without seeking or obtaining legal advice. If they noticed the easements endorsed on the title, they plainly misconstrued their significance. The possible scenario as to their conduct presented by Mr Procter in his final address, is by no means improbable.
For reasons already expressed, I find myself unable to accept the evidence of the plaintiffs as to the crucial conversation during which it is alleged the misrepresentation or misleading statements occurred.
The plaintiffs' action must fail and it follows that the counterclaim by the first and second defendants must succeed. The plaintiffs will recover nothing against either the first, second or third defendants. The first and second defendants are entitled to a declaration that the deposit of $21,000 is forfeited to them and that they are entitled to give a good receipt therefor to the third defendant. In addition, they are entitled to judgment for damages to be assessed against the plaintiffs. As to any further orders which should be made, and as to any issues of costs, I will hear counsel further.
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