Pratt and Ors. v Latta and ANOR.
[2001] FMCA 84
•5 October 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PRATT & ORS. v LATTA & ANOR. | [2001] FMCA 84 |
| TRADE PRACTICES – Misleading and deceptive conduct – Misdescription of land – Loss – Causation – Conduct of applicants – Whether chain of causation broken. DAMAGES – Considerations relevant to the assessment of damages. INTEREST – Determination of the appropriate rate of interest. Consumer Protection Act 1969 (NSW), s.32 Trade Practices Act 1974 (Cth, ss.52, 53A, 82 Antioniou v Sutton v A J Thompson Pty Ltd(in liquidation) (1987) 73 ALR 233 |
| First Applicant: Second Applicant: | DORIS PRATT BRYAN PRATT |
| First Respondent: Second Respondent: | JAMES LATTA LYN BRITZ PTY LIMITED, |
| File No: | CZ10 of 2000 |
| Delivered on: | 5 October 2001 |
| Delivered at: | Sydney (heard in Canberra) |
| Judgment of: | Driver FM |
REPRESENTATION
| Counsel for the Applicant: | Mr J Harris |
| Solicitors for the Applicant: | Vandenberg Reid, Lawyers |
| Counsel for the Respondent: | Mr J Constance |
| Solicitors for the Respondent: | Snedden Hall & Gallop |
ORDERS
The respondents are to pay damages to the applicants in the sum of $19,769.00, including interest up to judgment of $2,269.00.
The respondents are to pay the applicants’ costs of this application, including any reserved costs, assessed in accordance with the Federal Magistrates Court Rules and Schedule 1 to those Rules.
The Court certifies, pursuant to Rule 21.15, that it was reasonable for the applicants to employ an advocate to appear at the hearing on 13 June 2001 and 31 August 2001.
Settlement and entry of these orders may be effected pursuant to Order 36 of the Federal Court Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT CANBERRA |
CZ 10 of 2000
| DORIS PRATT BRYAN PRATT BRONWEN PRATT |
Applicant
And
| JAMES LATTA |
First Respondent
| LYN BRITZ PTY LIMITED, TRADING AS HORIZON REAL ESTATE |
Second Respondent
REASONS FOR JUDGMENT
Introduction and background
This is an application under the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”) alleging breaches of ss.52 and 53A. The applicants also allege breaches of the Fair Trading Act 1992 (ACT) (“the Fair Trading Act”) – sections 12 and 15. The applicants seek damages pursuant to s.82 of the Trade Practices Act or s.46 of the Fair Trading Act, costs and interest.
The substance of the applicants’ claim is set out in the statement of claim, filed on 27 October 2000. The applicants allege that on or about 8 January 2000 the first and second respondents advertised in the “Canberra Times” newspaper for the sale of a block of land (“the land”) in the following terms:
Yass River Road extensive river frontage. 27 FERTILE ACRES – A GREAT BLOCK. Tar-sealed road to land. Power, ph. Nearby. $132,000. Ph James Latta 0411 328 300.
The applicants allege that they read the advertisement and acted on the representations contained therein. They further allege that subsequently the first respondent made further representations orally to Bronwen Pratt concerning the land as follows:
“In or about January 2000 a number of telephone calls were made between Mr James Latta and Ms Bronwen Pratt in which Mr Latta said words to the following effect: “The block of land is 27 acres in size”.
The applicants allege that in reliance upon the representations made to the applicants set out above the applicants entered into a contract for the purchase of the land from the vendors, Mr and Mrs McBride. The applicants exchanged contracts for the land on or about 11 February 2000 and settled on the purchase on or about 24 March 2000. The contract price was $127,500.
The applicants allege that, contrary to the representations contained in the advertisement and the oral representations made to Bronwen Pratt by the first respondent, the land was only approximately 19 acres and not 27 acres as represented. The applicants allege that as a result of these representations made by the respondents the applicants have suffered loss in that they had purchased the land for agistment of horses, a purpose made known to the first and second respondents prior to purchase. The applicants say that they are unable to agist all the horses they have because of the small area of the land available and have paid more than the land is worth. The applicants allege misleading conduct contrary to s.52 of the Trade Practices Act and
s.12 of the Fair Trading Act. Alternatively, the applicants allege that the representations constitute misleading statements concerning the characteristics of land pursuant to s.53A of the Trade Practices Act and in contravention of s.15 of the Fair Trading Act. The applicants finally allege loss in terms of the value of the land, the cost of agistment for horses, legal costs and interest.In their defence, filed on 23 February 2001, the defendants admit that the advertisement alleged by the applicants did appear in the terms alleged and further admit that the advertisement incorrectly stated that the property was 27 acres, but they say that the error was corrected by disclosures made by the vendor to the applicants in the contract for sale of the land. In particular, the respondents say that a “section
149 planning certificate” noted the area of the property to be
7.79 hectares and that deposited plans for the property showing the area of the parcels of land being purchased to be approximately
19 acres. The respondents deny the further oral representations alleged, they deny reliance upon any representations and they deny any breaches of the Trade Practices Act and the Fair Trading Act. The respondents further deny that any act on their part caused loss or damage to the applicants, and to the extent that the applicants have suffered loss or damage, the respondents say that the loss or damage was caused by the applicants’ own conduct in failing to obtain their own valuation of the property prior to entering into the contract to purchase the property, to read and take note of a letter from Vandenberg Reid, Lawyers, dated 9 February 2000, which advised the applicants to peruse the contract carefully and to read the whole of the contract for sale dated 11 February 2000, which attached the section 149 planning certificate and the deposited plans for the property.
The evidence
The applicants rely upon the affidavit of Bronwen Pratt (“Ms Pratt”), made on 13 June 2001, the affidavit of Cherie Helen Hobart, made on 13 June 2001 and the affidavit of Mark Trew, made on 8 June 2001. Ms Pratt and Ms Hobart were cross-examined upon their affidavits. Ms Pratt deposed that she made contact with the first respondent after seeing the advertisement in the Canberra Times and in conversation with him placed some stress on her understanding of the size of the property and her proposed purpose of running horses on it. Ms Pratt deposed that she inspected the property twice, once on her own and once with her mother, Doris Pratt, who is also an applicant in these proceedings. Ms Pratt deposed that following the second inspection with her mother she again spoke to the first respondent and asked him to confirm the size of the property, to which he replied:
“It’s 27 acres.”
Ms Pratt deposed that she asked about a map of the property showing the dimensions of each paddock and that Mr Latta suggested she get one from the local council. Ms Pratt deposed that she did make an enquiry of the council and obtained a facsimile copy of a map which showed the land. She says that the map was not clear enough for her to read any dimensions.
Ms Pratt further deposed that some days after her second telephone conversation with Mr Latta she met him on the property in mid January 2000 and had a further conversation with him in which she stressed that she needed a property of not less than 27 acres. She says that she sought something which showed the exact dimensions of the property but that Mr Latta was not able to provide anything. Ms Pratt says that she also asked about flooding and that Mr Latta pointed out what he said was the flood water line on the property. Ms Pratt deposed that, based upon what Mr Latta had told her, she decided to buy the land and that if she had known the land was only about 20 acres in size she would not have proceeded with the purchase as it was not big enough to enable her to keep 16 horses as she proposed. Also, Ms Pratt deposed that she subsequently found out that the land was periodically flooded by the Yass River from time to time to a higher level than that pointed out by Mr Latta, which would have affected her decision to purchase.
Ms Pratt deposed that, based upon the representations from Mr Latta, she entered into a contract to purchase the land and subsequently settled on that purchase on 24 March 2000 for a total purchase price of $127,500.
Finally, Ms Pratt deposed that the land is in fact a little over 19 acres in size and is too small to accommodate her horses, which she has had to agist some of elsewhere. Ms Pratt deposed that she had a conversation with Ms Hobart in which Ms Hobart told her that her property was only 20 acres in size and that “James Latta knows it is only 20 acres”. Ms Pratt deposed that it was Ms Hobart who also revealed the truth about the flood prone nature of the land.
Under cross-examination, Ms Pratt was pressed on her recollections about her conversations with the first respondent, Mr Latta. Ms Pratt was resolute in affirming her recollections of those conversations. Mr Constance, for the respondents, suggested to Ms Pratt that she doubted the size of the property prior to entering into the contract, but she asserted that her uncertainty related only to the shape of the property because it was an unusual shape. She insisted that at all material times she believed that the property was about 27 acres. Ms Pratt also insisted that she had discussed running 16 horses with Mr Latta. Ms Pratt conceded that Mr Latta had raised with her the propensity of the property being flooded. In response to a question from me, Ms Pratt stated that she gave no consideration to the desirability of river flat land on the basis of its higher fertility.
Ms Pratt admitted under cross-examination that although the size of the property was a fundamental consideration to her she did not tell her solicitors about this concern. Neither did she ask her solicitors to verify the size of the property or to obtain a survey. Ms Pratt recalled seeing the deposited plans in the contract that was sent to her but denied that it occurred to her from looking at that plan that the property was in fact only about 20 acres in size. She said that she merely confirmed that the property on the plan was the one that she intended to buy. Ms Pratt stated that she did not specifically recall looking at the section
149 planning certificate when reviewing the contract. She says that she did not go through the contract very carefully because, having received the representations from the first respondent, she did not see any need to do so. In response to a question from me, Ms Pratt said that she regarded Mr Latta as a trustworthy person and that she did place trust in him. She now conceded that she may have been naïve.In her affidavit Ms Hobart deposed that she lives with her husband on the neighbouring property to that purchased by the applicants. She has lived there since 1989. Ms Hobart deposed that subsequent to purchasing their property the property in issue became available for sale and that she and her husband considered buying it. She deposed that she spoke to the owners about the property and that it was described as a “20 acre block”. At that time there was no real estate agent involved. Subsequently, the property was listed for sale through the first respondent’s then real estate agency and Ms Hobart deposed that she approached Mr Latta about purchase of “McCormick’s 20 acre block”. The sale did not proceed because the parties could not agree upon a price. A sale was subsequently made to Mr and Mrs McBride.
Ms Hobart deposed that some years later the McBrides also put the land up for sale and that she spoke to Mr Latta about purchasing “that 20 acres next door to us”. Finally, Ms Hobart deposed that she has observed the land being flooded on average four to five time each year to a point higher than that indicated by Mr Latta to Ms Pratt. However, Ms Hobart also deposed that the land has not flooded for the past two years, which she says is unusual.
Under cross-examination, Ms Hobart resisted suggestions that the property in issue was not known as “McCormick’s 20 acre block”. Ms Hobart stated that Ms Pratt had two conversations with her shortly after settling on the purchase of the property and that it was apparent from the second of those conversations that Ms Pratt had become suspicious about the size of the property. She recited a conversation with Ms Pratt in which Ms Pratt had said that she probably would not have bought the property if she had known that it was not 27 acres.
Ms Hobart conceded that the propensity of the land to flooding depended upon weather conditions and that since 1989 there have been four or five years in which there has been no flooding at all. When the land does flood, this is for a period of only one to two days. She admitted that such short duration river flooding was perfectly normal. Ms Hobart also admitted that in her conversations with Ms Pratt, Ms Pratt had asked her about a laneway shown on the deposited plans for the property. Ms Pratt was apparently concerned as to whether the laneway was fenced or not and whether it was included in the area of the land.
Mr Trew provided a valuation report in which he estimated the value of the property as at 15 August 2000 to be $110,000. His evidence was not contested.
The respondents rely upon the affidavit of James Latta, made on
29 June 2001. Mr Latta deposed that he denies Ms Pratt mentioning having 16 horses in conversation with him, he denies Ms Pratt making any mention of the property being 27 acres or enquiring whether it was 27 acres in conversation with him, and he denies Ms Pratt saying to him that she needed a 27 acre property to run a large number of horses or cattle. Mr Latta deposed that he did have a conversation with Ms Pratt in which she indicated she wished to run six to eight horses. He admitted that there was a conversation with Ms Pratt concerning the possibility of obtaining a map of the property and that he told her that he did not have one. Mr Latta also admits having a conversation with Ms Pratt concerning the susceptibility of the land to flooding and he deposed that he said that river flats do flood but that the block has high ground to get horses up on to. He admits that he pointed to a stump above the flood line and to an area of excavation that had not been affected by flood. Mr Latta deposed that to the best of his knowledge the property may flood once a year, sometimes less, as is normal for river flat country and which accounts for the fertile nature of the land.
Mr Latta deposed that the property was first listed for sale by him in 1996 when it was owned by Wayne and Leanne Batty. He denies having a conversation with Ms Hobart, during which she allegedly referred to “McCormick’s 20 acre block”. Mr Latta confirms that Ms Hobart did make an offer for the property in 1996 which was rejected. Mr Latta confirms that he subsequently listed the property for sale again for Mr and Mrs McBride and that he relied upon information given to him previously by Mr Batty as to the size of the property. He deposed that before advertising the property for sale he had three conversations with Ms Hobart concerning her interest in buying it and informed her that he believed the property was worth around $130,000. Mr Latta denies that Ms Hobart ever referred to the property being 20 acres in size in any conversation with him. Mr Latta further denies that the land floods four to five times a year.
Under cross-examination by Mr Harris, for the applicants, Mr Latta admitted having conversations with Ms Hobart in 1996 about the land but resisted suggestions that the land had been referred to as a
“20 acre block”. He further resisted suggestions that the land had been referred to as a 20 acre block when the McBrides were putting the land up for sale and when he had further discussions with Ms Hobart. Mr Latta further resisted suggestions that in conversation with Ms Pratt she had referred to her wish to run 16 horses on the property and that she had asked for confirmation that the property was 27 acres in area. When pressed, however, Mr Latta conceded that if he had been asked about the area of the property by Ms Pratt he would have told her that the property is 27 acres in area. Mr Latta conceded the possibility that in conversation with Ms Pratt she had asked about the size and that Mr Latta had referred back to the advertisement in confirming the area as 27 acres.In response to questions from me, Mr Latta stated that he did not become aware of the actual size of the property until after the sale of the property to the applicants.
Consideration of the issues
The present application is clearly within the limited jurisdiction of this Court under the Trade Practices Act in that the amount claimed is less than $200,000. This Court also has jurisdiction under the Fair Trading Act, pursuant to s.18 of the Federal Magistrates Act 1999, noting that the Fair Trading Act is an Act of a Commonwealth Territory.
The issues in this case are:
a)Did the respondents make false representations contrary to the Trade Practices Act or the Fair Trading Act?
b)Did the respondents rely upon those representations if so made?
c)Have the respondents suffered loss or damage as a result of such reliance?
d)What is the effect of the purported correction of the incorrect advertisement?
e)What is the effect of the conduct of the applicants?
Section 52(1) of the Trade Practices Act provides that:
“A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.”
Section 52(2) provides that:
“Nothing in the succeeding provisions of [that] division of the Trade Practices Act shall be taken as limiting by implication the generality of sub section (1).”
Section 52 is a comprehensive provision which does not purport to create liability, but rather establishes a norm of conduct. While there is no real doubt that section 52 applies to the promotion or sale of land as well as to goods or services, s.53A makes specific provision in relation to false representations and other misleading or offensive conduct in relation to land. There is no material difference between these provisions and the equivalent provisions of the Fair Trading Act. The respondents concede that the advertisement in the Canberra Times was a false representation (albeit innocent) in that the area of the land was misdescribed. The respondents dispute that any further misrepresentation was made orally by the first respondent but I find that on the balance of probabilities Ms Pratt, in at least one conversation with Mr Latta following her inspection of the property, sought some confirmation or queried the area of the property and Mr Latta confirmed the statements in the Canberra Times advertisement.
The first ground of defence of the respondents is that, notwithstanding the falsity of at least the written representation, there was no breach of the Trade Practices Act or the Fair Trading Act because the respondents were doing no more than passing on information supplied by another. I was referred to the decision of the High Court in Yorke & Another v Lucas (1985) 158 CLR 661 at 666. That decision may be contrasted with the decision in John G Glass Real Estate Pty Limited v Karawi Constructions Pty Limited (1993) ATPR 41-249. The question really is whether the respondents were simply the innocent carriers of a false representation from one person to another so that they were merely acting as a conduit or whether they were actively involved in the promotion and sale of the land in such a way that they should be held responsible for the false representations.
The available evidence in the present case leaves me to conclude that the respondents were more than simply conduits. I accept that the misrepresentations made by the respondents were innocent and I accept that the advertisement and oral confirmation by the first respondent were based upon an understanding conveyed by previous owners of the property. Nevertheless, the respondents held themselves out as real estate agents acting in a professional capacity on behalf of a vendor. The representation related to a fundamental issue concerning the sale of the land; probably the most fundamental issue. The representation in the advertisement was unqualified. There was no suggestion that the representation might not be wholly accurate or that it was simply based on what the respondents had been told or that a reader or listener should refer to the original source of the information for clarification. The respondents, and in particular the first respondent, made themselves available to answer queries on behalf of the vendor in relation to the land. In response to an admitted query from Ms Pratt about whether Mr Latta could supply a map, which may have enabled Ms Pratt to verify the dimensions of the land, the first respondent made a material suggestion. He did not suggest that Ms Pratt should make enquiries of his principal or previous owners. I conclude, therefore, that the respondents were not merely acting as a conduit but took responsibility for the provision of information concerning the land, including its area and, took responsibility for the accuracy of that information. Subject to the availability of any statutory defences, all corporations and some individuals connected with the supply or possible supply of land, goods or services may be liable for a false representation or false or misleading representations. The first respondent, if not liable under the Trade Practices Act, could be liable under the Fair Trading Act. I find that this ground of defence, whether it is offered generally or in reliance upon s.85 of the Trade Practices Act and s.49 of the Fair Trading Act, does not assist the respondent.
I find that the representation as to the area of the land in the Canberra Times article was false and misleading in that prospective purchasers (of which the applicants were three) were misled or were likely to be misled as to the area of the land being sold. There is no doubt that the conduct of the respondents, in contrast to that of the vendors, was conduct engaged in trade or commerce.
On the other hand, I am not satisfied that the respondents made any misrepresentations concerning flooding. Mr Latta gave information to the best of his knowledge to Ms Pratt. Ms Pratt may not have fully understood what she was told, or the full import of it, but I find that the oral statements made by Mr Latta about the frequency and depth of flooding of the land were not misleading or deceptive.
The next issue is whether the respondents in fact relied upon the misleading representations made. That is not formally conceded by the respondents but Mr Constance chose not to address me on it, which I took to be an acknowledgment that he would be unlikely to persuade me that there was no factual reliance. I accept in this regard the evidence of Ms Pratt that she acted for and on behalf of all three purchasers and that the issue of the size of the land was a fundamental consideration in their decision to purchase it. I find that the applicants did rely upon the representation in the Canberra Times and the subsequent confirmation by Mr Latta, in forming a view as to the size of the land, which in turn significantly influenced their decision to proceed with a purchase.
In their defence the respondents say that the misrepresentation was corrected by disclosures made by the vendor to the applicants in the contract for the sale of land, in particular in the section 149 planning certificate and the deposited plans for the property. This goes to the question of whether it was reasonable for the applicants to rely upon the misrepresentations beyond the point of correction. There is authority in relation to the Consumer Protection Act 1969 (NSW), s.32 that even if a misleading statement is corrected before any sale is induced by it, this does not prevent the misleading statement infringing the legislation: CRW Pty Ltd v Sneddon (1972) 72 AR (NSW) 17 at 37. The same result flowed in Lyndon v Coventry Motors Retailers Pty Ltd (1975)
11 SASR 308 at 313 where Wells J said the following:“Every day hundreds of advertisements appear in newspapers informing the public of houses and land for sale. They vary from laconic announcements to elaborate works of puffery. A house-hunter virtually never buys, unseen, the house or land that is the subject of an advertisement, nor would the advertiser expect him to. The purpose of the advertisement is to interest him; to persuade him to enquire about, to inspect, and to satisfy himself that he wants to buy, the house. The advertisement is the bait, not the hook.
If a misleading or deceptive statement is made and subsequently corrected, a person relying on the initial statement may suffer loss for damage prior to, or notwithstanding, the correction. Accordingly, section 52 and its equivalents may be breached notwithstanding that there has been a correction of the relevant misleading or deceptive statement.
Nevertheless, the purported corrections of the misrepresentations and the conduct of the applicants in relation to those purported corrections are relevant in considering whether the chain of causation has been broken between the representations and the suffering of any loss by the applicants. This arises in connection with the availability of damages pursuant to s.82 of the Trade Practices Act and s.46 of the Fair Trading Act. This is the most serious issue in contention in these proceedings.
In relation to this issue the applicants place heavy reliance on the decision of his Honour Hill J in Argy and Another v Blunts & Lane Cove Real Estate Pty Limited and Others (1990) 26 FCR 112. In that case, Mr Argy, a solicitor, responded to an advertisement for a sale of some land in the Lane Cove area of Sydney. He inspected the land and got a copy of the contract. Mr Argy also had access to the section
149 certificate. The certificate provided to him was incomplete. Prior to settling on the purchase of the land with his wife, Mr Argy discovered that the land was affected by an adverse zoning decision. He proceeded with the purchase but commenced proceedings against the real estate agents who had provided the contract to him with the section 149 certificate incomplete. The Court found that the provision of the incomplete section 149 certificate with the contract was a misrepresentation and that the applicants were induced by the misrepresentation to enter into the contract for the purchase for the land, even though the misrepresentation was not the sole cause of the damage ultimately suffered. It was sufficient if the misrepresentation was a cause of the damage suffered. Importantly, the Court found that Mr Argy, as a reasonably competent solicitor, should have seen that the section 149 certificate was incomplete. Nevertheless, the Court found that Mr Argy did in fact rely upon the misrepresentation and that it was in fact a cause of the damage he ultimately suffered. The respondents in that case had argued that the necessary causal connection was lost because Mr Argy had failed to take reasonable care of his interests. The Court considered and applied the decision of the Full Federal Court in Sutton v A J Thompson Pty Ltd(in liquidation) (1987) 73 ALR 233. In that case the Court held that the test is an objective one, whether the applicants are in fact induced by the misrepresentation to act to their disadvantage. The Court said this in that case at page 240:“If a person is so determined to enter into a contract that he is not in truth influenced by some false representation made to him, he clearly has no case. But there is nothing in the principles cited, or in any other authority which has been brought to our attention, to suggest that a person who has been misled into entering into a contract, by false representations of a type which will likely to produce that result, and in fact did so, can be deprived of his remedy because of his failure to check the accuracy of those representations.”
An applicant, under s.82, must show that he or she suffered loss or damage by the conduct of another person that constitutes a contravention of part V of the Act. This has been interpreted to mean that the loss or damage must be caused by reason of or as a result of that contravening conduct. Accordingly, it is only loss or damage that is caused by the contravening conduct which can be recovered under
s.82. That is, there must be a causal connection between the conduct and the loss for which the applicant seeks to be compensated. Generally, the causal link will not be broken because of a failure on the part of the applicant to take reasonable care: Neilsen v Hempston Holdings Pty Ltd (1986) ATPR 40-686. In Antioniou v Karedis Enterprises Pty Ltd (1995) ATPR 41-400 at 40,421 his Honour Einfeld J expressed concerned that although damages under the Trade Practices Act are largely assimilated to damages in tort, one of the elements bearing on the assessment, namely contributory negligence, is not available. I have a similar concern. The case before me was conducted on the basis that it was an all or nothing equation. In other words, the conduct of the applicants was relevant to establishing causation but not otherwise in the assessment of damages. Even if there are cases where the claimants’ own negligence or unreasonable behaviour may be relevant to indicating that a misrepresentation did not in fact cause the loss, that is not to say that a foolish or naïve person may not recover damages under s.82 upon being induced by a representation which no normal person would have taken seriously: Sullivan v Macqurie Pathology Services Pty Ltd (1995) ATPR (digest) 46-143 at 53, 132. The same view was taken in Sutton v AJ Thompson Pty Ltd (op cit).I was referred by Mr Constance to the decision of the High Court in Parkdale Custom Built Furniture v Puxu Pty Ltd (1982) 149 CLR 191. The High Court there stated, at page 1999:
“The heavy burdens which the section [s.52] creates cannot have been intended to be imposed for the benefit of persons who fail to take reasonable care of their own interests. What is reasonable will of course depend on all of the circumstances.”
It is relevant, however, that the High Court was there not referring to the issue of causation under s.82 but rather, to the issue of interpretation of s.52 in considering what conduct is misleading or deceptive or likely to mislead or deceive. It is also material, as was pointed out by Mr Harris in argument, that Parkdale was followed by the Federal Court in Argy. Nevertheless, as was submitted by Mr Constance, it is possible that the conduct of an applicant can be so foolish, so heedless of his or her own interests, as to break the chain of causation. The question must be decided on the facts of the instant case. What then are the facts in this case which the respondent says break the chain of causation? The respondents rely upon the following circumstances in their defence:
(a)Unlike the case of Argy where Mr Argy acted for himself on the purchase of the property, in this case the applicants retained solicitors to act for them and should have given the solicitors proper instructions;
(b)The material document annexed to the contract in the Argy case was incomplete and misleading. In this case the contractual material was accurate and, at least potentially, corrected the misleading impression created by the error in the advertisement;
(c)Prior to entering into the contract, the applicants received from their solicitors, a letter which invited them to consider whether a property survey was required to ascertain the true boundaries of the property;
(d)It was clear from the contract (clause 10) that the purchaser lost rights as against the vendor arising out of any representation once the contract was entered into.
Mr Constance submitted that the applicants could not sustain their claim based upon the naivety of Ms Pratt. He further submitted that by entering into the contract after failing to carefully examine it and the documents attached to it and to heed the advice of their solicitors, the applicants broke the chain of causation.
The arguments in this case are, I think, finely balanced. On balance, however, I have concluded that the chain of causation has not been broken by the conduct of the applicants and that the misrepresentations by the respondents were a cause, admittedly not the only cause, of the applicants entering into the contract for the purchase of the land and proceeding with it. In this regard, I reiterate that I accept the evidence of Ms Pratt that she was, in effect, appointed by the other two purchasers to act on their behalf. They took no active part in the matter. Ms Pratt was clearly influenced by the Canberra Times advertisement to inspect the property. That was, of course, the result that was intended by the advertisement. I find that the size of the property was a fundamental consideration for Ms Pratt in that she wished to use the property to run horses and possibly cattle. I find that she had in mind running
16 horses and that a property of less than 27 acres was unlikely to be big enough for her purposes. I find that she sought confirmation from Mr Latta of the accuracy of the Canberra Times advertisement and, while he was not able to provide her with any direct proof of size, he confirmed orally the representation that the property was 27 acres in area. The representation in the Canberra Times was unequivocal. Mr Latta confirmed it. Clearly, Ms Pratt was naïve in placing her faith in a newspaper advertisement and an oral representation from a real estate agent on such a fundamental issue. She would have been far wiser to heed the advice of her solicitors and obtain a survey. She did not do so but that failure does not, of itself, break the chain of causation.Ms Pratt was referred to the section 149 planning certificate which described the property as having an area of 7.97 hectares. A conversion of that metric measurement into imperial acreage would have led Ms Pratt to the realisation that the land was not in fact
27 acres in area. Not many people, however, and probably an ever reducing number of people, are familiar with the conversion rates between hectares and acres. Ms Pratt was also referred to the deposited plans which showed the area of at least one block and possibly two as being 11 acres. However, it required some careful analysis to derive from that an assessment of the total area. The clues were there for Ms Pratt to find but they were only clues. Presented with the unequivocal representation on the one hand and cautionary statements from her solicitors and clues as to the true facts on the other it is not entirely surprising that Ms Pratt proceeded on the basis of the unequivocal representation. She would have been wise not to, but she was naïve. That naivety, however, does not disentitle her, and through her the other applicants, from damages pursuant to s.82 of the Trade Practices Act or s.46 of the Fair Trading Act.
It remains then for me to determine what loss has been suffered by the applicants and what appropriate compensation is payable to them.
Section 82 does not itself set out how a court is to assess the amount of any loss or damage suffered by an applicant. There is no requirement that loss or damage be assessed in any different way than under the general law and neither is there any necessary restriction to common law conceptions as to the nature and extent of any damages recoverable. Financial loss as well as physical injuries to persons or property is clearly recoverable. It seems well settled that the measure of damages under s.82 approximates the damages recoverable in tort and in most cases, especially those involving misleading or deceptive conduct and the making of false statements, the measure of damages in tort is appropriate. In Brown v Jam Factory Pty Ltd (1981) 53 FLR 340 at 351, Fox J set out the proper approach to the assessment of damages:
“The correct way to approach the assessment of damages in this case, in my view, is to compare the position in which the applicants might have been expected to be if the misleading conduct had not occurred with the situation they were in as a result of acting in reliance on that conduct.”
The evidence of Ms Pratt, which I accept, is that she would not have purchased the property if she had known its true size. Accordingly, in order to place her and the other applicants in the position they would have been in if the misrepresentation had not occurred they should receive what they paid for the property that they would not have bought if they had known the truth, less the value of the asset which they in fact acquired.
There is authority that the damages recoverable for misleading statements leading to the purchase of a business and land will usually approximate the measure of damages in an action of deceit. In Kizbeau v W G & B Pty Ltd (1995) ATPR 41-439 at 40,972-3 the High Court said this:
“In an action for damages for deceit for inducing a person to enter a contract to purchase which is an action that is closely analogous to an action for damages for breach of s.52, the courts have consistently held that the proper measure of damages is the difference between the real value of the thing acquired as at the date of acquisition and the price paid for it.”
I conclude, therefore, that the proper measure of damages in this case is the difference between what the applicants paid for the land and what it was worth at the time of the purchase. Mr Constance submitted that the assessment of damages should take into account a road or right of way through the land which itself diminished the value of the land. It was not suggested that there was any misrepresentation by the respondents about the right of way, or road, and, in Mr Constance’s submission, the assessment of damages should take into account that the land was probably worth less than what the applicants paid for it, irrespective of any misrepresentation by the respondents. This is another way of saying that the respondents should not be put in the position of being the insurer of a gullible applicant’s loss who pays too much for a thing, irrespective of misrepresentation by a respondent. I do not accept that I should make any deduction from the assessment of damages to take account of that possibility. In the first place I have no evidence as to the adverse impact on the value of the land on the right of way or road. In the second place I have found as a matter of fact that the applicants were influenced by the misrepresentations made by the respondents to enter in to the purchase of the land and that it was a factor in causing their loss. Having made that finding I think that the ordinary principles for the assessment of damages in a s.52 case should apply and that the measure of damages should simply be the sum paid for the land, less its value at the time of purchase.
I have decided that I should reject the applicants’ claim for the cost of agisting horses that could not be run on the property because of its small area. This amounts to double dipping. If there had been no misrepresentation then the applicants would not have bought the land. They would still have had to put their horses somewhere and would have had to pay for agistment.
The difference between the purchase price of the land and the value of the land at the time of the purchase on 24 March 2000 is $17,500. In addition, the applicants having sought interest, are entitled to interest up to judgment pursuant to s.76(3) of the Federal Magistrates Act. No rate of interest is prescribed and the fixing of an appropriate rate is within the discretion of the Court. The practice of the Federal Court is to apply the same rate of interest that would be applied in the relevant State or Territory court, rather than the rate that is prescribed by the court rules for post judgment interest: Namol Pty Ltd & Anor v A W Baulderstone Pty Ltd & Others (1993) 119 ALR 187. In my opinion, this Court should follow the same general practice as the Federal Court. This matter is within the jurisdictional limit of the ACT Magistrates Court. Accordingly, I should apply the same rate of pre judgment interest as is applied in that Court. It is clear from s.230 of the Magistrates Court (Civil Jurisdiction) Act 1982 (ACT) that the rate of pre judgment interest is within the discretion of the ACT Magistrates Court. Since 1 May 1998, the general rate of pre judgment interest applied in that Court is 8.45 per cent. That is a reasonable commercial rate at the present time and I will apply that rate of interest in these proceedings. The applicants are therefore entitled to interest at the rate of 8.45 per cent on the sum of $17,500 between 24 March 2000 and 5 October 2001. The amount of interest therefore is $2,269.00. The applicants will also be entitled to interest on the judgment in accordance with s.77 of the Federal Magistrates Act and Rule 26.01 of the Federal Magistrates Court Rules. That rule applies the rate of interest prescribed by the Federal Court Rules (“the Federal Court Rules”). Order 35, rule 8 of the Federal Court Rules prescribes a general rate of interest of 10.5 per cent. I propose also to make a costs order and I will hear the parties as to costs.
I certify that the preceding forty-nine (49) paragraphs are a true copy of the reasons for judgment of Driver FM
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