Orchard Holdings Pty Ltd v Paxhill Pty Ltd as Trustee for Paxhill Trust trading as Property People

[2012] WASC 271

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   ORCHARD HOLDINGS PTY LTD -v- PAXHILL PTY LTD AS TRUSTEE FOR PAXHILL TRUST TRADING AS PROPERTY PEOPLE [2012] WASC 271

CORAM:   ALLANSON J

HEARD:   17-21, 24-27 OCTOBER 2011, 27-29 FEBRUARY, 12-14 MARCH 2012

DELIVERED          :   27 JULY 2012

FILE NO/S:   CIV 1762 of 2010

BETWEEN:   ORCHARD HOLDINGS PTY LTD

First Plaintiff

KEITH ROBERT ANDERSON
Second Plaintiff

SUE-ANN ELIZABETH ANDERSON
Third Plaintiff

AND

PAXHILL PTY LTD AS TRUSTEE FOR PAXHILL TRUST TRADING AS PROPERTY PEOPLE
First Defendant

PRO PROPERTY PTY LTD AS TRUSTEE FOR ACEHIGH ADELAIDE TRUST TRADING AS COLDWELL BANKER PRO PROPERTY
Second Defendant

RICHARD MASSON MOODY
Third Defendant

Catchwords:

Multiple causes of action - Misleading or deceptive conduct - Breach of contract - Negligence - Breach of fiduciary duty

Conduct of real estate sales representative in presenting false offers to vendor

Liability of agent for conduct of sales representative under statute and at common law

Apportionment of liability under statute

Assessment of damages

Legislation:

Civil Liability Act 2002 (WA), s 5AI, s 5AK, s 5AKA
Fair Trading Act 1987 (WA), s 9, s 10, s 68, s 79
Real Estate and Business Agents (General) Regulations 1979 (WA), reg 7
Real Estate and Business Agents Act 1978 (WA), s 4, s 26, s 44, s 51, s 55, s 60, s 132, s 133, s 134, s 140
Strata Titles Act 1985 (WA)
Trade Practices Act 1974 (Cth), s 52, s 75B, s 87CB, s 87CD, s 87CE

Result:

Judgment for the first plaintiff

Category:    B

Representation:

Counsel:

First Plaintiff                :     Mr P Mendelow

Second Plaintiff            :     Mr P Mendelow

Third Plaintiff               :     Mr P Mendelow

First Defendant             :     Mr M S White

Second Defendant         :     Dr J T Schoombee & Mr T A M O'Neill

Third Defendant           :     Dr J T Schoombee & Mr T A M O'Neill

Solicitors:

First Plaintiff                :     Lawton Gillon

Second Plaintiff            :     Lawton Gillon

Third Plaintiff               :     Lawton Gillon

First Defendant             :     Clavey Legal

Second Defendant         :     Downings Legal

Third Defendant           :     Downings Legal

Case(s) referred to in judgment(s):

BHPB Freight Pty Ltd v Cosco Oceania Chartering Pty Ltd (No 2) [2008] FCA 1656

Breen v Williams [1996] HCA 57; (1996) 186 CLR 71

Brockway v Pando [2000] WASCA 192; (2000) 22 WAR 405

Cartledge v E Jopling & Sons Ltd [1963] AC 758

Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337

Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64

Commonwealth v Cornwell [2007] HCA 16; (2007) 229 CLR 519

Como Investments Pty Ltd (in liq) v Yenald Nominees Pty Ltd (1997) ATPR 41‑550

Deatons Pty Ltd v Flew [1949] HCA 60; (1949) 79 CLR 370

Downey v Carlson Hotels Asia Pacific Pty Ltd [2005] QCA 199

Durban Roodepoort Deep, Ltd v Newshore Nominees Pty Ltd [2005] WASCA 231

Equiticorp Finance Ltd (in liq) v Bank of New Zealand (1993) 32 NSWLR 50

Fink v Fink [1946] HCA 54; (1946) 74 CLR 127

Gates v City Mutual Life Assurance Society Ltd [1986] HCA 3; (1986) 160 CLR 1

Goddard Elliott (a firm) v Fritsch [2012] VSC 87

Gould v Vaggelas [1985] HCA 75; (1985) 157 CLR 215

Grainger v Williams [2009] WASCA 60

Hawkins v Clayton [1988] HCA 15; (1988) 164 CLR 539

Henville v Walker [2001] HCA 52; (2001) 206 CLR 459

Hospital Products Ltd v United States Surgical Corporation [1984] HCA 64; (1984) 156 CLR 41

Houghton v Arms [2006] HCA 59; (2006) 225 CLR 553

I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd [2002] HCA 41; (2002) 210 CLR 109

John Alexander's Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1

Jones v Schiffmann [1971] HCA 52; (1971) 124 CLR 303

Junker v Hepburn [2010] NSWSC 88

Karacominakis v Big Country Developments Pty Ltd [2000] NSWCA 313

Kenny & Good Pty Ltd v MGICA (1992) Ltd [1999] HCA 25; (1999) 199 CLR 413

La Trobe Capital & Mortgage Corporation Ltd v Hay Property Consultants Pty Ltd [2011] FCAFC 4; (2011) 190 FCR 299

Malec v J C Hutton Pty Ltd [1990] HCA 20; (1990) 169 CLR 638

Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494

McRae v Commonwealth Disposals Commission [1951] HCA 79; (1951) 84 CLR 377

Mitchell Morgan Nominees Pty Ltd v Vella [2011] NSWCA 390

New South Wales v Lepore [2003] HCA 4; (2003) 212 CLR 511

Newmarket Corporation Pty Ltd v Kee-Vee Properties Pty Ltd [2003] WASC 157

NMFM Property Pty Ltd v Citibank Ltd [2000] FCA 1558; (2000) 107 FCR 270

North East Equity Pty Ltd v Proud Nominees Pty Ltd [2010] FCAFC 60; (2010) 269 ALR 262

Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451

Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (1994) ATPR 41-315

Perpetual Trustee Company Ltd v Milanex Pty Ltd (in liq) [2011] NSWCA 367

Pilmer v The Duke Group Ltd (in liq) [2001] HCA 31; (2001) 207 CLR 165

Podrebersek v Australian Iron & Steel Pty Ltd [1985] HCA 34; (1985) 59 ALJR 492

Reinhold v New South Wales Lotteries Corporation (No 2) [2008] NSWSC 187

Scarcella v Lettice [2000] NSWCA 289; (2000) 51 NSWLR 302

St George Bank Ltd v Quinerts Pty Ltd [2009] VSCA 245; (2009) 25 VR 666

Tiao v Lai [No 2] [2010] WASCA 189

Trade Practices Commission v Tubemakers of Australia Ltd [1983] FCA 93; (1983) 76 FLR 455

Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627

Walplan Pty Ltd v Wallace [1985] FCA 479; (1985) 8 FCR 27

Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514

Wheeler Grace & Pierucci Pty Ltd v Wright [1989] FCA 127; [1989] ATPR 40‑940

Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463

Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661

Zorom Enterprises Pty Ltd v Zabow [2007] NSWCA 106; (2007) 71 NSWLR 354

1. ALLANSON J:  The plaintiffs bring this action against three defendants, alleging:

   1.misleading or deceptive conduct under the Trade Practices Act 1974 (Cth) (against all defendants) and under the Fair Trading Act 1987 (WA) (against the third defendant, Mr Richard Moody, only);

   2.breach of contract by the first and second defendants;

   3.breach of duty of care by the first and second defendants; and

   4.breach of fiduciary duty by the first and second defendants. 

2. Having heard all of the evidence and submissions, it is difficult to see how the alternative claims add to that in misleading conduct.  The plaintiffs, having amended their claims in each cause of action at the start of the trial, did not even address on the claims other than those under statute. 

3. There is no question that Mr Moody engaged in a scandalous deception of the plaintiffs over a protracted period.  That deception has been pleaded as a series of representations by conduct; the first in December 2006 and the last on or about 18 May 2007.  The effect of those representations continued until events in December 2008 revealed what he had done.  The questions for determination are largely concerned with the liability of Mr Moody's employers (who were unaware of his conduct), and the extent of the damage suffered by the plaintiffs.  Mr Moody is responsible for all of the damage done, but financial responsibility will primarily be borne by others.

4. The plaintiffs commenced these proceedings in 2010.  In mid‑2011 they asked for some expedition in bringing the matter to a hearing as they were facing pressure from their bank. Although a trial in October was listed, it could not be completed and two later listings were required.

The parties and principal witnesses

1. The first plaintiff, Orchard Holdings Pty Ltd was incorporated in 1990.  Between 2006 and 2008, it carried out a strata titled development of land in Highgate, which ultimately was called Woodley Apartments.  Orchard Holdings' two directors are the second plaintiff, Keith Robert Anderson, and the third plaintiff, Sue‑Ann Elizabeth Anderson.  The second and third plaintiffs are husband and wife. 

2. In 2006, Mr Moody was a real estate sales representative employed by the first defendant.  The first defendant carried on business as a real estate agent under the name Property People (or 'property/people' as it appeared in correspondence and on letterheads).  The relationship between Mr Moody and Property People was one of employment, and is admitted to be such.  Many of the indicia of an employment relationship, however, were not present.  Mr Moody was largely independent.  He was paid commission only, and was invoiced for expenses (such as advertising) that he incurred on behalf of his clients.  One of the critical questions for determination is when Mr Moody's employment with Property People ceased.  Three witnesses from Property People gave evidence:  Barry Litten and Michelle McGill, both of whom were directors of the company and licensed real estate agents; and Yvonne Price, a sales/office administrator at the relevant time. 

3. The second defendant, Coldwell Banker, was also a real estate agent, and carried on business under the name Pro Property.  It is not in doubt that Mr Moody was employed by Coldwell Banker between 8 January 2007 and December 2008, although some questions were raised about when he began his employment there.  Coldwell Banker called evidence from one of their former employees, Melissa Cattai.  Ms Cattai was a sales administrator at the relevant time and it appears that she was a relatively junior employee.  None of the directors of Coldwell Banker gave evidence. 

4. Although he is not a party, Peter de Groot played a significant role in these events.  He managed the Woodley Apartments project in its early stages and represented Orchard Holdings in most of its dealings with Mr Moody. 

5. There are some other entities that may be mentioned now, as I refer to them on several occasions.  

6. Finance for the development was provided by Westpac Banking Corporation. 

7. The construction was carried out by Matrix Constructions WA Pty Ltd.   Mr Anderson was the sole director of Matrix Constructions.  

8. Kott Gunning Lawyers were the lawyers for Orchard Holdings:  they prepared a standard form contract which was used by Mr Moody for the offers he presented.  Later they advised Orchard Holdings when the deception was discovered. 

The case pleaded

1. Despite the pleas in contract, tort and breach of fiduciary duty, the focus at trial was on the claim under the Trade Practices Act. 

2. The plaintiffs plead Mr Moody's deception of Mr Anderson, Orchard Holdings, as a series of representations.  This was perhaps unnecessary, when the statute speaks in terms of conduct and does not require the identification of discrete representations.  The plea does, however, more readily meet the circumstance that Mr Moody's conduct occurred over a period when he changed his employment, and where the plaintiffs seek to prove liability against each of those employers.  

3. The claim by Orchard Holdings against each defendant is summarised below. 

The statement of claim 

The claim against Property People in misleading or deceptive conduct

1. From on or about 22 September 2006 to in or about December 2006 Property People, through Mr Moody, prepared and presented to Orchard Holdings a number of offers by third party purchasers to purchase individual apartments in the Woodley Apartments, using a standard contract for the sale of land.  Six offers were presented on 6 and 10 December 2006, for apartments 7, 9, 12, 21, 24 and 26.  On each occasion Property People presented an offer to Orchard Holdings, it represented that the offer was a genuine offer made by a real person and had been signed by the offeror (collectively, the First Representations). 

2. Acting in reliance upon the First Representations and induced by those representations, Orchard Holdings accepted the offers, resulting in six contracts for the sale and purchase apartments in Woodley Apartments, and did not attempt to market and sell those apartments to any other purchasers. 

3. On each occasion after Orchard Holdings accepted one of the offers, Property People wrote to Orchard Holdings congratulating Orchard Holdings on the sale, confirming acceptance, and confirming that the deposit payable under each contract had been paid to Property People (collectively, the Second Representations).

4. Acting in further reliance on the First and Second Representations and induced by those representations Orchard Holdings:

   (a)proceeded with its plans for construction of Woodley Apartments;

   (b)did not seek to market and sell the apartments 'sold' to any other purchaser;

   (c)in or about May 2007 presented to Westpac 20 contracts for the sale of 20 apartments in Woodley Apartments, which included the six contracts, thereby satisfying a condition precedent required by the bank (the pre‑sales condition precedent);

   (d)obtained the finance facility for the construction of Woodley Apartments from Westpac;

   (e)did not seek to sell the remaining unsold apartments in Woodley Apartments; and

   (f)using the finance facility provided by Westpac carried out the development and constructed Woodley Apartments. 

5. The First and the Second Representations were made in trade or commerce, and were misleading or deceptive or likely to mislead or deceive in that each purported purchaser had not signed that contract, some of them were not real persons, and the contracts were not genuine.  

6. In a late amendment to the statement of claim, following a plea by Mr Moody that the limitation period under the Fair Trading Act had expired, the plaintiffs further pleaded that the conduct of Mr Moody was conduct engaged in on behalf of Property People within the meaning of s 84(2) of the Trade Practices Act, in that Mr Moody was at all material times an employee of Property People, and engaged in the conduct within the nature and scope of his actual or apparent authority. 

7. Despite the width of the plea regarding reliance on the representations (that is, that in reliance, Orchard Holdings presented contracts to Westpac, obtained finance, and proceeded with the development), Orchard Holdings pleaded its loss and damage in this limited way:

   Had the plaintiffs not been misled into believing that the apartments … had been sold, the plaintiffs would have achieved an equivalent number of such sales of similarly priced apartments from genuine purchasers prior to June 2007. 

8. Schedule A to the statement of claim sets out the particulars of Orchard Holdings' loss:  the difference in price between the amount of each purported contract and the amount actually achieved on sale; various outgoings being the difference in agent's fees, loan interest expenses, shire rates, water rates, strata levies and strata insurance (collectively, holding costs) for the period from when it was intended pre‑construction contracts would settle and when settlement actually occurred; the holding costs for the apartments which were not the subject of fictitious contracts, but which they say they would have sold earlier, had they not been deceived; and various payments including amounts paid to Westpac and Kott Gunning.

The claim against Coldwell Banker in misleading or deceptive conduct

1. The plaintiffs plead against Coldwell Banker, that from in or about February 2007 to in or about May 2008, through Mr Moody, it prepared and presented to Orchard Holdings six offers to purchase apartments 4, 5, 8, 23, 25 and 28.  Coldwell Banker in that way made representations (the Third Representations), the representations were false, and Orchard Holdings acted in reliance on them.  The plea is in similar terms to that against Property People. 

2. Coldwell Banker, through Mr Moody, also:

   (1)By letter dated 31 January 2007, advised Orchard Holdings that it had received $391,200 into its trust account from Property People, comprising the deposits paid under contracts for the sale of apartments (the Fourth Representation). 

   (2)By a letter dated 20 April 2007, advised Orchard Holdings that it was holding $630,275 in its trust account, comprising the deposits paid under contracts for the sale of apartments (the Fifth Representation). 

   (3)On a date unknown, represented to Orchard Holdings that apartment 18 had been sold (the Sixth Representation).

   (4)On or about 18 May 2007, provided letters purportedly signed by each of the purchasers of apartments 4, 5, 7, 8, 9, 10, 12, 13, 15, 18, 21, 23, 24, 25, 26 and 28 (the Seventh Representation).  Following the usage of the parties, these letters are conveniently referred to as the letters of acknowledgement.

3. The plaintiffs plead that they acted in reliance on the Third, Fourth, Fifth, Sixth and Seventh Representations and were induced by them.  The plea mirrors that against Property People, even though the Seventh Representation is pleaded to have been made on about 18 May 2007, and most of the acts pleaded to have been in reliance on and induced by the representations occurred before then.

4. Again, the plaintiffs plead that the representations were made in trade or commerce and were misleading or deceptive, and that Mr Moody's conduct was conduct engaged in on behalf of Coldwell Banker within the meaning of s 84(2) of the Trade Practices Act. 

5. Orchard Holdings claims the same loss and damage as it claimed against the first defendant and relies on the particulars in schedule A. 

The claim against Mr Moody in misleading or deceptive conduct

1. Further or alternatively, the plaintiffs plead that Mr Moody made the seven pleaded representations in breach of s 9 of the Fair Trading Act. They further plead that Mr Moody was knowingly concerned in contraventions of s 52 of the Trade Practices Act by Property People and Coldwell Banker, within the meaning of s 75B of that Act.

The claims against Property People and Coldwell Banker in contract

1. The plaintiffs plead that each of Property People and Coldwell Banker entered into a selling agency agreement with Orchard Holdings which, on its proper construction, required the relevant defendant to market and pre‑sell the Woodley Apartments off the plan 'and to present only genuine and real offers to Orchard Holdings for consideration'.

2. Further or alternatively, it was an implied term of each selling agency agreement that:

   (a)each defendant would only present genuine and real offers to Orchard Holdings; and

   (b)each defendant would conduct itself with the utmost good faith and loyalty towards Orchard Holdings. 

3. The implied terms are to be implied in fact according to the criteria set out in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337.

4. Each defendant breached those contractual obligations by presenting the offers.  The damages claimed are the same as those claimed under the statutory cause of action.

The claims against Property People and Coldwell Banker for breach of their duty of care

1. The plaintiffs plead that each of Property People and Coldwell Banker, as agent of Orchard Holdings, owed it a duty to exercise reasonable skill and care in marketing and selling the apartments, and that in breach of that duty each of them presented contracts which were not genuine.  It is not alleged that either defendant neglected to take reasonable care in the supervision of Mr Moody, or otherwise. 

2. By reason of the breaches of duty, Orchard Holdings suffered loss and damage.  The damages claimed are the same as those claimed under the statutory cause of action. 

The claims against Property People and Coldwell Banker for breach of fiduciary duty

1. Finally, the plaintiffs plead that each agent owed fiduciary duties to Orchard Holdings:

   (a)to act in good faith and in the best interests of Orchard Holdings; and

   (b)to act honestly and for the benefit of Orchard Holdings,

   and breached those duties by presenting offers which were not genuine.  The plaintiffs plead that each of them is liable to pay Orchard Holdings equitable compensation. 

2. It is not alleged that either the first or second defendant obtained any benefit from the conduct of Mr Moody. 

The claims by Mr and Mrs Anderson

1. Mr and Mrs Anderson plead that in reliance on the representations, and induced by them:

   1.on 15 May 2007, and then again on 21 August 2008, each provided a guarantee and indemnity for the liabilities of Orchard Holdings to Westpac;

   2.on 15 May 2007, Mr Anderson granted to Westpac a first registered mortgage over a property he owned at Trigg;

   3.on about 5 September 2008, purchased a property at 72 Johnson Street, Mosman Park and granted a first registered mortgage over the Mosman Park property to Westpac. 

2. The plaintiffs plead that Mr Anderson was obliged by Westpac to sell the Trigg property for less than its value in order to reduce the plaintiffs' indebtedness to Westpac, and that if the fictitious contracts had been genuine and real Westpac would not have obliged Mr Anderson to sell the property and he would have sold it for its true market value at about the same time (July 2009).  The plaintiffs claim the difference between the amount received and the market value of the Trigg property. 

3. Mr and Mrs Anderson plead that they borrowed $3.8 million from Westpac to purchase the Mosman Park property.  Had they known the contracts were not genuine and real, Orchard Holdings would have achieved sales of an equivalent number of apartments at similar prices before June 2007, and would have sold the remainder of the apartments in or about the period between December 2008 and March 2009.  Orchard Holdings would not have incurred the additional interest and other costs and expenses on the finance facility for the development, and would have repaid the Mosman Park property loan.  Mr and Mrs Anderson would not have incurred interest and other costs which they have incurred in relation to that loan. 

The defence of Property People

1. Property People admits that it employed Mr Moody as a sales representative from about January 2006 to on or about 30 November 2006.  Significantly, it denies that it employed Mr Moody during the period in December 2006 and early January 2007 when he made the representations upon which the plaintiffs rely.  Property People pleads that Mr Moody terminated his employment without notice in or about the last week of November 2006.

2. Property People does not admit the plaintiffs' plea regarding Mr Moody's conduct in preparing and presenting the fictitious offers, admitting only that he presented the offers for apartments 13, 15, 27 and 28 (which are not alleged to be false).  It does not admit the allegations regarding the letters sent by Mr Moody in January 2007 and says that, in any event, the plaintiffs' reliance on the false representations occurred after Mr Moody had ceased his employment.  Property People also expressly pleads that Mr Moody had ceased to be its agent before the fictitious offers were received by Mr Anderson. 

3. The pleas in the alternative causes of action (contract, breach of duty, and breach of fiduciary duty) are denied. 

4. Property People pleads that if it is liable, the claims against it are apportionable claims and that Coldwell Banker and Mr Moody are concurrent wrongdoers within the meaning of s 5AI of the Civil Liability Act 2002 (WA), and s 87CB of the Trade Practices Act.  In particular, Property People pleads that Coldwell Banker negligently failed to make enquiries to ascertain which apartments had actually been sold and what deposits had been taken by Mr Moody, and negligently failed to require documentary evidence of those matters in order to properly advise Orchard Holdings. 

5. Property People further pleads that its liability is limited under s 5AK(1) of the Civil Liability Act and s 87CD of the Trades Practices Act.  It also pleads that the plaintiffs were negligent in relation to the loss or damage that they claim.

The defence of Coldwell Banker 

1. Coldwell Banker admits that it employed Mr Moody and that he commenced his employment on 8 January 2007.  It denies, however, that he was authorised to act on its behalf in respect of the making of the Third to Seventh Representations.  Further, it denies that Mr Moody acted within the scope of his employment with regard to any of those matters, or was authorised by it to act on its behalf to enter into any contract with a third party such as Orchard Holdings. 

2. Coldwell Banker specifically pleads, in admitting that Orchard Holdings obtained indicative approval for a finance facility from Westpac for the construction of the Woodley Apartments, that it was a condition precedent to that finance facility that Orchard Holdings provide Westpac with executed arms length contracts for the sale of 15 apartments; that the gross pre‑sales were to total no less than $10 million; and that written confirmation was required from Orchard Holdings' real estate agent that deposit money or security, to a minimum of 10% of the sales contract amount, was held in trust. 

3. Coldwell Banker denies that it had any selling agency agreement with Orchard Holdings, and pleads that any agreement alleged by the plaintiffs was invalid and of no force and effect to appoint it as Orchard Holdings' agent because of the failure to comply with s 60 of the Real Estate and Business Agents Act 1978 (WA).

4. Coldwell Banker does not admit that Orchard Holdings presented 20 contracts for the sale of 20 apartments to Westpac and denies that the pre‑sales condition precedent for the finance facility was satisfied. 

5. As well as denying that it presented any of the fictitious offers to purchase, Coldwell Banker pleads that Mr Moody presented the offers 'in terms of a package of offer documents put together by the law firm Kott Gunning acting for [Orchard Holdings]'; that one of the conditions in the standard offer (cl 9 of annexure B) provided, in effect, that a buyer could resile from the contract before settlement if there were any subsequent changes to the strata plan, by laws and strata budget which were unacceptable to the buyer; and that another condition (cl 10 of annexure B) provided, in effect, that a buyer could resile from the contract if Form 28 (a form required by the Strata Titles Act) was not acceptable to the buyer if and when filled out. 

6. Coldwell Banker denies that the letters of 31 January 2007 and 20 April 2007, which were prepared on its letterhead and purportedly signed by one of its employees, were signed by her or authorised by anyone with the requisite authority on behalf of Coldwell Banker. 

7. In relation to the fictitious offer purporting to have been made for apartment 18, Coldwell Banker alleges that it was presented to the plaintiffs by Mr Moody when he was employed by Property People. 

8. Coldwell Banker denies that Orchard Holdings was induced by or relied on the letters of acknowledgement in applying for the finance facility and denies that the pre‑sales condition precedent was satisfied.  It further alleges that any reliance by Orchard Holdings on the letters of acknowledgement was both manifestly unreasonable and not reasonably foreseeable.  It pleads that the purported waiver of the benefit of one of the contract clauses would, in any event, be of no force and effect. 

9. Coldwell Banker pleads that the purported waiver, in these circumstances, 'signalled a decision on the part of [Orchard Holdings] through de Groot not to comply with the requirements of the Strata Titles Act', with the result that, even if the fictitious contracts had been genuine, any genuine buyer could have resiled from the contract prior to settlement pursuant to the Strata Titles Act. 

10. Coldwell Banker further pleads that reliance on the letters purportedly sent by it was unreasonable because Mr de Groot had demanded on three occasions that Mr Moody produce bank statements confirming deposits held in the trust account of Coldwell Banker, and Mr Moody had not complied with those demands.

11. Coldwell Banker admits that the offers to purchase apartments 4, 5, 8, 25, and 28, presented by Mr Moody between about 31 January 2007 and 4 April 2007, were fictitious in the sense that the purported buyers had not signed or executed the offers.  It pleads that the offer made by Mr Moody for apartment 23 (in his name and that of his wife) was a genuine offer although not signed by Mrs Moody.  It further alleges that Orchard Holdings, through Mr de Groot or through Mr Anderson, should have been alerted to the fact that the letters of acknowledgement and the related contracts were fictitious or caused enquiries to be made. 

12. Coldwell Banker pleads in the alternative that if Mr Moody is found to have acted for or represented it, the making of the Third to Seventh Representations did not cause Orchard Holdings to suffer loss and damage as alleged or at all.  It pleads that Orchard Holdings would not otherwise have sold the apartments to genuine purchasers at the prices alleged in the statement of claim during the period when the fictitious sales occurred, as the apartments were overpriced. 

13. Further, it pleads that in the circumstances any genuine buyer 'could not only have resiled from the contract prior to settlement pursuant to the Strata Titles Act but would have done so in all probability' because the plaintiffs had decided not to bring to the attention of buyers the changes to the strata plan, strata bylaws, or strata budget, or to have Form 28 completed before settlement, and the strata plan applicable at the time of settlement differed materially from the draft strata plans previously attached to all offer documents for the Woodley Apartments.  

14. Coldwell Banker pleads that Orchard Holdings was guilty of both contributory negligence and failure to mitigate its loss. 

15. Coldwell Banker also pleads that the claims are apportionable claims and that Property People is a concurrent wrongdoer.  Although Coldwell Banker and Mr Moody were both represented by the same solicitors and counsel, it further pleaded that Mr Moody was a concurrent wrongdoer. 

16. Coldwell Banker also alleged that Mr de Groot was a concurrent wrongdoer due to his negligence in the management of the Woodley Apartments. 

The defence of Mr Moody

1. Mr Moody largely denies or does not admit the allegations pleaded by the plaintiffs.

2. He admits, however, that identified offers were fictitious (in that they were not made or signed by any genuine buyer) and that any related letter of acknowledgement was also not signed by a genuine buyer. 

3. The offers admitted to be false do not completely correspond with those alleged by the plaintiffs.  In relation to the offers said to have been presented while he was employed by Property People, Mr Moody admits false offers on apartments 9, 12, 21, 7, 26 and 25 (the last in the name of Ms Lesa Hinchcliffe).  In relation to offers presented while he was employed by Coldwell Banker, he admits false offers on apartments 5, 8, 25 (this time in the name of Mr Majteles), 28 and 4.

4. Mr Moody pleads that he presented an offer for apartment 23 in his name and that of his wife, Beverley Moody, and that it was genuine although not signed at the time by his wife.  He pleads that they were never called upon to perform the contract.  

5. Mr Moody pleads that he continued to market the apartments throughout the time when the fictitious offers were presented.  

6. Mr Moody pleads that the claim against him for damages under the Fair Trading Act was not commenced within three years from when the cause of action accrued and is barred by reason of s 79 of that Act. Specifically, he pleads:

   (a)all fictitious offers pleaded by the plaintiffs had been presented and accepted;

   (b)loss flowing from the fictitious contracts was inevitable from the time each of them was accepted by Orchard Holdings as genuine, and any related cause of action thus accrued on that date;

   (c)alternatively, loss was incurred and any cause of action accrued when Orchard Holdings decided to proceed and did proceed with the Woodley project. In particular, finance documents had been provided and executed, construction had substantially begun, and the letters of acknowledgement had been presented to Orchard Holdings and passed on to Westpac, more than three years before the writ was issued. 

Pleadings subsequent to the defences

The plaintiffs' replies

1. The plaintiffs filed replies to the defences of Coldwell Banker and Mr Moody.  The greater part of the replies joined issue with matters raised in the defences.  There were, however, some particular matters where the replies went further. 

2. In reply to Coldwell Banker's plea that reliance on the letters of acknowledgement was unreasonable and not reasonably foreseeable, the plaintiffs plead that the conduct of Mr Moody was intentional and resulted in economic harm, and by reason of that Coldwell Banker could not rely on any statutory apportionment of liability or exclusion of liability.  This plea is later repeated in a slightly different form, with the allegation that Coldwell Banker, acting through Mr Moody, 'intended to cause the plaintiffs' loss and damage'.  The plaintiffs plead that by reason of Coldwell Banker's vicarious liability for the acts of Mr Moody, and the intentional causing of loss or damage, Coldwell Banker and Mr Moody and not concurrent wrongdoers. 

3. The plaintiffs plead that Coldwell Banker did not provide notice to them that Mr de Groot was a concurrent wrongdoer, as required under s 5AKA of the Civil Liability Act or s 87CE of the Trade Practices Act. 

4. In response to the limitation argument pleaded by Mr Moody, the plaintiffs plead that:

   (a)the representations constituted continuing representations that were misleading or deceptive or were likely to mislead or deceive; and

   (b)at no material time until 8 December 2008 did they become aware of the misleading nature of each of the representations 'which the Third Defendant concealed from the Plaintiffs until 8 December 2008'. 

Rejoinders

1. Coldwell Banker filed a rejoinder, much of it pleading assertions of law.  The rejoinder clearly puts in issue whether there was a valid appointment of Coldwell Banker as a selling agent for the plaintiffs, whether the letter on which the plaintiffs rely satisfies the requirements of the Real Estate and Business Agents Act and also whether, to the plaintiffs' knowledge, Mr Moody had no authority to write such a letter. 

2. Coldwell Banker admits that it did not provide notice to the plaintiffs or inform them that Mr de Groot was a concurrent wrongdoer, but pleads that the plaintiffs were at all material times aware that he may be, and the plaintiffs were aware of the facts and circumstances relied on in the defence. 

3. Mr Moody also filed a rejoinder.  To some extent it takes pleading points, alleging that the representations were not pleaded in the statement of claim as continuing representations and cannot be pleaded as such in the reply. 

4. Further, Mr Moody pleads that knowledge of the facts giving rise to a cause of action is not a requirement for the limitation period under s 79 of the Fair Trading Act to commence to run.  Mr Moody denies that he concealed the misleading nature of the representations, but pleads, in any event, that concealment does not as a matter of law affect the commencement of the limitation period. 

5. He further pleads that Orchard Holdings, through Mr Anderson or Mr de Groot, could and should by reasonable inquiry have become aware of the alleged misleading nature of any representations he had made. 

The issues for determination

1. The cases pleaded by each of the parties raise a multiplicity of issues, not all of which were dealt with by the parties in submissions, although none was abandoned.  The principal issues, both factual and legal, are:

   1.Whether Mr Moody was employed by Property People when he presented the six fictitious offers in December 2006 and in January 2007 when he provided the letters confirming receipt of the deposits.

   2.Whether the offer presented in December 2006 for apartment 24 (in the name of Mr Moody's sister‑in‑law, Helen Moody) was false.

   3.When did Mr Moody present the offer in the name of Ms Hinchcliffe?

   4.Whether the offer presented by Mr Moody for apartment 23 on behalf of himself and his wife was genuine. 

   5. Whether Mr Moody was acting on behalf of Property People and Coldwell Banker, and whether he was acting in the course of his employment, or within the scope of his actual or apparent authority, in presenting the false offers.

   6.Whether the plaintiffs acted in reliance on the various representations and were induced by them.  It was not seriously in dispute that the plaintiffs were deceived by Mr Moody.  The central issue is what they did in reliance on the belief that they had genuine contracts, and what losses they suffered as a result.

   7.Whether, had Mr Moody not presented the false offers, Orchard Holdings would have proceeded with the construction of the Woodley Apartments. 

   8.Whether Mr Moody was acting on behalf of his employers, in the course of his employment, or within the scope of his actual or apparent authority, in preparing and presenting the various letters which are said to constitute the Second, Fourth, Fifth and Seventh Representations. 

   9.Whether the plaintiffs acted reasonably in relying on the representations, and, in particular, the Seventh Representation (the letters of acknowledgement). 

   10.Whether there was a contract between Orchard Holdings and Coldwell Banker under which Coldwell Banker agreed to market and sell the Woodley Apartments. 

   11.Whether Property People and Coldwell Banker, or either or them, entered into a contract with Orchard Holdings which, on its proper construction, required them to present only genuine and real offers to Orchard Holdings.  Alternatively, whether there was an implied term to that effect. 

   12.Whether there was an implied obligation of utmost good faith and loyalty towards Orchard Holdings in either contract. 

   13.Whether Property People and Coldwell Banker, or either or them, breached contractual duties to Orchard Holdings by presenting false offers.

   14.Whether Property People and Coldwell Banker, or either or them, as agent of Orchard Holdings, owed it a duty to exercise reasonable skill and care in marketing and selling the apartments, and whether either of them breached that duty by presenting contracts which were not genuine.

   15.Whether Property People and Coldwell Banker, or either or them, owed fiduciary duties to Orchard Holdings.  And if so, whether either of them breached those duties by presenting false offers. 

   16.Whether any claim against Mr Moody under the Fair Trading Act is barred by reason of the limitation provision in the Act. 

   17.Whether the plaintiffs or any of them suffered loss and, if so, the measure of that loss. 

   18.Whether the claim against any of the defendants is an apportionable claim and, if so, the apportionment between the defendants, Mr de Groot and the plaintiffs (for contributory negligence).

Statutory context

1. Although the occupations of real estate agent and real estate sales representative are regulated by statute, except for the reliance by Coldwell Banker on s 60(1) of the Real Estate and Business Agents Act, none of the parties relied on the provisions of either the Act, the Real Estate and Business Agents (General) Regulations 1979 (WA) or the Code of Conduct made under the Act.

2. It is common ground that Mr Moody was a real estate sales representative.  Under the Real Estate and Business Agents Act, real estate sales representative means 'a person who on behalf of an agent or a developer negotiates a real estate transaction': s 4.

3. Under the Act, a real estate agent must be licensed and hold a current triennial certificate: s 26. A real estate sales representative must hold a current certificate of registration and act 'for and on behalf of' a licensee or a developer: s 44.

4. At the time of these events, a registered sales representative was required, within 14 days after commencing or ceasing in the employment of a licensee, to give to the Registrar of the Real Estate and Business Agents Supervisory Board notice in writing of that fact: s 51. A registered sales representative was prohibited from being in the employment of, or to act for or on behalf of, more than one person: s 55. A licensee was required to constantly supervise and control the work of unlicensed persons (including sales representatives) engaged in assisting in the conduct of the business of a licensee: s 132.

1. When the licensee was a body corporate, it was required to have a person in bona fide control of the business who must give substantial time and attention to the business. 

2. Under s 133, the Registrar of the Board was required to maintain a register of holders of current certificates of registration as sales representatives, including any prescribed particulars and to record details of any change of those particulars that was notified under the Act. Under reg 7 of the Regulations, prescribed particulars included: the name and address of the licensee by whom the holder is employed; the date upon which the employment commenced; the name and address of every other licensee or developer by whom the holder has been employed, and the dates on which the holder commenced and ceased to be employed by each of them. Under s 134(3), a certificate of the Registrar as to any matter contained in the register was, in the absence of proof to the contrary, to be taken as proof of the matter certified. Despite the issue in these proceedings about the date on which Mr Moody ceased to be employed by Property People, none of the parties sought to rely on those provisions of the Act.

3. Section 60, on which Coldwell Banker relies, provides:

   (1)An agent is not entitled to receive any commission, reward, or other valuable consideration in respect of his services in that capacity unless ‑

   (a)he is licensed in that capacity and he holds a current triennial certificate in respect of his licence when he renders the services; and

   (b)he has a valid appointment to act in that capacity which is in writing signed by the person for whom the services are or are to be rendered or by some other person lawfully authorised to sign on behalf of the person for whom the services are or are to be rendered. 

   (2)An appointment to act as an agent is not valid unless ‑

   (a)it is contained in a document which ‑

   (i)clearly sets out the services that are or are to be rendered; and

   (ii)where specific property is to be the subject of those services, clearly identifies the property; and

   (iia)clearly sets out the method by which the amount of any commission, reward or other valuable consideration to be received for those services is to be calculated; and

   (iii)contains such other information, if any, as is prescribed;

   and

   (b)the document is not an offer or acceptance or a contract, or a document purporting to be an offer or acceptance or a contract, binding or purporting to bind a party thereto to a transaction; and

   (c)the person obtaining the signature to the document gives a true copy thereof to the signatory immediately after the signing thereof (the onus of proof of which is upon the person obtaining the signature). 

   (3)A person shall not demand or receive any commission, reward, or other valuable consideration in contravention of subsection (1) or (2), or both. 

   Penalty: $5 000. 

   (4)Any commission, reward, or other valuable consideration received in contravention of subsection (1) or (2), or both, may be recovered as a civil debt recoverable summarily in any court of competent jurisdiction. 

4. Under s 140, except as expressly provided in the Act, 'nothing in this Act shall have the effect of limiting, restricting, or otherwise affecting any right or remedy a person would have had if this Act had not been enacted'.

Facts

The beginning of the Woodley Apartments project

1. In 2006, Orchard Holdings purchased four adjoining properties in Lord Street, Highgate.  Its intention was to demolish the existing buildings, amalgamate the lots, and develop the land by constructing a group of 28 apartments on it.  The apartments were later named the Woodley Apartments. 

2. Mr Anderson is a registered master builder and a property developer.  He had previously carried out property developments, but not of the nature or on the scale of this development.  Orchard Holdings was used as the vehicle for carrying out the development. 

3. In purchasing the land for the development, Mr Anderson met Mr Moody.  Property People was the selling agent for each of the properties.  At the time of buying the land, Mr Anderson told Mr Moody of his plans to amalgamate and develop the site. 

4. In order to purchase the land, Orchard Holdings obtained a loan from Bank of Western Australia Ltd (Bankwest) for $3,150,000.  Orchard Holdings would need to borrow a much larger sum to carry out the proposed development.  In discussions with Bankwest, Mr Anderson was advised that Orchard Holdings would need to sell some of the apartments off the plan to satisfy a lender. 

5. In February 2006, Mr Anderson again met Mr Moody.  Also present was Mr De Groot, who later had a central role in the management of the development.  Mr Anderson says that he told Mr Moody of the need to pre‑sell apartments in order to obtain finance, and asked Mr Moody if he would be interested in selling them off the plan.  Mr Moody did not recall when he was told of the need for pre‑sales, but agreed that he was told about the pre‑sales condition precedent by May 2007.  Mr Moody agreed to send a proposal for Property People to act as the selling agent for the development.  In a letter dated 22 February 2006, Mr Moody set out a proposal for Property People to act.

6. The written agreement pleaded by the plaintiffs as the contract between Orchard Holdings and Property People is constituted by that letter and a later oral variation of it:  the letter proposes a fee of 1.8% on each sale; the plaintiffs say (and it was not disputed) that there was an oral agreement amending the fee to 1%. 

7. The letter is not in the form of an exclusive agency agreement.  It sets out, in very general terms, the marketing services which would be provided by Mr Moody and Mr Michael Warner (another sales representative at Property People): internet exposure, professional photography, maintenance of a ledger of purchaser enquiries, a for sale sign, newspaper advertising, inspection of the property, conducting home opens, a letter drop in the surrounding area, and conjunctional arrangements with other agents.  It does not confer an exclusive agency.  Except for the reference to conjunctional agency, it does not provide for the agent's authority in dealing with prospective buyers, or its authority to accept and retain any deposit.  Nor does it provide for the payment of marketing charges and expenses.  If a selling agency agreement, such as that published by the Real Estate Institute of Western Australia (REIWA), was ever provided to the plaintiffs, it was neither pleaded nor adduced in evidence. 

8. At a further meeting on 27 March 2006, between Mr Anderson, Mr Moody and Mr de Groot, Mr Anderson agreed with Mr Moody to appoint Property People as the selling agent to pre‑sell the apartments.  Later, Mr Moody forwarded to Orchard Holdings a confidential marketing plan, dated 29 March 2006. 

9. On 23 May 2006, the Western Australian Planning Commission granted conditional approval for the subdivision of the Highgate properties.  In July 2006 the Town of Vincent, which was the relevant local government, approved applications for demolition of the three existing houses on the properties.  The demolition was carried out and completed by about the end of August 2006.  On 29 September 2006 the Town of Vincent notified Orchard Holdings that it had, on 12 September, granted conditional approval to commence development.

10. Mr Anderson says that the marketing and selling of the apartments off the plan by Property People commenced in approximately September 2006.  Mr Moody had carried out some preliminary activity, primarily on the internet sites aussiehome.com and realestate.com.au, before September.  From June 2006 he and Mr Warner had received over 100 expressions of interest.  These expressions of interest and inquiries continued into 2007. 

11. On 22 September 2006, Mr Moody received an offer for apartment 13 from Mr Craig Thomas.  On 25 September he received an offer for apartment 15 from Mr Jamie Greer.  It is necessary to refer to these as genuine offers to distinguish them from those later presented by Mr Moody.

12. Mr Anderson accepted both offers on 26 September 2006.  The deposit in each case was paid, and was held by Property People. 

13. Mr Moody began a marketing campaign starting in September that included for sale signs at the site, and a pre‑release package.  On 3 October 2006, he advertised the apartments in a community newspaper.  He placed advertisements of various types in the Saturday edition of The West Australian newspaper every week from 11 November 2006 to 16 December 2006, and again on 6 January 2007.  The for sale sign and the newspaper advertisements identified Mr Moody and Mr Warner of Property People as the two sales representatives and gave mobile phone numbers for each.  Mr Moody was to share commission with Mr Warner on the sale of the apartments.  There is little evidence about the extent of Mr Warner's involvement.  He did not give evidence. 

14. On 4 October 2006, Kott Gunning Lawyers, the solicitors for Orchard Holdings, forwarded to Mr Moody an offer and acceptance form with annexed contract conditions.  These included the disclosures required under the Strata Titles Act.

15. On 19 October 2006, Mr Moody met with Mr Anderson and Mr de Groot.  There were several subsequent meetings.  Mr de Groot produced a written record of each meeting, which was kept on file.  Mr Moody disputed that Mr de Groot's records could properly be called minutes, as they were not circulated or agreed.  I will use a neutral expression and call them notes.  The notes are useful as a contemporaneous record of at least Mr de Groot's understanding of what was discussed, and Mr Moody did not disagree with much of what was recorded.  There are some oddities of expression ‑ perhaps from typographical errors.  On the occasions when I have quoted from the notes, I have not corrected errors. 

16. Notes made by Mr de Groot of the meeting on 19 October record Mr Moody saying he would have three more offers in a week.  The target was set at 14 units sold by the end of October. 

17. On 26 October 2006, there was a further meeting between Mr Moody and Mr de Groot.  The notes of this meeting adopt a format that was followed for later meetings - indeed the notes from 26 October seem to have been used as a template that was updated following a further meeting, but with some items remaining in identical terms.  The notes show that Mr Moody said (or was understood to say) that he had strong interest in 17 apartments, and appointments for six apartments the following week.  Under the heading 'timeline', the notes record 'Richard is still aware and confident in selling 10 mio halfway November'.  If Mr Moody said any of those things, I have no confidence that he was telling the truth. 

18. In very stark terms, there are two alternatives.  The first is that there was a high level of interest in the apartments, but Mr Moody did not follow that interest up and obtain the offers that should have resulted.  In the course of their submissions, the plaintiffs put forward this interpretation of events.  There is little evidence to support it.  The other alternative is that the level of interest in the apartments, at least at the prices being asked, was low.  Although there were expressions of interest, they did not translate into offers.  This is the effect of what Mr Moody said in evidence.  Mr Moody said that Mr de Groot was relentless in requiring him to attend meetings, and provide information, and that it wore him down.  He attributed his later conduct, in substantial part, to the effect of being bullied by Mr de Groot, when he could not obtain offers that would satisfy Mr de Groot and the plaintiffs' expectations.

19. On 30 October 2010, Mr Moody prepared an offer in the name of Ms Carma Brennan (Mrs Anderson's daughter) for apartment 20.  The front page of the offer, addressed to Coldwell Banker rather than Property People, was substituted at a later date.  Mr Anderson did not accept the offer until 17 January 2007, when Mr Moody was employed by Coldwell Banker.  Mr Moody says the offer was not presented earlier because, while he prepared it in October 2006, he was delayed in being able to meet Ms Brennan and have her sign it. 

November 2006

1. On 2 November 2006, Mr de Groot (or his business, Petrus Project Development) was formally appointed as project manager for the development.  It was his role to 'manage and direct the real estate agent to sell the 28 units'.

2. Mr de Groot and Mr Moody continued to meet regularly.  The notes of their 9 November 2006 meeting record Mr Moody's continuing expressions of confidence in his ability to sell the apartments, although Mr de Groot notes 'Richard is aware of the fact that we need contracts to verify this confidence'.  The comment regarding '10 mio at the end of November' is repeated.

3. On 11 November 2006, The West Australian ran a short article or advertisement, the distinction between news and advertising is often blurred, about the 'Highgate complex', which was then still unnamed.  Readers were referred to Mr Moody, Mr Warner and the Property People website.

4. On 17 November 2006, Mr Moody received a genuine offer for apartment 10 from Mr and Mrs Tetlow.  The offer was not accepted until 22 December 2006.  There is no evidence about when the offer was presented to Mr Anderson, and no apparent explanation for his delay in accepting it.  The Tetlows did not pay a deposit but provided a deposit bond.  

5. Around this time, Mr Moody was discussing a possible move to Coldwell Banker.  On 18 November 2006, Mr Brett Wilkins, Executive Director of Coldwell Banker, sent an email to Mr Murray Bathgate (also a director of Coldwell Banker) in which he said that he wanted to 'confirm the offer to Richard as discussed'.  The email sets out basic details of the offer, including that Mr Moody would be a consultant and receive an advance.  On the same day, Mr Bathgate forwarded the message to Mr Moody, with the comment 'look forward to you coming on board next week'.

6. Mr Moody met Mr de Groot on 18 November 2006 (a Saturday).  Mr de Groot recorded in his notes that Mr Moody was thinking of moving employment from Property People to Coldwell Banker.  The note continues:  'Peter says he would like to continue the project with Richard as long as Orchard Holdings and the project won't get any imago organisation or financial damage of it'.  This note also records some apparent impatience on the part of Mr de Groot, with the comment, 'Peter tells Richard it is very hard to manage a project when appointments/agreements are not happening'.  It also records Mr Moody as 'aiming on 3 contracts for the weekend and 6 at Tuesday'.

7. From a meeting on 24 November 2006, the notes record that Mr Moody said he had not been able to sign up more contracts that week because of 'private circumstances' but the appointments had been postponed to the coming week.  It continues:

   We have 9 contracts.  Richard has to change them because of the change between Property People and Coldwell.  Richard will send Peter scans/copies of the original signed contracts. 

   3.  Marketing Plan

   Richard has had a meeting with the West.   He has demanded 2 extra ads at the end and the possibility to alterations (banners).  He is confident he will get what he asked for. 

   Richard placed extra ads for coming Saturday in the Highgate and the Mt Lawley section with 25% sold on it. 

   If we get solar power and/or grey water, we will manage the information to the West.  So we can coordinate the time the editorial will be printed in the papers. 

   Next Monday Richard will physically be an employer of Coldwell Bankers.  At that time he will start to organise a new Project Bill Board at the sight.  This board will have the %-sold banners on it. 

   …

   5.   Timeline

   Richard is confident in selling 10 mio at the end of November.  We set the deadline on the first of December. 

   6.   Other Items

   Richard declares there will be no damage to Orchard Holdings or the project's imago, organisation or finances because of his move from Property People to Coldwell Bankers.  All agreements written and verbal stay the same.  To his opinion the project will benefit from the experience within Coldwell Bankers. 

8. On 30 November 2006, Mr Moody received offers from Lefteris Georganis and Christos Georganis and John (?) Sadeghzadeh for apartments 27 and 28 (penthouse units, each with a price of $825,000).  Each offer required a deposit of $10,000 within seven days, and a further $31,250 within 28 days of acceptance 'to be held by Property People Trust A/C'.  Mr Anderson signed as accepting the offers, but the acceptance is not dated or witnessed.  The evidence does not permit a finding as to when the offers were accepted.  The initial deposits were not paid, and the offers were eventually treated by Orchard Holdings as having been abandoned. 

The resignation of Mr Moody

1. Although it involves evidence of later events, it is convenient to separately consider the question of the termination of Mr Moody's employment with Property People at this stage.  Property People's case in evidence was that Mr Moody ceased employment by resigning in the first week of December 2006, and some time before 5 December 2006.  The representations on which the plaintiffs rely were made after that date.

2. It is common ground that at all material times up to December 2006, Mr Moody was an employee of Property People, with the designation 'property sales consultant'.  There was no formal written employment contract.  Nor was Mr Moody paid a salary.  Mr Litten said that, in practice, if a sales representative resigned the engagement ended immediately.  I am not satisfied that can be accepted as universally true.  It must depend on what the parties intended at the time of the resignation.  The conflict of evidence in this case, however, is quite stark on this point.  Mr Litten said that Mr Moody resigned early in December 2006.  Mr Moody also said that he resigned, with the resignation to take effect immediately, but said that he did not do so until January 2007.  

3. In his witness statement, Mr Litten said that he had a discussion with Mr Moody at the new premises of Property People either in late November or in the first week of December 2006.  Mr Moody came to see him and said, in effect, that he had been offered a position at Coldwell Banker in which he would be paid a retainer.  Mr Litten told him that he was sorry to see him go and wished him all the best.  After that discussion, to the best of his knowledge, Mr Moody did not again come into the offices of Property People.  Mr Moody did not attend the Property People Christmas party on 8 December 2006.

4. As with any evidence of a conversation recalled some years later, the court may be satisfied that the witness accurately remembers the effect of what was said.  But in forming that judgment, regard should be had, where possible, to any contemporaneous documents and events which the court considers are reliable. 

5. In her witness statement, Ms McGill stated that on 1 December 2006, the date that Property People relocated to its current premises in Oxford Street, Leederville, Mr Moody dropped off a couple of files.  He told her that he did not know what he wanted to do and was considering leaving the real estate industry.  She did not hear anything further from him after this discussion, he did not take up his desk at the new premises, and he did not attend the office Christmas party.  Ms McGill did not take part in any conversation between Mr Moody and Mr Litten after she had spoken to him.  At the Christmas party later that month, Mr Litten told her that Mr Moody was moving to Coldwell Banker.

6. Mr Moody could not recall whether or not he had that conversation with Ms McGill but was adamant he had no conversation with Mr Litten on the same day.  I accept Ms McGill's evidence about her conversation with Mr Moody when he told her that he was thinking of getting out of real estate.  

1. Mrs Price was the office manager for Property People.  Her duties included maintaining a book of advertising, containing copies of newspaper advertisements placed by employees of Property People.  She also prepared letters, from templates, for signature by sales representatives, including letters confirming contracts and receipt of deposits.  Mrs Price could not recall being told that Mr Moody had left Property People before 18 January 2007.  In February 2007, she prepared a letter, for signature by Mr Litten, advising the Real Estate and Business Agents Supervisory Board that Mr Moody was no longer employed by that agency.  The letter stated Mr Moody's termination to be from 1 February 2007. 

2. The evidence of Mrs Price demonstrates a lack of attention to these matters within Property People.  It is not realistic to treat her evidence as showing that Mr Moody was still employed at 18 January or 1 February 2007.  There is no doubt that he had left Property People and was employed by Coldwell Banker well before those dates.  Mrs Price's evidence is, however, inconsistent with the evidence of Mr Litten that he advised the staff at Property People that Mr Moody had resigned at about the time Mr Moody said he was leaving.

3. In his witness statement, Mr Moody said that in late November 2006 he told Mr Litten that he had received an offer from Coldwell Banker.  He said that he resigned on 8 January 2007 after he knew he had a job at Coldwell Banker.  He said the resignation took place in the boardroom at Property People and both Mr Litten and Ms McGill were there.  Mr Moody said that he attended the new premises of Property People after 1 December 2006 and could recall working there.  In part Mr Moody based his evidence on emails that he had sent with the Property People email signature on 6 and 8 January 2007.  There is, however, evidence that Mr Moody was prepared to use Property People stationery even after he had, on his own evidence, resigned.  For example, he prepared and sent a letter to Mr Anderson on Property People letterhead dated 12 January 2007. 

4. I am satisfied that Mr Moody commenced his employment at Coldwell Banker by, at the latest, 8 January 2007, and underwent an induction into his new job on that day.  It is not impossible that Mr Moody resigned from one position and commenced in the new one on the same day.   

5. There is some assistance from other contemporaneous events and documents. 

6. First, advertisements appeared in the Saturday edition of The West Australian, advertising the Woodley Apartments with Mr Moody's name and phone number listed (as well as that of Mr Warner in some, although not all advertisements) through December 2006, with the last advertisement appearing on 6 January 2007.  The advertisements were collected by Mrs Price and maintained in a spiral note book.  I am satisfied that Mrs Price had not been told that Mr Moody had left during the period when these advertisements appeared. 

7. Mr Litten said in evidence that the advertisements would have been booked as a series, probably some time before they first appeared, although he accepted that some changes in the advertisements in the course of the series made it appear that some of the advertising may have been placed (or at least altered) after Mr Moody had resigned.  The continued advertising is not conclusive, but it is more consistent with Mr Moody not having resigned with immediate effect. 

8. Second, the Tetlow contract and two contracts in the name of Creekview Holdings Pty Ltd were accepted by Mr Anderson during December 2006, but were not given to Mrs Price to process.  The offers were prepared on offer and acceptance forms with the name of Property People on them (as were the fictitious contracts presented in December 2006).  If these were genuine contracts (and the plaintiffs do not suggest otherwise) one might expect them to have been given to Mrs Price.  Mr Moody may not have done so because he was no longer employed by Property People when the offers were presented.  Alternatively, he may have been anticipating his move to Coldwell Banker.  The evidence, in my opinion, is equivocal.  

9. Third, Mr Moody did not attend the office Christmas party on 8 December 2006.  Counsel for Property People suggested, as an explanation, that he did not attend because he had resigned.  There are, however, many alternative explanations.  For example, one would hope that by 8 December, Mr Moody felt some shame for what he had done in the preceding days. 

10. Fourth, on 5 February 2007, Property People wrote to the Real Estate and Business Agents Supervisory Board advising that Mr Moody, and his wife Beverley, were no longer employed by Property People 'effective from 1st February 2007'.  The letter was signed by Mr Litten.  It is inconsistent with Mr Moody having unequivocally resigned in December 2006. 

11. Fifth, the plaintiffs placed some weight on events after the fictitious contracts came to light in December 2008.  In particular, Property People prepared a letter explaining what had happened for their insurers.  The letter was apparently prepared by Ms McGill, although she had little if any personal knowledge of the circumstances.  The letter states:

    On December first, 2006 we moved premises from Fitzgerald street, North Perth to Oxford Street, Leederville.  Richard came to Oxford Street for only a couple of weeks and informed us that he was thinking of getting out of Real Estate.  He did not attend the office January, 2007 as he was supposedly having a break. 

12. The plaintiffs point to the obvious discrepancy between that account and the evidence on behalf of Property People that Mr Moody resigned, taking effect immediately, on 1 December 2006.  Even though Ms McGill was writing about events in which she was only marginally concerned, and which had occurred in December 2006, it is an important letter.

13. The person with actual knowledge was Mr Litten.  The plaintiffs argued that he must have known the contents of the letter to the insurer because the letter was discovered and he had signed the discovery affidavit.  That fact, however, does not establish that he knew the contents of the letter when it was written.  The plaintiffs also rely on the fact that at the time the letter was written, Mr Litten was the person in bona fide control of Property People.  That, in my view, is a misreading of the statutory notion of a person in bona fide control.  It is a regulatory device for identifying the person responsible for ensuring compliance with the provisions of the Real Estate and Business Agents Act. 

14. I cannot accept the plaintiffs' submissions that the letter should be assumed to be accurate.  But the letter is inconsistent with Property People's case.  

15. Finally, there are the transactions which Mr Moody was negotiating and which were not complete in the first week of December 2006.  Of the surrounding circumstances, this is most telling, particularly in relation to a property in Regent Street, Mount Lawley.  Mr Litten remembered that this contract was written after his discussion with Mr Moody about Mr Moody leaving Property People.  He said that Property People allowed Mr Moody to continue on with the negotiation for the Regent Street property after the conversation in which Mr Moody said he was leaving: Mr Moody wrote an offer on 5 December 2006, which was presented to the vendors on 10 December and counter‑offered.  That conduct, and its acceptance by Property People, is inconsistent with Mr Moody having resigned with immediate effect before 5 December 2006, and perhaps before 10 December.  Quite apart from the statutory requirement that a sales representative be employed by and act on behalf of an agent, the evidence about Mr Moody's continuing dealings regarding Regent Street, apparently with the knowledge and agreement of Property People or at least Mr Litten, simply does not fit with Mr Litten's account of the effect of the earlier conversation. 

16. It is likely, in my opinion, that Mr Litten did have a conversation with Mr Moody in the first week of December 2006, in which they discussed Mr Moody leaving.  Mr Litten now believes that there was a resignation on that date.  But, some five years after the event, his recollection of what was actually said is poor.  I am not satisfied that he does accurately recall the effect of what was said on that day, and I can make no precise finding about what was said. 

17. Because he had told Ms McGill that he was thinking of getting out of real estate, coupled with his relatively informal work arrangements where he was paid only on commission, Mr Moody could be absent from the office without causing anyone to be particularly concerned. 

18. The onus is on the plaintiff to show that Mr Moody was employed by Property People at the material time.  It is uncontested that he was an employee before December 2006.  In the ordinary course of things, that relationship would continue until it was brought to an end.  I am satisfied that it continued. 

19. Accordingly, I find that Mr Moody remained an employee of Property People during December 2006.  I am not satisfied, on the evidence, that I can identify an occasion when he resigned.  His employment, however, had ended by 8 January at the latest, when he commenced with Coldwell Banker. 

20. I will now return to the narrative of events. 

December 2006

1. On 2 December 2006, The West Australian carried advertisements for the apartments in the Mount Lawley and Investment sections of the real estate advertisements.  It also carried a large advertisement with the banner 'over 35% sold'.  The sales at that stage were not even close to 35%.  The advertisement also said there were only 14 apartments, not 28.  Mr Moody attempted to explain the patent falsity of these advertisements.  They do not reflect well either on him, or on Orchard Holdings.  There is no evidence that these advertisements affected the public response to the development. 

2. On about 6 December 2006 Mr Moody presented offers for four apartments:

   1.apartment 9, offer dated 20 November 2006 from Marina van Leeuwen for a purchase price of $665,500;

   2.apartment 12, offer dated 30 November 2006 from Flux Holdings Pty Ltd for a purchase price of $665,500;

   3.apartment 21, offer dated 20 November 2006 from Aram Hoise for a purchase price of $621,500; and

   4.apartment 24, offer dated 20 November 2006 from Helen Louise Susan Moody for a purchase price of $665,500. 

3. There is no reason to believe that the dates of the offers are true, when the rest of the offers are false.

4. On 8 December 2006, Property People held its annual Christmas party.  Mr Moody did not attend. 

5. On about 10 December 2006, Mr Moody presented offers for two more apartments:

   1.apartment 7, offer dated 7 December 2006 from Giuli Todaro for a purchase price of $621,500; and

   2.apartment 26, offer dated 9 December 2006 from Focal Point Marketing for a purchase price of $665,500. 

6. In his defence, Mr Moody admitted that he presented offers that were fictitious 'in that they were not made or signed by any genuine buyer' for apartments 7, 9, 12, 21, 24 and 26 on 10 December 2006. 

7. There are also offers dated 10 December 2006 for apartments 5 and 8 from Creekview Holdings, apparently accepted on the same day.  Neither of these offers is pleaded by the plaintiffs as part of the misleading or deceptive conduct of Mr Moody.  Both of these apartments were the subject of later fictitious offers presented by Mr Moody when employed by Coldwell Banker. 

8. The Creekview Holdings contracts for apartments 5 and 8 were part of the trial bundle and referred to in the submissions of the second defendant.  Mr Anderson does not refer to them in his witness statement, but accepted in evidence that they were genuine offers.  Despite them purportedly bearing his signature, it is possible that he was not aware of them. 

9. A letter from Mr Moody to Orchard Holdings and Mr Anderson, dated 3 January 2007, offering congratulations on the sale of apartments 5, 8 and 23 to Creekview Holdings and confirming that deposits had been paid and would be held in trust by Property People, was included in the trial bundle and referred to in the plaintiffs' submissions.  The Creekview Holdings contracts were not otherwise the subject of evidence.  In particular, there was no explanation of what happened to the Creekview Holdings contracts, and how these apartments were 'resold' in 2007, apparently without regard to existing contracts.

10. Mr Moody also admitted that he presented a fictitious offer of $665,500 on apartment 25 in the name of his sister‑in‑law, Lesa Hinchcliffe.  This offer is not pleaded by the plaintiffs as a deceptive offer.  Mr Anderson did not recall the offer had been made.  Apartment 25 was the subject of a later fictitious offer, and the 'offer' by Ms Hinchcliffe for apartment 25 was transferred to apartment 18, at a significantly lower price ($566,550).  Again, there is no explanation for how this was done.

11. Mr Moody denied that the offer presented for apartment 24 (in the name of another sister‑in‑law, Helen Moody) was fictitious, and there is evidence that a deposit was later paid into the Coldwell Banker trust account.  Mr Moody admitted in evidence, however, that the offer had not been signed by Ms Moody.  I am satisfied that his conduct in presenting the offer was misleading or deceptive as alleged.

12. On 11 December 2006, Mr Moody met again with Mr de Groot and Mr Anderson.  Mr de Groot's notes are cryptic.  They include the comments:

    Contracts copies and describing letter with deposit and trust info.

    …

    3 apartments per week 16+6Keith→6 to go = 2 weeks

    …

    Another ad 'only 6 left!'/close to sold out.

    There are references in notes from several of the other meetings to 'sold out'. 

13. There is no evidence of any further activity by Mr Moody during December. 

14. Only three apartments had been sold during the period Mr Moody was with Property People: the two offers for the penthouse apartments made on 30 November 2006, and on which no deposits were paid, were treated as unlikely to proceed and allowed to lapse; the offers from Creekview Holdings, which were apparently treated as genuine, were replaced by fictitious offers early in 2007.  I infer that Mr Moody, through Creekview Holdings, did not intend to proceed with them.  The genuine offers that were received from unrelated parties were all before November 2006.  There is no evidence of any genuine offers arising out of the marketing campaign in November and December 2006. 

January 2007

1. Mr Moody furthered his deception in presenting the false offers by producing letters, dated 3 January 2007, which confirmed that the deposit in each case had been paid, and would be held in trust pending settlement, for the apartments 7 (Todaro), 9 (van Leeuwin), 12 (Flux Holdings), 21 (Hoise), 24 (Helen Moody), 25 (Hinchcliffe), and 5, 8 and 23 (Creekview Holdings).  A further letter to the same effect, in relation to apartment  26 (Focal Point Marketing), is dated 12 January 2007.  In the absence of any contrary evidence, I assume they were sent (or handed over) at about the time they were dated. 

2. The letters were all on Property People letterhead, although they did not use the Property People template and were prepared by Mr Moody rather than Mrs Price.  The letter relating to apartment 25 (Ms Hinchcliffe) is not pleaded by the plaintiffs.  Mr Anderson said that before preparing his witness statement and having his attention drawn to the letter, he was not aware that the letter related to apartment 25 rather than apartment 18. 

3. In January 2007 Mr Moody commenced employment with the second defendant (Coldwell Banker).  He undertook an induction on Monday, 8 January 2007, and it is likely that his employment commenced on that day.

4. There is no direct evidence regarding the duties and functions of a sales representative at Coldwell Banker.  There is, however, evidence of things actually done by Mr Moody during the course of his employment, including advertising; the placing of an article in the Coldwell Banker newsletter; a mass email sent out to Coldwell Banker clients, particularly investors; attendance at sales meetings; and, as set out in more detail below, the receipt of genuine offers from related parties.  It is possible to infer at least some of his actual authority from what he did with the apparent acceptance of his employer.  Coldwell Banker led no evidence from any of its directors or managers which would weigh against the drawing of such inferences.

5. On 9 January 2007, Mr Moody received an offer for apartment 22 from one of Mr Anderson's children, Paul Anderson.  It was under Coldwell Banker's name, and Mr Anderson accepted it on 17 January.  On 17 January 2007, Mr Anderson also accepted (as an offer made through Coldwell Banker), the offer made by Ms Brennan and dated 30 October 2006 for apartment 20. 

6. On 15 January 2007, Mr Moody met with Mr de Groot.  The notes of their meeting record 17 apartments sold, although deposits had not been paid on three of them, including the penthouse apartments (27 and 28).  The notes record that there would be an announcement in the Coldwell Banker newsletter.  Further, the last item records:  'Richard will send us the continuity letter from Coldwell Bankers this week'.

7. On 25 January 2007, Mr de Groot made an offer for apartment 16, and it was accepted on 31 January.

8. On 31 January 2007, Mr Moody prepared and sent a letter to Mr Anderson.  The letter was on Coldwell Banker letterhead, and was purportedly signed by 'Rosemary O'Neil', who was described on the bottom of the letter as an accountant.  Coldwell Banker had an employee named Rosemary O'Neill, but the letter was a forgery.  The letter stated that Coldwell Banker had received deposits relating to the pre‑sale contracts in its trust account from Property People.  That was not true.  Although there had been two genuine contracts presented through Property People on which deposits had been paid, the deposits remained in the Property People trust account.  No deposits had, of course, been received on the fictitious contracts. 

9. The letter identified 15 contracts, including those of Ms Brennan and Mr Paul Anderson, as well as the contracts for Ms Moody and Ms Hinchcliffe.  It did not include the contracts in the name of Creekview Holdings. 

10. Mr Moody continued the marketing of the apartments.  Coldwell Banker had a different advertising strategy from that used by Property People, with an emphasis on electronic communication rather than print media.  An information package was prepared and distributed, although I can not find when.  Advertisements for Woodley Apartments were placed on the Coldwell Banker website from (at the latest) 31 January 2007, an 'email blast' to those on the Coldwell Banker email list (said by Mr Moody to be 1,600 investors) was sent in early February 2007, and an article was placed in Coldwell Banker's April 2007 newsletter. 

11. A feature article advertising the site appeared in The West Australian on 27 January 2007.  The evidence does not show when it was prepared.  It gave the name of the apartments (Woodley Apartments) which was a later development.  But the body of the article referred to selling agent 'Richard Moody, of Property People'. 

February to April 2007

1. On 1 February 2007, Mr Moody again met with Mr de Groot.  The notes made by Mr de Groot recorded that there were 17 apartments sold, with eight strong leads (suggesting an intention to sell all apartments).  The sale of apartments 27 and 28 was noted as having fallen through, with Mr Anderson to take apartment 27, but 14 and 28 'on the market again'.  There is no evidence that an offer had been made for apartment 14. 

2. Under the heading 'Contracts', Mr de Groot recorded:

   Richard provides Peter with new scans of the contracts of number 5, 8 and 23. 

   Richard provides Peter with a banking letter from Coldwell.  He will also provide a bank statement asap.

   Richard gives the letter of Aram Hoise to Peter.

   Contracts for apartments 5 and 8, and perhaps also for apartment 23, had been made in the name of Creekview Holdings. 

1. The defendants pleaded to these allegations by denying them.  The plaintiffs did not even make submissions on them.  It almost overstates their significance to the course of the trial to describe these causes of action as peripheral. 

2. The claim for breach of the Fair Trading Act was relevant up to trial, due to Mr Moody's limitation defence.  After the plaintiffs amended to plead that Mr Moody was knowingly concerned in breaches of the Trade Practices Act by his employers, the importance of his limitation defence fell away.

3. I will make a specific order regarding the application to amend.  Otherwise, those failed causes of action should not affect the order for costs.

The amendments at the beginning of the trial

1. The costs of 18 October 2011, the second day of the trial, were reserved.  On 17 October, plaintiffs' counsel foreshadowed amendments to each of the causes of action on which the first plaintiff relied.  Other matters were dealt with, including some inadequacy in the trial bundle.  The trial was adjourned to the following day, and I ordered that the plaintiffs pay the defendants' costs thrown away by reason of the adjournment.

2. On 18 October, I heard argument on the plaintiffs' application to amend the statement of claim, including an application (previously not pressed) to rely on s 75B of the Trade Practices Act in their claim against Mr Moody.  The trial had been adjourned the previous day to allow the application to amend to be considered with as much notice as possible to all parties. 

3. The defendants opposed the proposed amendments, in part because of when they were made, and in part by arguing that they would be liable to be struck out.  Most of the amendments proposed by the plaintiffs were allowed. 

4. The plaintiffs say that the order that the defendants have the costs thrown away by reason of the adjournment on 17 October sufficiently compensates the defendants for the costs thrown away by reason of the late amendments to the statement of claim.  I do not see how that can be so.  The plaintiffs moved amendments to the statement of claim only when the trial was due to start.  Those amendments had to be dealt with before the trial could get underway.  Both 17 and 18 October were needed to deal with the plaintiffs' applications. 

The application and the special appointment in January 2012

1. The plaintiffs accept that the defendants should have the costs of the application dated 10 January 2012 and the special appointment on 25 January 2012.

Conclusion

1. The costs orders, accordingly, are these:

   1.The second and third plaintiffs to pay the defendants costs of the action on the claims by the second and third plaintiffs.

   2.The defendants to pay the costs of the first plaintiff.  The defendants to be liable for those costs as follows:

   a.The first defendant and third defendant are jointly and severally liable for one half of the first plaintiff's costs.

   b.The second defendant and the third defendant are jointly and severally liable for one half of the first plaintiff's costs.

   3.The plaintiffs to pay the defendants' costs thrown away by reason of the application to amend the statement of claim, heard on 17 and 18 October 2011 and determined on 19 October 2011, which include the costs of 18 October 2011.  The plaintiffs are jointly and severally liable for those costs.

   4.The plaintiffs to pay the defendants' costs of the application dated 10 January 2012 and the special appointment on 25 January 2012.

2. The matters which were argued in relation to set off and stay of execution do not arise on the orders I propose.

3. I am not aware of any other applications where costs orders were not made at the time.

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION: ORCHARD HOLDINGS PTY LTD -v- PAXHILL PTY LTD AS TRUSTEE FOR PAXHILL TRUST TRADING AS PROPERTY PEOPLE [2012] WASC 271 (S2)

CORAM:   ALLANSON J

HEARD:   15 MARCH 2013

DELIVERED          :   9 MAY 2013

FILE NO/S:   CIV 1762 of 2010

BETWEEN:   ORCHARD HOLDINGS PTY LTD

First Plaintiff

KEITH ROBERT ANDERSON
Second Plaintiff

SUE-ANN ELIZABETH ANDERSON
Third Plaintiff

AND

PAXHILL PTY LTD AS TRUSTEE FOR PAXHILL TRUST TRADING AS PROPERTY PEOPLE
First Defendant

PRO PROPERTY PTY LTD AS TRUSTEE FOR ACEHIGH ADELAIDE TRUST TRADING AS COLDWELL BANKER PRO PROPERTY
Second Defendant

RICHARD MASSON MOODY
Third Defendant

Catchwords:

Practice and procedure - Costs - Application to correct judgment - Slip rule - To include interest component - Turn on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 21 r 10
Supreme Court Act 1935 (WA), s 32
Trade Practices Act 1974 (Cth), s 52

Result:

Application to correct judgment to include an interest component allowed

Category:    B

Representation:

Counsel:

First Plaintiff                :     Mr S C England

Second Plaintiff            :     Mr S C England

Third Plaintiff               :     Mr S C England

First Defendant             :     Mr T M Clavey

Second Defendant         :     Mr J R Ludlow

Third Defendant           :     No appearance

Solicitors:

First Plaintiff                :     Lawton Gillon

Second Plaintiff            :     Lawton Gillon

Third Plaintiff               :     Lawton Gillon

First Defendant             :     Clyde & Co Australia

Second Defendant         :     Downings Legal

Third Defendant           :     No appearance

Case(s) referred to in judgment(s):

Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd [No 2] [2008] WASC 10 (S)

Gould v Vaggelas (1985) 157 CLR 215

Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60

Hanave Pty Ltd v LFOT Pty Ltd [2004] FCAFC 180; (2004) 136 FCR 566

L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) [1982] HCA 59; (1982) 151 CLR 590

Milson v Carter (1893) AC 638

Orchard Holdings Pty Ltd v Paxhill Pty Ltd [2012] WASC 271

Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446

1. ALLANSON J: On 27 July 2012, I gave reasons for decision on the claim by Orchard Holdings against three defendants. While there were several causes of action pleaded, the claim allowed was for conduct in breach of s 52 of the Trade Practices Act 1974 (Cth).

2. The findings with regard to damages were relatively complicated.  In summary, I found that the plaintiffs were entitled to:

   (1)Interest which they would not otherwise have paid on a Westpac finance facility from 5 March 2009 to the date of settlement of each eventual sale of each of the relevant apartments.

   (2)Holding costs on each of those apartments from 5 March 2009 to the date of settlement of each eventual sale.  This was subject to the allowance for one apartment where a notional date of sale was used.

   (3)The loss of value in the apartments.

3. This part of the damages was to be reduced by 50%, for reasons explained in the judgment.  The relevant settlement dates were between April 2009 and October 2010.

4. The second limb on which damages were awarded to Orchard Holdings was for specific outgoings:  a 'valuation fee' or 'inspection/valuation fee' of $16,041.36 charged by Westpac, and certain legal fees payable to Orchard Holdings' solicitors.

5. The plaintiffs brought in a minute of proposed orders, supported by calculations made necessary by the basis on which I had allowed the first part of the damages.  On 20 August 2012, the court made orders awarding damages in the total amount of $450,000.  The award of damages did not include interest from the date the losses were incurred to the date of trial.  Pre‑trial interest had, however, been claimed in the statement of claim. 

6. Orchard Holdings now applies for a correction of the judgment to include an interest component.  The application was brought on 5 December 2012, although only served in January 2013.

Pre-judgment interest

1. Under s 32(1) of the Supreme Court Act 1935 (WA) the court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect. Section 32(1) confers a wide discretion on the court awardinginterest.  That discretion must be exercised in accordance with legal principle.  There is no statutory presumption in favour of interest:  compare Federal Court of Australia Act 1976 (Cth) s 51A.

2. The purpose of an award of interest under s 32 is to ensure an innocent party is properly or completely compensated for its loss or damage. It has been described as 'an integral element in the attainment of the object of damages' and 'an essential element in the achievement of true compensation for that damage': see Haines v Bendall [1991] HCA 15; (1991) 172 CLR 60, 66 ‑ 67.

3. In the circumstances of the present case, Orchard Holdings was indebted to Westpac, which had provided finance to it for the purposes of carrying out the apartment development.  It was paying interest on that debt.  So much is clear from the components of the award of damages.  To not include an award of interest on the damages from the time the cause of action accrued in 2009 to the time of trial would significantly detract from the effect of the judgment in providing compensation.

The slip rule

1. The orders have been formally recorded. The general rule is that a superior court of record, in the absence of a statutory provision, and subject to certain narrow exceptions, may not reopen an extracted order. The slip rule in O 21 r 10 of the Rules of the Supreme Court 1971 (WA) is one of the exceptions. The rule reflects the inherent jurisdiction of a court 'at any time to correct an error in a decree or order arising from a slip or accidental omission', regardless of whether the order has been drawn up, passed and entered: see Milson v Carter (1893) AC 638, 640.

2. The purpose of the slip rule is to avoid injustice to litigants.  While it is a jurisdiction to be exercised sparingly, the application of the rule should not be constrained by a narrow or restrictive approach to the circumstances in which it might be applied:  Gould v Vaggelas (1985) 157 CLR 215, 274 ‑ 275; Areva NC (Australia) Pty Ltd v Summit Resources (Australia) Pty Ltd [No 2] [2008] WASC 10 (S) [7].

3. The slip rule applies also where the mistake or error is the result of inadvertence by a party's legal representative:  L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) [1982] HCA 59; (1982) 151 CLR 590, 594. But it is a power to correct a mistake. The correction should be such that had the matter been drawn to the court's attention at the time, the correction would have been made at once: Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446. Where the proposed correction would alter the substance of an order in a matter on which there might be a real difference of opinion, the rule does not apply. I also take into account the consideration that courts 'should not encourage carelessness and thereby put at risk the public interest in the finality of litigation': Hanave Pty Ltd v LFOT Pty Ltd [2004] FCAFC 180; (2004) 136 FCR 566 [42]; Gould v Vaggelas (274 ‑ 275). 

4. The failure to include interest in an award is capable of coming within the slip rule:  see, for example, L Shaddock & Associates Pty Ltd.

The evidence

1. The following matters are not in dispute.

2. First, while the prayer for relief claimed interest under s 32 against each defendant, the particulars filed did not refer to the interest claim or identify any date from which interest should be calculated. The particulars did, however, attempt to identify the date on which loss accrued for each of the apartments. I see no reason to read them as a limitation on the claim for interest in the prayer for relief.

3. Second, in conferral between the parties after the court delivered reasons, Orchard Holdings did not include pre-judgment interest in its calculations.  

4. Third, the claim for pre‑judgment interest was only raised by Orchard Holdings, after judgment had been entered on 20 August 2012.  On 14 September 2012, the court made orders regarding the costs of the action.  At the hearing on 14 September, I mentioned in court that I had, in preparing reasons, noticed the omission of interest.  No application was made immediately.  The solicitors for Orchard Holdings, however, wrote to the defendants on 18 September regarding the claim for interest.  The application for amendment of the judgment was made on 5 December 2012.

5. Fourth, the application was not served until 14 January 2013.

6. Orchard Holdings relies on the evidence of their solicitor, Simon Christopher England, who had the day‑to‑day conduct of the action.  In an affidavit sworn 4 December 2012, Mr England deposes that the calculation of pre‑judgment interest 'was inadvertently omitted' in the calculation of damages, and 'inadvertently overlooked' at the hearing at which orders were made.  The defendants object to this evidence as a conclusion, with no evidentiary basis for the assertion made.  I accept that the evidence is scant, but that is consistent with the subject matter.  Were Mr England purporting to give evidence about the conduct of someone else, there may be substance in the objection.  But Mr England was deposing to his own conduct and state of mind.  In my opinion, the passages referred to, reasonably read, say that he did not include the claim for interest because of his own inadvertence (that is, it was unintentional, or he did not turn his mind to it).  So understood, the statements are admissible.  I accept that the failure to include interest in the orders sought was an error due to the solicitor's oversight.  

7. No explanation is given for the oversight.  There are cases where it may be possible to explain why something was missed.  But it is also relevant, in my opinion, that the reasons for decision on which the orders were based did not include pre-judgment interest.  Orchard Holdings' entitlement to interest was not considered and rejected.  To move from the passive voice to the active, I overlooked that pre-judgment interest had been claimed and did not deal with the interest entitlement in the reasons for decision.  The plaintiff's orders and calculations reflected the heads of damages in those reasons. 

The application of the slip rule

1. The defendants submit that this application does not come within the slip rule.

2. The defendants argue that the decision to award interest requires the exercise of an independent discretion. It is not a matter of correction of an error and does not fall within the intent of the rule. The defendants point, in part, to the wide discretion of the court under s 32, including as to the rate at which interest should be allowed.

3. The slip rule should not be used to vary a judgment in a matter of discretion on which real differences of opinion may exist.  But the rule has been applied where interest has been omitted.  There are three matters which, in my opinion, resolve this issue in favour of the application of the rule.  First, the claim for interest is not an afterthought, but was claimed in the prayer for relief.  Second, as noted above, the orders sought reflected the reasons for judgment.  Third, while there is no doubt an exercise of discretion in the award of interest, including in choosing the proper rate to be applied, the cases show that the award of pre‑judgment interest may be essential to achieving proper compensation for the loss suffered.  In this case, where Orchard Holdings was heavily indebted to Westpac, which had provided the finance for the apartment development, I cannot see how the damages can be a proper measure of compensation if no allowance is made for the detriment that flows from it being deprived of the use of the money between the date of accrual of the loss and the date of judgment.  That is, the discretion to award interest would, if exercised judicially, have resulted in a decision to award interest.  Orchard Holdings has put forward a conservative rate (6%) as the basis for its present calculations. 

4. The second defendant also refers to comments made in the principal judgment (Orchard Holdings Pty Ltd v Paxhill Pty Ltd [2012] WASC 271) about the limited basis on which Orchard Holdings pursued its claim, where I said:  

   Despite the width of the plea regarding reliance on the representations (that is, that in reliance,Orchard Holdings presented contracts to Westpac, obtained finance, and proceeded with the development), Orchard Holdings pleaded its loss and damage in this limited way:

   'Had the plaintiffs not been misled into believing that the apartments ... had been sold, the plaintiffs would have achieved an equivalent number of such sales of similarly priced apartments from genuine purchasers prior to June 2007.' [22]

5. The contrast there referred to, between what Orchard Holdings said it did in reliance on the misleading representations and the facts on which it based its loss, are irrelevant to the present question.  Orchard Holdings did not limit its claim at trial in a manner which excluded its pleaded claim for interest. 

6. The defendants refer also to the detailed calculations used by Orchard Holdings to establish its claim for the interest it paid to Westpac up to the date of settlement of each apartment.  The fact that the plaintiff went to such detail in calculating its actual loss (a level of detail which I did not follow in making the assessment) does not indicate any conscious decision not to pursue interest for the period to judgment.  

7. Finally, the defendants rely on the delay between the judgment and this application.  The evidence shows that it was first raised in correspondence between the parties within a few days of the judgment on costs.  In the period between then and the making of the formal application, there was communication between the parties directed, initially, to whether the claim fell within the slip rule, and later to whether the issues could be limited by agreement on the calculations.  The application to amend the judgment was filed on 5 December 2012.   

8. There could have been more urgency in bringing the application before the court.  But neither defendant has put forward any evidence of prejudice arising from the delay.  I am not satisfied that the delay is a sufficient basis to deny the application.

Conclusion

1. In summary, I am satisfied that this is a proper case for the application of the slip rule to avoid what would, in my opinion, be an injustice.

2. The orders made on 20 August 2012 should be amended by the inclusion of interest in the sum of $67,573.14 for the period between when each loss was incurred and the date of judgment.  The rate of 6% is, in my view, appropriate.  I include below, the tables prepared by the solicitors for Orchard Holdings which set out, in detail, the amount awarded and the calculations of interest.

TABLE A - Pre‑judgment interest on holding costs and loss in value of apartments

Apartment	Settlement Date	50% of Amount Awarded	Days from Settlement Date to Judgment Date (27.07.2012)	Interest to Judgment Date (calculated at 6% per annum)
4	27.02.2009	$0.00	-
5	22.10.2009	$46,747.26	1,009 days	$7,753.64
7	02.11.2009	$46,910.72	998 days	$7,695.93
8	15.04.2009	$18,180.69	1,199 days	$3,583.34
9	19.04.2010	$35,611.11	830 days	$4,858.72
12	19.04.2010	$35,246.81	830 days	$4,809.02
18	31.03.2010	$29,128.80	849 days	$4,065.26
21	01.05.2009	$17,857.29	1,183 days	$3,472.63
23	16.12.2009	$52,508.15	954 days	$8,234.43
24	03.09.2009	$31,885.02	1,058 days	$5,545.37
25*	31.03.2010	$29,245.16	849 days	$4,081.50
26	25.10.2010	$28,276.21	641 days	$2,979.46
28	25.01.2010	$49,067.36	914 days	$7,372.20
TOTAL	$64,451.50

TABLE B - Pre‑judgment interest on legal fees and valuation fees

Amount	Relevant Date	Days from Relevant Date to Judgment Date (27.07.2012)	Interest to Judgment Date (calculated at 6% per annum)
Legal fees
(a)	$6,781.90	07/01/09	1321	$1,472.69
(b)	$4,685.85	09/02/09	1288	$992.12
Valuation	fees
(a)	$3,500.00	08/12/08	1351	$777.29
(b)	$3,500.00	19/12/09	1340	$770.96
(c)	$186.36	31/03/09	1266	$38.78
(d)	$2,255.00	01/06/09	1176	$435.93
(e)	$4,400.00	20/07/09	1127	$815.15
(f)	$2,200.00	28/06/10	784	$283.53
TOTAL	$3,121.64