Mitchell v Valherie
[2005] SASC 350
•14 September 2005
SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
MITCHELL & ANOR v VALHERIE
Judgment of The Full Court
(The Honourable Justice Sulan, The Honourable Justice White and The Honourable Justice Layton)
14 September 2005
SALE OF GOODS - SUBJECT MATTER - INTERPRETATION OF PARTICULAR EXPRESSIONS
DAMAGES - MEASURE AND REMOTENESS OF DAMAGES IN ACTIONS FOR BREACH OF CONTRACT
Appeal against a judgment of the District Court awarding damages of $53,409.70 to the purchaser of a house – vendors' agent made representations about the house - newspaper advertisement described the house as “Cosy-Immaculate” – brochure produced by the vendors’ agent at open inspection stated “Nothing to Spend - Perfect Presentation” – inspections subsequent to purchase revealed inadequate foundations on reactive soil - structural damage requiring extensive repair – whether the agent's statements contained representations of fact - whether promotional puffery or opinion – whether the content of the representations constituted a material misrepresentation - whether there was admissible evidence of the existence of the alleged defects at the time that the statements were made - whether the doctrine of caveat emptor applied - whether respondents relied upon representations - whether error in the assessment of damages.
Cross-appeal by the respondent - whether trial judge erred in assessment of damages, particularly consequential losses - whether conduct of appellants was unconscionable.
By majority, appeal allowed - cross-appeal dismissed.
Local Government Act 1934 (SA); Misrepresentation Act 1972 (SA) s 7(1), s 7(2); Trade Practices Act 1974 s 51AC, referred to.
Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491; Blomley v Ryan (1956) 99 CLR 362; Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15, distinguished.
Academy of Health & Fitness Pty Ltd v Power [1973] VR 254; Banks v Copas Newnham Pty Ltd [2002] QCA 217; Butcher v Lachlan Elder Realty Pty Ltd (2004) 79 ALJR 308 ; Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (No 4) [1999] FCA 1824; (2000) 22 ATPR 41-751 ; General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164; Given v Pryor (1979) 39 FLR 437; John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) 15 ATPR 41-356; Kadissi v Jankovic (1987) VR 255; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563; Mount Gambier Co-op Milling Society Ltd v Williams [1921] SASR 185; Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191; Pryor v Given (1980) 30 ALR 189; R v Credit Tribunal (SA); Ex parte General Motors Acceptance Corporation, Australia (1977) 137 CLR 545; Riley McKay Pty Ltd v Bannerman (1977) 31 FLR 129; Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 4 ATPR 43,733; Pappas v Soulac Pty Ltd (1983) 50 ALR 231, considered.
MITCHELL & ANOR v VALHERIE
[2005] SASC 350Full Court: Sulan, White and Layton JJ
SULAN J
Introduction
This appeal arises out of an action between the respondent, to whom I shall refer as the plaintiff, and the appellants, to whom I shall refer as the defendants, in which the plaintiff alleges that the defendants, through their agent, misled her about the condition of a house property she purchased on 24 February 1999. On 20 February 1999, the plaintiff had inspected the subject property at 4 Lothian Avenue, Windsor Gardens. She had seen it advertised in the newspaper, it having been described as “Cosy – Immaculate Style”. At the inspection, she was handed a brochure by the defendants which described the property, and included the following representation “Nothing to Spend – Perfect Presentation”.
Settlement took place on 9 April 1999. After settlement, a number of faults, including cracking and damage due to soil movement, were evident. The trial judge concluded that the defendants had misrepresented the condition of the property, and he awarded the plaintiff damages in the sum of $53,509.70, plus costs.
I have had the opportunity of considering the reasons of White J. His Honour has dealt in detail with the facts, and it is unnecessary for me to further review them.
Did the statements amount to a misrepresentation?
The trial judge accepted the evidence of Mr Rositano, an expert architect who is a member of the panel of architects appointed by the Royal Australian Institute of Architects to provide advice to members of the public. The trial judge concluded that serious faults, including cracking and damage due to soil movement, must have been present over the years in which the defendants had resided in the premises. The trial judge determined that the representation in the brochure was inconsistent with the many serious faults that Mr Rositano observed.
A question which arises in this appeal is whether the statement in the brochure “Nothing to Spend – Perfect Presentation”, either alone or combined with the advertisement describing the property as “Cosy – Immaculate Style”, amounted to a misrepresentation.
Counsel for the defendants contends that the trial judge was in error in concluding that the words represented to prospective purchasers that there were no serious faults present at the date of inspection. Counsel submits that the expression “Nothing to Spend”, when considered in context with the other words and phrases used, did not amount to a representation that the house was free of all serious faults at the date of the open inspection. She submits that these types of statements are commonly used in advertising in the real estate industry, and that they are simply designed to attract the interest of potential buyers. Statements by real estate agents, it is said, often contain vague and flowery language, and brochures which are handed to prospective purchasers at an open inspection are introductory comments for the purpose of attracting the interest of possible purchasers. It is said that the words were intended to convey no more than that the house was immediately habitable, and that no immediate expenditure was required.
The first question is whether the statements are representations of fact, or whether they are merely puffery. When considering whether statements are misleading, it is necessary to consider them in the context of all the circumstances surrounding their making, including the respective experience and knowledge of both the maker of the statements and those said to have relied upon them. Statements of a general promotional nature addressed to sophisticated investors made in the context of extensive negotiations may be regarded by the courts as amounting to no more than promotional material or puffery. Whether statements are to be characterised as puffery will depend upon the circumstances surrounding the making of the statements, and how the representations were understood by the person to whom they were made.
In Banks v Copas Newnham Pty Ltd,[1] McPherson JA observed:
What amounts to misleading conduct in relation to a particular matter depends very much on the impression conveyed by the representation considered in the circumstances and context in which it is made.[2]
[1] [2002] QCA 217
[2] Banks v Copas Newnham Pty Ltd [2002] QCA 217 [6]
In R v Credit Tribunal (SA); Ex parte General Motors Acceptance Corporation, Australia[3], Mason J, with whom Barwick CJ, Gibbs, Stephen and Jacobs JJ agreed, said:
“Misleading” is a word which is capable of expressing various shades of meaning, sometimes signifying that which is subjectively misleading and at other times that which is objectively misleading. Its meaning therefore is apt to be influenced, indeed decisively influenced, by the context in which it is found.[4]
[3] (1977) 137 CLR 545
[4] (1977) 137 CLR 545 at 561
The defendants rely upon a decision of Young J in Eighth SRJ Pty Ltd v Merity[5]. In that case, the purchasers of a property responded to an advertisement which stated “AMAZING VALUE for under $700,000, max. living style with min. maintenance … JUST MOVE IN AND ENJOY”. The purchaser, who was a solicitor, spoke to the land agent and told her that his wife was looking for a property in good repair which was of low maintenance. The agent responded that the property would satisfy his requirements, and that all it needed was a coat of paint. She added, in response to a question from the purchaser, that he would not have to do anything to the property. On a later occasion, she told the purchaser and an interior designer who came to view the property with the purchaser “You will enjoy it here. You will have nothing to spend”. In response to a question from the purchaser about maintenance, she agreed that the property required minimal maintenance, and all that had to be done was to move in, and that it was ideal for his requirements.
[5] (1997) 7 BPR 15 at 189
It transpired, after signing the contract, the purchaser commissioned a pest report from a Mr Joyce. Unbeknown to the purchaser, Mr Joyce had performed work at the property some years before, to rid the property of termites. There was a residual problem which required further termite treatment which would cost about $1500. Young J considered that, in the context in which the statements had been made, and having regard to how the speaker and the hearer would have understood the statements, they related to minimal upkeep of the property, and the house being a house which could be lived in with a minimum amount of day-to-day care because of its particular layout. He concluded that neither party was directing their mind to the question of whether there was a defect or termite infestation or a structural defect. He concluded that the statements, when considered in context and having regard to the whole of the negotiations, did not amount to false or misleading conduct.
The situation in Merity is distinguishable. The purchaser was concerned primarily with obtaining a property which required minimal maintenance. The statements made by the agent, when considered in context and analysed, were never intended, in the trial judge’s view, to be directed to hidden defects or termite infestation or structural defects. The whole tenor of the conversations related to the upkeep of the home and the minimum amount of time needed for day-to-day care because of the particular layout of the house.
In Pappas v Soulac Pty Ltd[6], the applicants contended that the vendors of a shopping centre had engaged in misleading and deceptive conduct, and that their agent had made a number of false representations during negotiations which misled the applicants into paying an excessive price for the centre. The agent’s employee, Mr Spencer, was alleged to have made a number of statements to the applicants, which the applicants claimed were misleading and deceptive. Fisher J, the trial judge, considered various statements that had been made during the course of the negotiations leading to the entry by the applicants into the contract. The agent told the applicants that tenants of the shops were good tenants, and that the shopping centre was a good investment and that it was a good shopping centre. Representations were made to the effect that there would be no trouble in letting one of the shops. Fisher J concluded that the statements, either considered alone or in combination, did not amount to false or misleading statements. In his view, the statements amounted to no more than puffery. In arriving at his conclusion, the trial judge had regard to the fact that the applicants were experienced in commerce, and that they had conducted their own inquiries and assessments and obtained detailed information about the operation of the shopping centre. He regarded that fact as an important consideration in determining the final question. He observed:
It is important to appreciate that many of the statements alleged or admittedly made by Mr Spencer were wholly or in part statements of opinion, not capable of being objectively proved to be true or false. They 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.[7]
[6] (1983) 50 ALR 231
[7] Pappas v Soulac Pty Ltd (1983) 50 ALR 231 at 234-235
In Pryor v Given[8], the appellant was convicted of making a misleading statement concerning the use to which land was capable of being put. The appellant had advertised land for sale. The advertisement included the words “A wonderful place to live”, and “watch it grow”. The land was zoned non-urban. The consequence of the zoning was that houses could not be built on the relevant land without the special approval of the responsible authority, and by satisfying onerous conditions. Lockhart J, with whom Northrop and Sheppard JJ agreed, said:
In our opinion, the advertisement, which was shown to this Court, could only lead persons who saw it to conclude that the land which was being advertised was land upon which houses could be built. The statement that the area was “A wonderful place to live” by itself is probably mere puffing, but its significance, for the purpose of the present appeal, is that it is part of the advertisement which, taken as a whole, inevitably conveys the impression that a house can be built on each of the one-quarter acre blocks of land. Plainly, the advertisement was misleading.[9]
[8] (1980) 30 ALR 189
[9] (1980) 30 ALR 189 at 192
Where the conduct complained of consists of words, they must be looked at in the context of other words used and in the context of those to whom the words are directed. See: Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd.[10]
[10] (1982) 149 CLR 191
Turning to the words used in this case, the statement “Immaculate Style”, conveys an opinion, not a representation of fact, and is designed to arouse the interest of potential purchasers. Even combined with other statements, it is nothing more than an opinion that the house is stylishly presented. Those words in the advertisement do not represent that there is no money to spend on the house in the near future, or that there are no structural defects in the house.
However, the statement “Nothing to Spend – Perfect Presentation” contained in the brochure connotes more than a mere opinion about the property. It goes beyond what can be characterised as puffery. The statement “Nothing to Spend – Perfect Presentation” was contained in a brochure which referred to features of the house which was advertised for sale. The brochure included a sketch of the house, a description of a number of rooms in the house and reference to heating and cooling. The subject words formed an essential part of the description of the house representing to a prospective purchaser that it was habitable and that no major expenditure would be required in the immediate future.
The brochure was aimed at a large group of prospective purchasers, being average wage earners who might be interested in purchasing a property in the medium to low price range. Those to whom the representation was aimed would not be expected to seek legal advice, nor would they be regarded as sophisticated purchasers of property. They were not sophisticated risk-takers who were shrewd and self-reliant, such as the purchasers in Pappas’ case.
In Parkdale Custom Built Furniture Pty Ltd, Gibbs CJ said:
It seems clear enough that consideration must be given to the class of consumers likely to be affected by the conduct. Although it is true, as has often been said, that ordinarily a class of consumers may include the inexperienced as well as the experienced, and the gullible as well as the astute, the section must in my opinion be regarded as contemplating the effect of the conduct on reasonable members of the class. The heavy burdens which the section creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all the circumstances. [11]
[11] (1981) 149 CLR 191 at 199
In my view, it is reasonable to expect potential purchasers to whom the representations were directed to rely on the accuracy of words in a brochure produced by an agent on behalf of the defendant vendor, which is distributed at an open inspection. The words “Nothing to Spend” could not be taken literally. Therefore, the question that arises is whether the words suggest, to a reasonable person who has a basic understanding of property transactions, whose experience in purchasing property is minimal and who is unlikely to have sought legal advice, that the house requires no significant short-term expenditure. A reasonable person who falls within this category would be likely to interpret the statement “Nothing to Spend” as meaning that no additional expenditure would be required in the short term.
The words “Nothing to Spend” in the context in which they appear in the brochure would suggest to a member of the public likely to be interested in purchasing this kind of residential property that the house required no major short-term expenditure. The words “Nothing to Spend” convey to a prospective purchaser that no additional expenditure would be required in the near future. The context in which the words “Nothing to Spend” appear went beyond a mere enticement or puffery, and amounted to a factual representation.
The trial judge was correct in his conclusion that it was a misrepresentation of the condition of the house for the defendants to say, through their agent, that there was nothing to spend. This ground of appeal has not been made out.
Was there reliable evidence of the existence of the defects at the time that the statements were made to the plaintiff?
The plaintiff relied upon the reports and the evidence of Mr Rositano and Mr van der Horst, a building surveying technician, who is qualified to inspect domestic buildings. A major part of his work consists of pre-purchase inspections. The trial judge accepted the evidence of Mr Rositano that there were a number of serious faults, including brick cracking, floor levels and framing that were not likely to be sudden faults. Mr van der Horst’s evidence was that in a number of areas of cracking there appeared to have been repairs. Bare walls appeared to have been recently renovated. The cornices appeared to be renovation work. This evidence was admissible. Each witness was qualified to express expert opinion about the condition of the building and about defects, and when those defects were likely to have occurred. I agree with White J, that no basis for disturbing the trial judge’s findings has been demonstrated. I agree with White J’s reasons and his conclusion that the defendants have failed to establish this ground of contention.
Did the trial judge err in not applying the doctrine of caveat emptor?
If the agent had not presented the plaintiff with the pamphlet, and simply allowed the plaintiff to purchase the premises, relying entirely on her own judgment, then the action must fail. But the trial judge found that reliance had been placed by the plaintiff upon statements of the agent. Once it is established that there was a representation upon which the plaintiff relied, then the doctrine of caveat emptor has little application. I agree with the reasons of White J.
Causation
The defendants submit that the trial judge erred in finding that there was a causal link between the alleged misrepresentation and the damages. It was submitted that the plaintiff relied entirely upon her own judgment in purchasing the property, and that the misrepresentation had no causal effect upon her decision. The plaintiff gave the following evidence:
… I had lived the previous 14 years in Paris. I really needed a place that was not going to require any more expense because I simply could not afford to pay any more than the purchase price. I also did not have the time to redecorate or renovate a house. Because of these requirements I was not going to buy a cheaper house where I would have some works to do, repair works or renovation works, I just didn’t have the time or didn’t have the money. Even if I had to pay a little bit more, and I thought at the time this particular property in Windsor Gardens, because I had been inquiring around Adelaide and I knew – because I knew that I could not afford more than $100,000, I knew that in order to find a good property where I would not have any more work to do in it, any more to spend, I would need to go in the cheaper areas …[12]
[12] Appeal Book Vol 2 p 39 lines 14-30
The plaintiff was attracted to the property substantially because of the information conveyed to her by the agent. She was asked to what information the agent referred. She said:
The fact that the property had been very well maintained for 17 years and it had been redecorated inside two years before and repainted outside one year before. What I’m saying is that it is the combination of all the representations, it’s a whole, it’s the advertisement that was saying that the property was immaculate and cosy which was what I could see when I went to the property. It was the brochure that was saying ‘Nothing to spend’.[13]
…
… That also was telling me, if I wanted this property I would need to spend that kind of money which I was not very keen on to start with but I needed a property where really I would have nothing more to spend, so I told the agent that I wanted to make an offer and explain to her my situation. ...[14]
[13] Appeal Book Vol 2 p 42 lines 9-17
[14] Appeal Book Vol 2 p 43 lines 3-8
The trial judge accepted the plaintiff’s evidence. He was satisfied that she was induced to enter into the contract by the words ‘Nothing to Spend’, reinforced by other statements from the agent.
The defendants have not demonstrated any error in the reasoning of the trial judge. This ground of appeal has not been made out.
Was the trial judge in error in his assessment of the damages?
The trial judge approached the assessment of damages in two ways. The primary approach was to arrive at a value of the property at the time of the sale. The trial judge had regard to the Valuer-General’s valuation of $60,000 as at December 1999, and the forced sale price of the property of $99,500 in 2002. The trial judge considered valuations of two valuers, Christopher Dreyer and Geoffrey Cooney. Mr Dreyer’s valuation was $50,000, and Mr Cooney’s valuation was $95,000 at the time of sale. The trial judge rejected the valuation of Mr Dreyer who, in the trial judge’s view, wrongly assumed that the premises were uninhabitable. The trial judge concluded that Mr Cooney had failed to have regard, or sufficient regard, to Mr van der Horst’s report, and had failed to take his costings into account. He therefore rejected Mr Cooney’s valuation.
The trial judge concluded that the true value of the premises was $75,000. It followed that the loss to the plaintiff was, therefore, $24,000. Both the plaintiff and the defendants were unrepresented. In the circumstances, the trial judge arrived at a value at the time of sale on the evidence in the trial. It was a difficult case because, as both parties were unrepresented, the evidence of value was not presented in a way in which it was open to the trial judge to arrive at a value based upon detailed valuation evidence. However, it has not been demonstrated that the trial judge was in error in concluding that the property’s true value at the time of sale was $75,000.
The trial judge accepted the evidence of Mr Dreyer, that between 1999 and 2004, the date of the judgment, the property would have doubled in value. He assessed the loss of opportunity to enjoy a capital gain at $26,000. He gave judgment for the plaintiff in the sum of $53,409.70, which he calculated as follows:
difference between price paid and real value $24,000.00
loss of capital gain $26,000.00
mental distress $3,000.00
costs of attempted sale $409.70
$53,409.70
The alternative approach the trial judge adopted was to estimate what would have occurred if the plaintiff had used the $100,000 used to purchase the house to purchase an equivalent house, without defects, in an equivalent area. In those circumstances he concluded that, by 2004 the property would have been worth approximately $200,000. He then had regard to the value of $75,000 in 1999, as he had assessed it. He considered that that value would have doubled by the time of judgment in 2004, namely, to a value of $150,000. He concluded that, using this methodology, the loss of opportunity to the plaintiff was $50,000, being the difference between the appreciated value of $200,000 and the appreciated value of $150,000 of the property.
However, it seems that the trial judge did not take into account the fact that the house which, in his judgment was worth $75,000, was sold in 2002 for $99,500, thereby resulting in an actual gain to the plaintiff of $24,500. Nor did he have regard to the fact that the house had deteriorated due to neglect, resulting in a forced sale in 2002.
Having assessed the lost opportunity at $100,000, the trial judge should have then had regard to the failure of the plaintiff to keep the property maintained and the likely value of the property in 2004. That figure should then be deducted from the lost opportunity amount of $100,000 to arrive at damages.
However, apart from the trial judge’s failure to have regard to the capital gain of $24,500, based on his initial valuation of $75,000, and given the evidence with which he was presented, I would not disturb his finding.
Conclusion
I would dismiss the appeal in respect of liability. I would allow the appeal as to damages. I would assess the damages at $27,909.70.
The Cross Appeal
The respondent contends that the trial judge erred in failing to assess damages for consequential losses alleged to have arisen from the misrepresentation. It is unnecessary for me to deal in detail with the respondent’s contention having regard to the conclusions of White and Layton JJ. However, I am of the view that no error has been demonstrated in the approach of the trial judge. I would make no order in respect of the cross appeal.
WHITE J: On 23 December 2004, a District Court Judge found that the appellants’ land agent had, during the course of an open inspection, misrepresented the quality of their home to the respondent who was then a prospective purchaser. In particular, the Judge found that a statement by the land agent in respect of the home “Nothing to Spend – Perfect Presentation” misrepresented the true condition of the home. The Judge found that the misrepresentation was actionable pursuant to the Misrepresentation Act 1972 (SA) and assessed the plaintiff’s losses in consequence of the misrepresentation in the sum of $53,409.70.
The appellants appeal against the finding of misrepresentation and against the assessment of damages. The respondent cross-appeals against the assessment of damages, seeking an order that the damages be increased.
At the trial, both parties were unrepresented. On the appeal, the appellants were represented by counsel but the respondent remained unrepresented.
It is convenient, in these reasons, to refer to the parties by their description at trial, ie, the respondent as plaintiff and the appellants as defendants.
The Circumstances of the Sale
The defendants had owned and lived in the property at 4 Lothian Avenue, Windsor Gardens since 1980. It contained a 3-bedroom bungalow. The defendants wished to sell the property. They retained the real estate firm known as “Ray White Glynde” to act as their agent in that regard. A Ms Mansergh was the particular agent within that firm who acted for the defendants.
On Saturday, 20 February 1999, Ray White Glynde published in “The Advertiser” an advertisement in the following terms:
WINDSOR GDNS
4 Lothian Avenue
• Open SUN 3.30-4.30 •
Cosy – Immaculate Style
Lovely gardens & outside ent., solid brick, 3 lge BRs, open plan lounge/dine, nice views, modern kitchen & bathroom, heating/cooling, plenty of parking. Reduced to sell $99,950. Joan Mansergh 0414 378 334 Glynde.
The plaintiff attended the open inspection on Sunday, 21 February 1999. On entering the house, she was given by Ms Mansergh a single page brochure which was of the kind commonly issued by land agents during the course of an open inspection. On the front of the brochure, and above the address and sketch of the house, were the following words:
Nothing to Spend – Perfect Presentation
3 bedrooms with built in robes
Large Lounge
Combustion Heater
Upgraded Kitchen
Modern Bathroom
Cooling
Large Private rear gardens
At the bottom of the front page, in small, closely typed printing, were the following words:
DISCLAIMER CLAUSE
While every endeavour has been made to verify the correct detail in this brochure, neither the Agent or Vendor accepts liability for any error or omission. The drawing is for illustration purposes only. The drawing and the information contained are not intended to be part of any contract. All measurements are approximate and details intended to be relied upon should be independently verified. Section 90 statements relating to encumbrances and other matter (sic) affecting the above property may be inspected at the registered office 3 consecutive business days preceding the auction and at the place of auction 30 minutes before same commences.
It was not contended at the hearing of the appeal that this disclaimer was of any significance in the determination of the appeal.
On the reverse side of the brochure, there appeared a plan of the house, a plan of the block showing the location of the house and other improvements on it, and some approximate measurements and areas.
The plaintiff’s evidence was that Ms Mansergh told her that the house had been redecorated within the previous two years and the exterior repainted 12 months previously. She was also told that the defendants had maintained the property well. Ms Mansergh agreed that she had made each of those statements.
The plaintiff’s evidence was that she was attracted to the house by its price, its apparent quality, and the words in the brochure “Nothing to Spend”. She told Ms Mansergh, at the open inspection on 21 February 1999, that she wished to make an offer, but the latter declined to write out a contract form containing the offer until she had sighted proof that the plaintiff had the money with which to honour an unconditional contract. The plaintiff provided the proof on Wednesday, 24 February 1999 and, later that day, signed a contract offering $99,000 for the defendants’ property. The defendants accepted the offer on the same (or following) day. At the time of making her offer, the plaintiff had been inside the home on one occasion only.
Settlement occurred on 9 April 1999 and the plaintiff moved in a week or so later. At that time, the plaintiff noticed a number of matters of concern to her. There were difficulties in opening the external doors to the house, and a difficulty in opening a sliding door to a built-in wardrobe. When the sliding door was opened, the plaintiff saw a gap in the cornice between the wall and the ceiling. The plaintiff had not opened this built-in wardrobe at the time of the inspection.
It was common ground, at trial, that the home was located on Bay of Biscay soil which is prone to movement, thereby causing cracking of houses. It is likely that the difficulties, which the plaintiff experienced, were attributable to movements in the underlying soil. The plaintiff was sufficiently concerned in April 1999 to retain an architectural service, Archicentre Ltd, to provide a building report on the condition of the house. Mr Rositano, a registered architect, inspected the house on 17 April 1999, and about three weeks later provided a written report. I will return to the contents of that report shortly.
The plaintiff’s evidence was that cracking in the house deteriorated during 1999. On 2 August 1999, a piece of cornice in the passage fell down, apparently in consequence of the cracking. The plaintiff retained a building inspector, Mr Van Der Horst, to provide another report in November 1999.
On 4 July 2000, the plaintiff gave notice to the defendants purporting to rescind the contract. The proceedings giving rise to the current appeal were instituted on 16 August 2000.
The evidence of the defendants was that they had only ever had minor cracks inside the house. The evidence of the first defendant was to the effect that at the time of the sale to the plaintiff, there were some cracks in the paving around the outside of the house and in the kitchen floor, but otherwise that the home was in good condition. Further, the first defendant said that at the time they left the home on 2 April 1999 they had not observed any damage or cracks other than the crack in the tiling in the floor of the kitchen and the cracking in the outside paving.
The evidence of Ms Mansergh was to the effect that both at the time of her initial appraisal on 13 December 1998, and at the time of settlement on 9 April 1999, the only cracks which she had observed were the cracks in the tiling of the kitchen floor, in the outside paving and a hairline crack in the dining-room, close to the cornice. She considered that the descriptions “cosy” and “immaculate” in the advertisement of 20 February 1999 and the statement “Nothing to Spend – Perfect Presentation” in the brochure were warranted by the condition of the home.
The Condition of the House
The trial Judge accepted the evidence of Mr Rositano and Mr Van Der Horst. Mr Rositano included the following summary in his report:
This house appears at first sight in very good order but for its age is in worse than average condition due primarily to the lack of “level” paving throughout caused by uneven soil settlement. The most serious matters which will not involve great costs include (1) floor levelling, (2) re-tiling repairs, (3) painting/patching of ceilings/cornices, (4) HWS remedial work. The future roof replacement will not incur great cost but the new paving will and is justified as it will help control the brick cracking evident along with improving the property value. The excellent north-facing rear provides many opportunities to renovate/re-plan this home.
Mr Rositano identified a number of “serious faults” which his report defined to mean:
A fault which seriously effects the structural integrity of the property or requires the substantial replacement of plumbing or electrical services. In the case of cracking, a serious fault denotes certain severe cracking as defined by Category 4 Appendix A – Australian Standard 287.1 – 1988.
The serious faults identified by Mr Rositano were:
Each of the exterior walls
Past brick cracking openings patched with some control joints installed. (Internal cracking within built-in wardrobe not patched). With removal of several trees close to the building and installation of gardening watering system, it appears measures have been taken to prevent further damage.
Exterior of north wall
Aluminium sliding door not closing. Adjust guides.
Exterior of west wall
Bowed facia due to footing settlement at south-west corner. Appears to have settled.
Living room
Uneven/dropped floor level. Have stumping contractor re-level floor joists.
Patched cornice to ceiling joint requires re-painting and butt joints in ceiling require filling with a fixable sealant prior to applying a finishing coat of paint.
Kitchen
Cracked quarry tiles. Suspect poor sub-base construction. Recommend replacing with a sheet vinyl/cork tiles for more comfort under foot.
Re-cork bench top to walk tile joint.
South-west bedroom
Patched cornice to ceiling joint requires re-painting and butt joints in ceiling require filling with a flexible sealant prior to applying a finishing coat of paint.
North-west bedroom
Uneven/dropped floor level. Have stumping contractor re-level floor joists.
Main bedroom
Uneven/dropped floor level. Have stumping contractor re-level floor joists.
Door frame has dropped. Remove architraves to level head and replace architraves.
Aluminium sliding door not closing. Adjust guides.
Although Mr Rositano did not consider a serious fault to be evident in the passage of the house, he did report in respect of the passage walls “past cracks patched and visible under shining a torch across wall surface. Expect on-going maintenance with filling cracks and re-painting”.
Mr Van Der Horst prepared a written report which included the following:
Major cracking was observed in many walls throughout the house, more so in the upper portion of the walls, in masonry and timber-framed walls.
The deformations noted were evident in the internal and external walls. These appear to be the result of upheaval due to settling and heaving of the footings as a consequence of extreme soil movement.
The junction of the walls at the cornice/ceilings showed considerable lateral movements in some cases, which has led to considerable damage and some of the cornices dropping down.
Examination of the walls showed several areas with more or less extensive repairs, quite likely in response to previous incidences of cracking. Several instances of drumminess in plaster and wall tiles.
…
There appeared to be generally no indications of moisture readings or decay along the base of the walls. However, it was also noted that much of the surface of the base walls appeared to have been renovated comparatively recently.
…
Some of the ceilings showed tearing across a room (lounge etc), and deformation and distortion at some wall junctions as mentioned under walls.
Hence the cornices and some surrounding surfaces appeared to suffer considerable damage due to what appeared to be the differential movement between the wall tops and ceilings. The 90mm cornices appeared to be part of some recent renovation work.
In his oral evidence, Mr Van Der Horst described the cracking in the home as above average. He also noted that there were distortions in the structure of the home of a kind which were not generally seen.
The Judge considered it unlikely that the serious faults observed by Mr Rositano on 17 April 1999 had developed after the open inspection 21 February 1999. The Judge was satisfied “that there was no change of any significance in the condition of the house between the open inspection and the defendants’ departure from the house [on 2 April 1999]”. The Judge found that over the years that the property had been owned by the defendants, extensive cracking in the walls had been patched and repaired. Although the Judge did not make an explicit finding to this effect, it follows from the finding to which I have just referred, that the Judge rejected the evidence of the defendants that they had only ever had minor cracking inside the home. It also follows from his findings that the defects identified by Mr Rositano must have been apparent at the time of the plaintiff’s inspection on 21 February 1999.
Section 7 of the Misrepresentation Act 1972
Section 7(1) and 7(2) of the Misrepresentation Act 1972 (SA) provide as follows:
(1)Where a contracting party is induced to enter into a contract by a misrepresentation made -
(a) by another party to the contract; or
(b) by a person acting for, or on behalf of, another party to the contract; or
(c) by a person who receives any direct or indirect consideration or material advantage as a result of the formation of the contract,
and any person (whether or not he or she is the person by whom the misrepresentation was made) would, if the misrepresentation had been made fraudulently, be liable for damages in tort to the contracting party subjected to the misrepresentation in respect of loss suffered by him or her as a result of the formation of the contract, that person is, subject to subsection (2), so liable to that contracting party, in all respects as if the misrepresentation had been made fraudulently and were actionable in tort.
(2) It is a defence to an action under subsection (1) –
(a) that the person by whom the representation was made had reasonable grounds to believe, and did believe, that the representation was true; or
(b) that the defendant was not the person by whom the representation was made and did not know, and could not reasonably be expected to have known, that the representation had been made, or that it was untrue.
The effect of s 7(1) is that where a misrepresentation induces a party to enter into a contract, the representor is liable for damages in tort as if the representation had been made fraudulently.
The Trial Judge’s Conclusions with Respect to Misrepresentation
The trial Judge considered the most important of the statements made by the defendants’ agent to be the words “Nothing to Spend” in the brochure. The Judge also considered that that statement was reinforced by the words “Immaculate Style” in the advertisement, the words “Perfect Presentation” in the brochure, and the agent’s statement to the plaintiff at the open inspection to the effect that the house had been very well maintained. The Judge then concluded:
The representation in the brochure was quite inconsistent with the many serious faults that were observed by Mr Rositano. Clearly it was a misrepresentation of the condition of the house for the defendants to say through their agent that there was nothing to spend. Upon that basis of Mr Rositano’s evidence and report, I am satisfied that those words were untrue at the date of the open inspection. Upon the basis of the plaintiff’s evidence, I am satisfied that she was induced by those words, reinforced as they were by the other words that I have mentioned, to enter into the contract.
In relation to the defence for which s 7(2) provides, the Judge said:
With respect to the first link of the defence, I do not consider that Ms Mansergh, the person by whom the representation was made, had reasonable grounds to believe that it was true. It is one thing to say that the house was cosy and that its style was immaculate, as she did in the advertisement, quite another to assert that there was nothing to spend, as she did in the brochure. The issue here is not whether she believed that the assertion was true, but whether she had reasonable grounds to believe that the assertion was true. A mere visual appraisal of the house, in the absence of qualified advice, was not enough in my view.
The second link of the defence also requires consideration, because the defendants were not the person by whom the representations were made. Nevertheless, the defendants knew of the representations, or at least of those in the advertisement and the brochure. As I have said, they made substantial renovations and improvements to the house over the years, and were aware that cracking was fairly common in the area due to Bay of Biscay soil. The reports of Messrs Rositano and Van Der Horst show that extensive cracking in the walls had been patched and repaired. If the defendants did not know that the representations were untrue, they were careless about whether the representations were true or not. I am unpersuaded that the defendants could not reasonably be expected to have known that the representations were untrue.
It can be seen that the words found by the Judge to constitute the misrepresentation were the words in the brochure “Nothing to Spend”. Although the Judge considered that the meaning conveyed by those words was reinforced by the words “Perfect Presentation” and reinforced by the words in the advertisement “Immaculate Style” as well as the oral representation of Ms Mansergh to the effect that the house had been very well maintained, he did not find that those words of themselves constituted a misrepresentation.
The Judge considered evidence from some expert valuers and found that the real value of the defendants’ home at the time of sale was $75,000. He therefore awarded to the plaintiff the sum of $24,000 being the difference between the real value and the price which she had paid. The Judge also awarded to the plaintiff an additional $26,000 for the lost opportunity to obtain a capital gain on purchase of the home. In addition, the Judge awarded damages of $3,000 for the distress which the plaintiff had suffered in consequence of the misrepresentation and some consequential costs of $409.70. The total assessment was, therefore, $53,409.70.
Ground 1 of the Appeal
It was contended that the trial Judge had erred in finding that the words “Nothing to Spend” constituted a representation of fact. In particular, it was submitted that the expression was of a kind commonly used in real estate advertising material and that it could not reasonably be understood as indicating literally that no expenditure would be required of a purchaser, or that the house was free of structural defects. It was submitted that these words were merely a form of general promotion of the house, ie, intended to attract the attention of prospective purchasers. In short, they were a form of puffery.
It was submitted, in the alternative, that if the words did convey a representation of fact, it was no more than a representation that a purchaser could “move straight into and enjoy” the property due to there being no immediate need for expenditure on the property to make it reasonably liveable.
This issue was not addressed by the trial Judge in his reasons. It does not seem that any submission to the general effect of Ground 1 was made to him. That does not preclude the defendants from arguing this point on the appeal.
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.
“The essence of misrepresentation is that it led the representee into error. This must be tested objectively – would a reasonable person in the position of the representee had been led into error by the statement?”[15]
[15] N C Seddon and M P Ellinghaus, Cheshire and Fifoot’s Law of Contract (8th ed, 2002) [11.11].
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.[16] 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.[17] The more specific the words used, the less likely it is that they will be regarded as mere puffery.[18]
[16] David Harland, “The Statutory Prohibition of Misleading or Deceptive Conduct in Australia and its Impact on the Law of Contract” (1995) 111 Law Quarterly Review 100, 112.
[17] Pappas v Soulac Pty Ltd (1983) 50 ALR 231 at 234-5, per Fisher J.
[18] Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (No 4) [1999] FCA 1824; (2000) 22 ATPR 41-751 at 40,694.
The defendants placed particular reliance on the decision of Young J in Eighth SRJ Pty Ltd v Merity[19]. In that case, the purchasers of a home relied, amongst other things, on a verbal statement by the vendor’s agent about the home, “You will enjoy it here. You will have nothing to spend”. Before settlement, the purchasers ascertained that the property had in the past been the subject of termite infestation which a pest control firm had found difficult to eradicate. It was possible, but not certain, that some infestation remained. The purchasers purported to rescind the contract. Young J held that the statement “You will have nothing to spend” could not reasonably be construed as a representation that there was no termite infestation, or that there was no other latent defect which would cause the purchasers to spend money. In the context of the parties’ negotiations, the tenor of the representation was to convey the impression that there was little to do to keep the house “spick and span” week by week rather than being concerned with structural issues. However, as Young J noted, 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.[20] In Merity, that context included the fact that both the vendor and purchaser were solicitors, negotiating the sale and purchase of a home for a consideration of $675,000 over a period of one week. Further, the words were spoken in a context relating to the week by week maintenance which may be required. That is a different context from the present case.
[19] (Supreme Court of New South Wales, Young J, 25 March 1997, Unreported).
[20] See also Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 at 576, per Brennan, Deane, Gaudron and McHugh JJ; Banks v Copas Newnham Pty Ltd [2002] QCA 217 at [6].
The plaintiff did not have experience in the purchase of real estate in Australia. For the period of approximately 14 years prior to 1999, the plaintiff had been resident in Paris. Given the price of the home, it is reasonable to suppose that many first time (and therefore inexperienced) home buyers would have been included in the class of prospective purchasers of the property. It is apparent that the plaintiff’s decision to buy the property was made during her first visit to the home. As noted by Gleeson CJ, Hayne and Heydon JJ in Butcher v Lachlan Elder Realty Pty Ltd[21], a more impressionistic analysis, concentrating on the immediate impact of the representor’s conduct may be appropriate where the document containing the representation is looked at only briefly before the decision to purchase is made. Another relevant matter of context is that the circumstances in which the brochure was issued indicate that most readers of it would, almost immediately, enter the house and make their own observations of it.
[21] (2004) 79 ALJR 308 at [76]; [2004] HCA 60.
There are some difficulties in identifying a representation of fact in the statement “Nothing to Spend”. Clearly enough, the statement could not reasonably be understood as meaning literally that no expenditure at all would be required by a prospective purchaser. Some expenditure on maintenance or upkeep is an inevitable incident of home ownership. The words used could hardly be understood as indicating a contrary view. Further, it is common for purchasers of homes to make at least some minor adaptations of a home shortly after taking occupation so as to have the house better suit their needs or tastes. Again, the words could hardly be understood as indicating that the condition of the house and its improvements were such that no alteration of any kind would be necessary to meet individual tastes.
On the other hand, the brochure was of the kind used to convey information to prospective purchasers. It did include factual matters, eg, the number of rooms, improvements, and some approximate measurements and areas. It could also be said that its purpose went beyond the attracting of the attention of a prospective purchaser. The newspaper advertisement had served that purpose in the plaintiff’s case, having piqued her interest and enticed her attendance at the open inspection. Those considerations may suggest that the brochure was intended to convey representations of fact.
As already noted, the defendants submitted that if any representation of fact was made, it was no more than a representation about the ability of the home to be lived in immediately after purchase without further expenditure. Put slightly differently, the defendants submission was that the words, considered at their highest, were a representation about the habitability of the home at a particular time, viz, the time of purchase. I do not consider that submission to be persuasive. I think it underestimates the impression sought to be conveyed by the use of the words. I consider that the agent was intending to convey more than that the house was “reasonably liveable” at the particular time. The words are more apt to suggest that, leaving aside expenditure arising from the ordinary wear and tear in the occupation of a home, expenditure would not be required of the purchaser on the home, at least for a reasonable period.
This is similar to the impression which the plaintiff received. In her evidence she said that the brochure “was saying there was nothing to spend and it did indeed, from what I could see there was nothing that the house needed. It was just perfect the way it was. You could just move in.”
The question remains, however, whether the words are no more than commendatory opinion. Not without some reservations, I am satisfied that the words cannot reasonably be understood as conveying a representation of fact. A number of considerations lead me to that conclusion. The first is that the words of which the plaintiff complains are really in the nature of a pithy promotion of the property. They are in the form of catchwords, appearing immediately above a statement of some fairly basic facts about the property. This does not mean that of themselves they may not contain a representation of fact but, in context, I consider that they are more like a headline, which is designed to attract the eye of the reader. It is relevant that they do not appear in a sentence describing the qualities of the property.
The second consideration is that the words “Nothing to Spend – Perfect Presentation” have to be read as a whole. The words “Perfect Presentation” are clearly enough words of promotional puffery. A reasonable prospective purchaser of real estate would not understand those words as conveying a representation of fact. The words “Nothing to Spend”, which immediately proceed them take their colour, to some extent, from those words.
The third consideration is that the words were used in a context in which some hyperbole is commonplace. Exaggerated descriptions of houses is a common, even expected, feature of real estate advertising. Reasonable persons would not, in my opinion, understand words of this kind to be conveying a representation about the structural integrity of the property.
The final consideration is the difficulty to which I have already referred in identifying the precise content of the representation if it is to be construed as a representation of fact. In particular it is difficult to construe the statement as a representation about the structural integrity of the home, or the solidity of its foundations.
The plaintiff submitted that other statements made by Ms Mansergh on behalf of the defendants constituted misrepresentations. In particular, she referred to the statement, “Immaculate Style” appearing in the advertisement published on 20 February 1999. Although, like the trial Judge, I consider those words may be capable of giving some colour to the expression “Nothing to Spend”, I do not consider that it can be said that those words by themselves conveyed a representation of fact. They too were simply promotional words designed to catch the attention of a prospective purchaser.
The plaintiff also complained of the statements by Ms Mansergh that the house had been redecorated within the previous two years, that its exterior had been repainted 12 months previously and that the defendants had maintained the property well. Each of the first two statements was a representation of fact and the third should, in my opinion, be similarly characterised. However, the evidence did not disclose that any of those statements was incorrect so as to constitute a material misrepresentation.
For these reasons, I consider that the defendants’ first ground of appeal is made out. Strictly speaking, this conclusion makes it unnecessary to consider the remaining grounds of appeal. However, in case the matter goes further, I express my views on Grounds 2 and 3.
Ground 2
The defendants contended that there was no admissible evidence, or alternatively, no reliable evidence of the existence of the alleged defects at the time that the statements were made to the plaintiff. It was submitted that the trial Judge erred in admitting into evidence the reports of Mr Rositano and of Mr Van Der Horst.
An immediate difficulty for the defendants with this submission is that no objection was taken at trial to the tender of either report, during the course of the oral evidence of Mr Rositano and Mr Van Der Horst respectively. Mr Rositano was a registered architect who, at the time of trial, had been so registered for 10 years but had been working in the building industry since 1989. He was qualified by both academic qualification and experience to express the opinions which he did. Mr Van Der Horst had been employed as a building consultant since 1988. He had completed four of the five years required for the Bachelor of Architecture Degree at the University of Adelaide. He had completed the Builders’ Certificate Course at a TAFE College. He was also an accredited building surveying technician for the purposes of the Local Government Act1934 (SA). Again, he was qualified, both by reason of training and experience, to express the opinions which he did.
It was submitted that the report of Mr Rositano, prepared following his inspection on 17 April 1999, should not have been admitted into evidence because the original had not been produced, because two alterations had been made to the report by someone other than Mr Rositano and because a later report prepared by Mr Rositano in October 1999 had not been produced and tendered. None of those criticisms warranted rejection of Mr Rositano’s report or of his evidence. The original could not be located because it had been archived. The two alterations were minor and appear to have been of a kind made by someone else in the office of Archicentre Pty Ltd. The existence of the report prepared in October 1999 was well-known and, had the defendants pressed for its production, Mr Rositano indicated that he was in a position to obtain it.
Next, the defendants submitted that it could not be inferred that the defects observed by Mr Rositano and by Mr Van Der Horst were present at 21 February 1999. In my opinion, no basis for disturbing the trial Judge’s finding of fact on this question has been shown. On the contrary, given that Mr Rositano made his observations on the 17 April 1999, it seems quite unlikely that the defects which he observed could have developed in the short period which had elapsed since 21 February 1999. Furthermore, the defendants themselves gave evidence that there had been no change in the condition of the house between 21 February 1999 and the date of their departure from the house, 2 April 1999.
In my opinion, Ground 2 has not been made out.
Ground 3
The defendants submitted that the Judge had erred in not considering “the application of the doctorine of caveat emptor to the circumstances” This ground was argued only faintly. If the defendants’ agent’s statement constituted a misrepresentation, then the maximum caveat emptor would not have saved the defendants from liability. In the absence of a misrepresentation or of an express agreement, a vendor of real estate is not liable to a purchaser for defects in a building even if the vendor has created the defects itself or is aware of their existence.[22] However, the plaintiff’s claim in this case was based upon an alleged misrepresentation.
[22] Kadissi v Jankovic (1987) VR 255.
Grounds 4 and 5
Ground 4 alleged that the trial Judge had erred in finding that there was a causal link between the alleged misrepresentation and the plaintiff’s loss. Ground 5 alleged an error by the Judge in his assessment of the damages. Given the view which I have taken of Ground 1, it is unnecessary and, in my opinion, inappropriate, to express any view about these grounds.
Other Claims of the Plaintiff
The plaintiff’s particulars of claim also included an allegation that the conduct of the defendants, both directly and by their agent, was unconscionable, in breach of a “duty of honesty” and of a duty of care. The trial Judge did not deal with those claims in his reasons. No submissions were developed with respect to those claims on the appeal. It is not easy to see how a finding could have been made in favour of the plaintiff that she was in a position of special disadvantage in February 1999 of which the defendants or Ms Mansergh had taken advantage. There was no obligation on Ms Mansergh to advise the plaintiff to obtain her own building report before deciding to purchase the property. The proposed sale of the property did not involve unusual circumstances which might have required additional disclosure.[23] I do not consider that it would have been open to the Judge to hold that the plaintiff was in a position of special disadvantage viz-a-viz the defendants so as to make the conduct of Ms Mansergh in relation to the plaintiff unconscionable. The facts of this case are very different from those of Blomley v Ryan[24] and CBA v Amadio.
[23] Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 457, per Gibbs CJ.
[24] (1956) 99 CLR 362.
No reference was made by the plaintiff to s 51AC of the Trade Practices Act 1974 but I doubt that recourse to that provision would have availed the plaintiff. I refer, in particular, to the discussion by Selway J of the meaning of the word “unconscionable” in s 51AC in Australian Competition and Consumer Commission v 4WD Systems Pty Ltd[25]. No submissions were made with respect to the “duty of honesty” alleged. The evidence did not disclose circumstances giving rise to a duty of care owed by the defendants, or their agent, to the plaintiff.
[25] (2003) 200 ALR 491 at 541-46 [175]–[185].
In those circumstances, although the trial Judge has not made findings about these particular claims of the plaintiff, I do not consider it necessary for the matter to be remitted for the purposes of further consideration of those claims.
The Plaintiff’s Cross-Appeal
The plaintiff contended that the trial Judge had erred in his assessment of the damages and, in particular, in his assessment of the consequential losses which she had claimed. She sought an increase in the damages awarded.
Having regard to my conclusion that the plaintiff’s claim of misrepresentation had failed, it is not necessary to consider the cross-appeal.
Summary
In my opinion, the appeal should be allowed, the judgment in favour of the plaintiff against the defendants should be set aside and in lieu thereof, there should be an order that the plaintiff’s claim be dismissed. The cross-appeal should also be dismissed.
LAYTON J: I have had the opportunity of reading the reasons for decision of White J. I agree with the conclusion that his Honour reaches in relation to Ground 1, namely that the appeal should be allowed on the basis that the trial Judge was in error in finding that a statement made by the defendants in a brochure constituted a misrepresentation pursuant to s 7(1) of the Misrepresentation Act 1972 (SA). However, my reasons for so concluding respectfully differ from those of his Honour and I therefore publish separate reasons.
Following the approach taken by White J, I too will refer to the parties by their description at trial namely the respondent to this appeal will be referred to as the plaintiff and the appellants as defendants.
I agree in general terms with the description by White J of the factual matters which he has summarised under the headings of ‘The Circumstances of the Sale’, ‘The Condition of the House’ and ‘The Trial Judge's Conclusions with Respect to Misrepresentation’.
The written misrepresentation relied upon was contained in a brochure which the plaintiff obtained at the time of an open inspection on Sunday 21 February 1999 after she had read an advertisement in The Advertiser newspaper the previous day, 20 February 1999.
It is convenient to refer again to be the terms of the advertisement and the brochure for internal comprehension of these reasons.
The Advertisement
The advertisement was in the following terms:
WINDSOR GDNS
Open SUN 3.30-4.30
Cosy – Immaculate Style
Lovely gardens & outside ent., solid brick, 3 lge BRs, open plan lounge/dine, nice views, modern kitchen & bathroom, heating/cooling, plenty of parking. Reduced to sell $99,950. Joan Mansergh 0414 378 334 Glynde.
The Brochure
The brochure given to the plaintiff contained the following words, below an address and sketch of the house:
Nothing to Spend – Perfect Presentation
3 bedrooms with built in robes
Large Lounge
Combustion Heater
Upgraded Kitchen
Modern Bathroom
Cooling
Large Private rear gardens
The specific issue is whether the statement ‘Nothing to Spend – Perfect Presentation’ in the context of the brochure alone or combined with the advertisement describing the property as ‘Cosy – Immaculate Style’, amounts to a misrepresentation.
The trial Judge did not specifically make findings as to what the words in either the advertisement or the brochure represented. Instead a finding was made by the Judge that:
The representation in the brochure was quite inconsistent with the many serious faults that were observed by Mr Rositano. Clearly it was a misrepresentation of the condition of the house for the defendants to say through their agent that there was nothing to spend.[26]
[26] [45].
It would appear by implication that his Honour concluded that the words ‘nothing to spend’ amounted to a representation of fact and that the words conveyed that there were no serious faults with the house. The Judge found that because there were serious faults with the house, the words in the brochure amounted to a misrepresentation. In this context one must assume that the ‘serious faults’ are related to the structural problems which the Trial Judge found to exist.
Legal Principles Concerning Misrepresentation
In considering this appeal, I have had regard to the following principles with respect to misrepresentation:
·A misrepresentation is a false statement of a past or existing fact.[27]
·The falsity of a representation cannot be demonstrated except by reference to a statement of fact.[28]
·The representation may be express or implied.[29]
·Falsity is not established simply be proving the literal untruth of a wide representation where the literal meaning could not have been intended.[30]
·A misrepresentation of fact must be distinguished from promises, predictions, advice, and expressions of opinion, belief or intention.
·The expression of an opinion or ‘puffery’ does not amount a representation of a matter of fact.[31]
·‘Puffery’ refers to exaggeration, particularly in the context of advertising to attract potential purchasers.[32] It has particularly been noted by courts that it often accompanies the sale of real property.[33]
·Whether or not there has been a misrepresentation as to fact must be determined having regard to the context and to the surrounding facts and circumstances,[34] and must also be considered in its totality.[35]
·It is wrong to select words which alone would be likely to mislead, but when viewed in their context, were not capable of misleading.[36]
·In considering whether there is a misrepresentation, consideration is to be given to the likely class of persons who will be affected by the misrepresentation. That class may include the inexperienced, the gullible as well as the astute.[37]
[27] Given v Pryor (1979) 39 FLR 437, 441.
[28] Ibid.
[29] Ibid.
[30] Academy of Health & Fitness Pty Ltd v Power [1973] VR 254, 263-264.
[31] Riley McKay Pty Ltd v Bannerman (1977) 31 FLR 129, 139.
[32] Pappas v Soulac Pty Ltd (1983) 50 ALR 231, 234, 238; General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164, 178.
[33] Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189, 15,205; John G Glass Real Estate Pty Ltd v Karawi Constructions Pty Ltd (1993) 15 ATPR 41,356, 41,359.
[34] Pappas v Soulac Pty Ltd (1983) 50 ALR 231, 234; Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 4 ATPR 43,733.
[35] Mount Gambier Co-op Milling Society Ltd v Williams [1921] SASR 185, 196.
[36] Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 199.
[37] Ibid.
Whether Misrepresentation in this Case
Applying the first of these principles I consider that the trial Judge erred in not identifying what representation of fact was conveyed in the brochure to potential buyers and in what manner such representation of fact was false. Further in my view his Honour does not address the words in the brochure in totality or in conjunction with the advertisement.
A court is required to make an objective assessment as to what representation of fact is conveyed which is the subject of the misrepresentation. Whilst it is in no way determinative of that issue, it is relevant for a court to have regard to the evidence of the witnesses in a case.
In this case, the wording in the brochure and in the advertisement was that of the real estate agent Ms Mansergh. It was not chosen by the present defendants, who are liable for the selection of the words by their agent.
The evidence of Ms Mansergh as to the use by her of the words ‘Cosy – Immaculate Style’ was:
"cosy" to me means intimate, comfortable. Immaculate to me means clean, spotless and style, it has the feel of class about it…[38]
[38] Transcript 289, lines 10-13.
Her evidence as to what she meant by ‘Perfect Presentation’ was that:
It was perfectly presented. It was immaculate as my ad stated. It was just homely, it was a lovely home.[39]
[39] Transcript 289, lines 34-37.
Further, in relation to her evidence as to what she meant to convey by the words ‘nothing to spend’, Ms Mansergh indicated:
what I meant with the "nothing to spend" was that you could just move straight into the property; unpack your suit cases and you were at home. Kitchen updated, bathroom upgraded, nice carpets, heating, cooling, you just need to move in.[40]
[40] Transcript 289 lines 26-30.
The Advertisement
In my view the interpretation given by Ms Mansergh to the words ‘Cosy – Immaculate Style’ is correct and is their ordinary meaning.[41] I consider that the use of the word ‘Immaculate’ in conveying a flawless quality in relation to a house which was 40 years old,[42] is an exaggeration and hyperbole designed to attract persons to view the property. Further that word is linked to the word ‘style’ which necessarily contains a subjective element in that what is viewed as ‘style’ by one person may not be so regarded by another. In my opinion there is no representation of fact contained in the advertisement in relation to the phrase ‘Cosy – Immaculate Style’. In the context in which they appear, the words do not take on a different connotation. The remainder of the information in the advertisement simply referred to the size and type of house, the facilities of the modern kitchen and bathroom, and to the heating and cooling.
[41] The Macquarie Concise Dictionary (3rd ed 1998) 252, 563. In relation to the word “immaculate”, I note that a potential meaning is “free from fault or flaw”.
[42] Exhibit 46 Report of Archicentre 17 April 1999.
The Brochure
The brochure apart from the words in controversy, referred to the number of rooms; the upgraded bathroom and modern kitchen; the facilities and the gardens. The words ‘Perfect Presentation’ and in particular the use of the word ‘Perfect’, like the word ‘Immaculate’ also suggests flawlessness.[43] This is also consistent with their usage by Ms Mansergh. For the same reasons discussed above in the context of ‘Presentation’, I consider that ‘Perfect’ is an exaggeration such as would to amount to puffery. The word ‘Presentation’ is similar to the word ‘Style’ in the overall context and when combined with the word ‘Immaculate’, has a subjective connotation, as ‘Immaculate Presentation’ to one person may not be so regarded by another. I do not consider that this phrase conveys a representation of fact.
There is also support for this interpretation from the evidence of the plaintiff herself who said in examination in chief that:
I had looked around the property. The property looked really very, very nice. It was impeccable indeed, it was immaculate, exactly like the advertisement was saying. It had nice wallpaper, it was nicely furnished, it was very well presented.[44]
[43] The Macquarie Concise Dictionary (3rd ed 1998) 855.
[44] Transcript 39-40, lines 38-4.
Turning now to the words ‘Nothing to Spend’. A literal meaning of ‘Nothing to Spend’ by themselves without any context, convey a representation that there was ‘not a thing to spend’. In the absence of context, there is no limitation as to the subject matter of spending or any limitation as to time whether it be at that moment, or next month, at some indeterminate time in the future or indeed ever.
However, the phrase does not stand alone. The phrase is linked to ‘Perfect Presentation’ being a phrase of puffery and reinforces the perfection of the presentation of the property. That is, the presentation of the property is so perfect that there is ‘Nothing to Spend’. In this sense it could again be regarded as part of the puffery and it took no account of the taste of a potential buyer. However, I consider that the preferable interpretation is that the phrase ‘Nothing to Spend’ in its context, amounts to a representation of fact.
Whilst the interpretation given by Ms Mansergh used more verbiage, I consider she was correct, and that the words in the brochure in the context (reinforced by the contents of the advertisement), represented that the presentation of the house was at that time so clean, spotless and had such style, that a buyer could simply move in with no need to spend any money on its presentation.
The clear focus of the descriptive words used in both the advertisement and the brochure was on the visual appearance of the house property. The words ‘Nothing to Spend’ are precisely linked with the words ‘Perfect Presentation’. The words do not in the context expressly or impliedly convey anything more about the property other than a glowing description of its presentation. It does not expressly or impliedly say anything about whether the house is structurally sound, or indeed whether the plumbing or electrical wiring is sound.[45] The words in issue are specifically connected to the presentation or appearance of the house and indicate there was nothing to spend on presentation. In this sense, although the words are connected to words of puffery, they purport to represent a statement of fact, namely that there was nothing to spend, but this is limited to presentation only. It was not representing that there was ‘Nothing to Spend’ on other aspects of the property such as structural matters or plumbing or electrical wiring.
[45] This interpretation is consistent with the approach taken by Young J in Eighth SRJ Pty Ltd v Merity (1997) 7 BPR 15,189, 15,206 with regard to the same phrase in similar context.
There is also some support for this approach from the plaintiff when she gave the following evidence:
The fact that the property had been very well maintained for 17 years and it had been redecorated inside two years before and repainted outside one year before. What I’m saying is that it is the combination of all the representations, it’s a whole, it’s the advertisement that was saying that the property was immaculate and cosy which was what I could see when I went to the property. It was the brochure that was saying ‘Nothing to spend’…
Then the brochure that was saying there was nothing to spend and it did indeed, from what I could see there was nothing that the house needed. It was just perfect the way it was. You could just move in. Then there was the statements by the agent that was conveying to me the impression that, indeed, the property had been very well looked after. It actually looked very much like all the properties that I have left myself. I have owned three properties in Paris. I bought and sold, and every time I left a place it looked immaculate.
It may have been a different case if the words ‘Perfect Presentation’ had not been on the brochure. In that case there would have been no qualification to the words ‘Nothing to Spend’ and the fact that the plaintiff was required to spend money by reason of the ‘serious faults’ found by the trial Judge may have amounted to a misrepresentation.
To the extent that there was evidence from Ms Mansergh that this was a frequently used phrase within the real estate industry, it is a most unwise practice as it could potentially give rise to misrepresentation depending on the particular context in which it was used.
Conclusion
For these reasons I agree that the appeal should be allowed and with the orders proposed by White J.
I also generally agree with the approach taken by White J in relation to Grounds 2 to 5 and in relation to ‘Other claims of the Plaintiff’. Similarly in relation to the plaintiff’s cross-appeal I agree that should also be dismissed
13
22
1