Ramensky, N. v Demagogue Pty Ltd

Re: NICHOLAS RAMENSKY and GISELA ELIZABETH RAMENSKY
And: DEMAGOGUE PTY LIMITED
No. N G128 of 1990
FED No. 289

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Spender J.(1)

CATCHWORDS

Trade Practices - misleading or deceptive conduct - contract for sale of land - misrepresentation by vendor as to access to site - plan in draft contract reasonably conveyed that driveway on common property - failure to inform that driveway subject to a road licence - silence a misrepresentation in the circumstances.

Trade Practices - misleading or deceptive conduct - contract for sale of land - inducement - sufficient that applicants might have abstained from course of action allegedly induced if misrepresentation had not been made - likely that applicants would not have entered contract if had been aware of true state of affairs - clause in contract cannot preclude action on misrepresentation.

Contract - common law rescission - request for extension of time in which to complete not unequivocal affirmation in the circumstances - request made when applicants not aware of full circumstances attaching to road licence.

Vendor and Purchaser (Q) - home and commercial units - sale by origin al proprietor - statement as to any 'prescribed arrangements' to be given to purchaser - 'prescribed arrangement' must affect proprietor of a lot to a 'material extent' - whether road licence materially affects proprietor's rights - right to rescind where 'materially prejudiced' - payment of annual fee not material prejudice in the circumstances.

Trade Practices Act 1974 (Cth) ss. 52, 53A, and 87.

Building Units and Group Titles Act 1980 (Qld) ss. 7 and 49.

Deming No. 456 Proprietary Limited v. Brisbane Unit Development

Corporation Proprietary Limited (1983) 158 CLR 129.

Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd (1988) 79 ALR 83.

Rhone-Poulenc Agrochimie SA v. UIM Chemical Services Pty Ltd (1986) 12 FCR 477.

National Australia Bank Ltd v. Cunninghamn (1990) ATPR 41-047.

Gold Coast Carlton Pty Limited v. Wilson (1985) 1 Qd R 182.

Brisbane Unit Development Corporation Pty Ltd v. Sokola Pty Ltd (1983) 1 Qd R 292.

HEARING

BRISBANE

#DATE 19:3:1992

Counsel for the applicants: B. O'Donnell
instructed by: Henderson Trout (now Clayton Utz,

Henderson Trout)

Counsel for the respondent: P. J. Lyons QC with

S. Lumb

instructed by: Virgil Power, Bothwell and Co.

ORDER

The Court declares that:

1. The respondent has in trade or commerce engaged in conduct that was misleading or deceptive or was likely to mislead or deceive in contravention of s. 52 of the Trade Practices Act 1974.

2. The respondent has in trade or commerce made false or misleading representations in connection with the sale of land in contravention of s. 53A of the Trade Practices Act 1974.

3. The agreement for sale of land dated 14 March 1989 is void ab initio.

The Court orders that:

4. The respondent pay forthwith to the applicants the deposit of $40,500.00 together with all accruals.

5. The respondent pay to the applicants the sum of $6,960.00 being consequential costs incurred by the applicants together with interest.

6. The respondent pay the applicants' costs, including reserved costs, to be taxed if not agreed.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Mr and Mrs Ramensky seek declarations that an agreement for sale of land dated 14 March 1989 was validly rescinded by them by a letter of 12 February 1990 or, alternatively, a declaration that the agreement is void ab initio. A claim for common law rescission was not pursued at the conclusion of the hearing.

The agreement is a contract between the applicants and the vendor builders of the development, Demagogue Pty Limited ("Demagogue") for the purchase of Unit 5, "Picture Point Terraces" at Noosa Heads for $405,000.00. The applicants paid a total of $40,500.00 to the vendor's solicitors and they seek an order for the repayment of that amount, with interest. They seek also costs and expenses they have incurred in connexion with the agreement to purchase Unit 5.
The application has two primary bases, both directed to the aspect of access to the site.
The applicants claim that, in the dealings prior to the execution of the contract, it was represented to them orally by Mr Warren Miller, a real estate agent from Noosa Village Properties on behalf of the respondent, and by a plan marked "A" at page 20 of a draft agreement for sale of land shown to the applicants by Mr Miller, that the driveway to the south-east portion of the development would form part of the common property of the development. This representation is said to have induced the entry into the contract for the purchase of Unit 5.
The applicants say that by so representing the driveway access to the site, Demagogue engaged in conduct in trade or commerce that was misleading or deceptive in contravention of s. 52 of the Trade Practices Act 1974 ("the Act"); or alternatively, the representation was a false or misleading representation concerning the nature of the interest in the property, the characteristics of the property, the use to which the property is capable of being put or may lawfully be put or the existence or availability of facilities associated with the property, and constituted conduct by the respondent in trade or commerce in connection with the sale or grant, or the possible sale or grant, of an interest in the property or in connection with the promotion by any means of the sale or grant of an interest in the property in contravention of s. 53A of the Act.
In fact, the driveway giving vehicular access to the site is partly positioned outside Lot 11 on Registered Plan No. 183640, which was the land owned by the respondent, and on land which became the subject of a road licence granted by the Land Administration Commission to Demagogue under the provisions of the Land Act 1962-1988 (Qld). That portion of the roadway did not, and does not, form part of the common property of the development. The nature of the road licence, and the dealings leading to the grant of it, and the significance of such a licence must necessarily be detailed later.
The applicants say also that the respondent failed to inform the applicants that part of the driveway giving vehicular access to the site was, or was to be, the subject of a road licence, and thereby represented to the applicants that no part of the driveway was subject to any road licence. The road licence is dated 16 May 1989 but stated to commence on 2 March 1989, is in respect of property described as Lot 1 on Plan RL 8247 being a strip of road having a maximum width of about 9.2 metres abutting part of the eastern boundary of Lot 11 on Registered Plan 183640 as shown on Drawing 46863 in the Land Administration Commission. The applicants say that acting on the faith and truth of the said representation and induced thereby, they entered into the agreement and paid the deposit pursuant to the terms thereof. They say that that representation was false because part of the driveway to the south-east portion of the development was or was to be subject to a road licence, and the making of it was in contravention of ss. 52 and 53A of the Act.
Further, the applicants assert that there was an agreement or arrangement between Demagogue and the Land Administration Commission on behalf of the State of Queensland for the grant of a road licence to Demagogue at an annual rental of $1,500.00 in respect of part of the driveway to the south-east portion of the property and that such an agreement or arrangement was a "prescribed arrangement" within s. 7 of the Building Units and Group Titles Act 1980 (Qld), and that in contravention of s. 49 of that Act, the statement in writing furnished by the respondent to the applicants pursuant to s. 49(1) of that Act stated that there were no prescribed arrangements, save for a proposed managing agent's agreement, and did not disclose the dealings and arrangements between the respondent and the Land Administration Commission, leading to the payment by the solicitors for the respondent to the Land Administration Commission on 2 February 1989 of $1,585.00 in respect of the grant of a licence, a letter of acknowledgment from the Land Administration Commission of 13 February 1989, the gazettal in the Government Gazette on 2 March 1989 of notification of temporary closure of the area to be the subject of the road licence and a letter from the solicitors for the respondent to the Land Administration Commission dated 2 March 1989. Further or alternatively, the applicants allege that the statement did not disclose that on or about 2 March 1989, the Minister granted to the respondent a road licence under s. 366 of the Land Act in respect of part of the driveway to the south east portion of the development.
Alternatively, if the road licence was not granted until 16 May 1989, (which the respondent alleges in its defence), the applicants say that the issue of the road licence was a "prescribed arrangement" within the Building Units and Group Titles Act, and the respondent failed in breach of the obligation imposed by s. 49(4) of that Act to give written notification of the issue of the road licence.
The applicants assert that they have been materially prejudiced by the failure to comply with s. 49(1), (2) and/or (4) of the Building Units and Group Titles Act, and were therefore entitled to rescind, pursuant to s. 49(5) of that Act, as they did on 12 February 1990.
The application by the Ramenskys was filed in the Federal Court on 19 March 1990. A writ was issued out of the Supreme Court of Queensland by Demagogue on 13 March 1990 claiming specific performance of the agreement for the sale of Lot 5, damages for breach of contract in lieu of or in addition to specific performance, and interest on any damages pursuant to the provisions of the Common Law Practice Act 1867-81. On 10 May 1990 a consent order was made in the Supreme Court transferring the Supreme Court proceedings to the Queensland Registry of the Federal Court of Australia, reserving the costs of the Supreme Court application to the Federal Court. By cross-claim in the Federal Court proceedings, Demagogue claims specific performance of the agreement and claims the relief which it sought by its Supreme Court writ.
In respect of the application of the Ramenskys, Demagogue denies that it represented to the applicants that the driveway to the south-east portion of the development would form part of the common property of the development. It denies that it represented to them that no part of the driveway was subject to any road licence, this representation being said to be made by a failure to inform the applicants prior to their entering into the agreement that part of the driveway to the south-east portion of the development was or was to be the subject of a road licence.
Demagogue denies that the applicants were induced to enter into the agreement by those representations concerning the driveway and denies that the making of those representations constituted conduct in contravention of ss. 52 or 53A of the Trade Practices Act.
Demagogue says it was granted a road licence on or about 16 May 1989. It denies it failed to give to the applicants a statement in compliance in every respect with s. 49(1), (2) and/or (4) of the Building Units and Group Titles Act. The question here is whether the issue of the road licence when it occurred constituted a "prescribed arrangement" requiring the respondent to give notification under s. 49 to the applicants. Demagogue says that if there was any such failure, the applicants were not materially prejudiced thereby. Demagogue denies that the Ramenskys were entitled to rescind pursuant to s. 49(5) of the Building Units and Group Titles Act.
As to the entitlement of the applicants to rescind, Demagogue says that by 8 February 1990 the Ramenskys were aware that part of the driveway to the south-east portion of the development was not on common property and was on land the subject of a road licence granted to it on 16 May 1989, pursuant to the provisions of the Land Act.
Demagogue says that on 9 February the Ramenskys, by their solicitors, requested that the date for settlement of the agreement be extended and that an agreement to do so was made orally on that date, confirmed by letter of the same date from solicitors for the Ramenskys to the solicitors for the respondent and a letter of 12 February from the solicitors for the respondent to solicitors for the applicants. Demagogue says that as a consequence the applicants had affirmed the agreement after they became aware of the facts on which they rely to rescind the agreement and have thereby waived their right to rescind the agreement.
Concerning the making of the representations, Demagogue relies on clause 14.1 of the agreement which provides:
"The Purchaser acknowledges and agrees that save as are

expressly set out herein no warranties or representations have been given or made by the Vendor or by the Vendor's servants or agents and any warranties and conditions other than those expressed in writing herein are hereby negatived and it is agreed that this sale is subject to no conditions or representations other than those expressed herein in writing and the Purchaser further acknowledges that the Purchaser has relied solely on the Purchaser's own skill and judgment in entering into this Contract."

Demagogue, relying on this provision, says that the applicants are precluded or, alternatively, are estopped from alleging that the representations concerning the driveway were made and says that the applicants are precluded or, alternatively, are estopped from alleging that they entered into the agreement in reliance on the said representations.
Essentially there are two bases by which the applicants seek to avoid the contract. In the first, the applicants allege contraventions of the Trade Practices Act relating to alleged misrepresentations concerning road access and involving the non-disclosure of the road licence prior to entry into the agreement. The second basis of seeking to avoid the contract is under s. 49 of the Building Units and Group Titles Act.
There are two aspects of that Act which are relied on in the alternative. If the road licence was granted prior to the execution of the contract, the applicants say that should have been disclosed under s. 49(1) and, if the road licence was issued on 16 May 1989, as the respondent alleges in its defence, the applicants say that the matter should have been disclosed under s. 49(4).
On 10 January 1989, Mr and Mrs Ramensky, while holidaying at Noosa, visited a real estate agent in Hastings Street, Noosa, called "Noosa Village Properties", and spoke to a Mr Warren Miller. He suggested, amongst other things, a block of units yet to be constructed called "Picture Point Terraces". Whilst in his office he showed them some maps or plans. Mrs Ramensky says that she was shown a map showing Noosa as a whole as well as some architectural drawings which included a layout of the units of the "Picture Point Terraces" development. Mr Ramensky does not recall any architectural drawings.
The Ramenskys and Mr Miller went to look at the units at No. 1 Hastings Street, which was another development being constructed by the same developer, and then were driven by Mr Miller to a point from which they walked downhill to the site of "Picture Point Terraces". There is a dispute as to where the vehicle was stopped. The Ramenskys say that they stopped at a point at the end of Edgar Bennett Avenue and walked through steeply sloping land covered in vegetation with rough four-wheel drive sand tracks to get to the property. They walked to a spot indicated by Mr Miller as the approximate location of Unit 5. While on the site, Mr Miller was asked about access to the property and, according to Mrs Ramensky, Mr Miller replied "Well, look, of course there will be access. The developer will build a driveway up to the road." After the inspection they returned to the real estate agent's office where Mr Miller gave them a draft contract.
Mrs Ramensky says that from what she was told by Mr Miller she believed that the driveway would form part of the common property of the development and would be built in the same location as the sandy track down which they had walked to get access to the hillside. She says that had she known prior to executing the contract that the driveway would not form part of the common property, she would not have executed the contract for sale in its current form. She says that there is nothing in the drawing on page 20 of the contract handed to them by Mr Miller which gave any suggestion that the driveway might have been subject to restrictions or conditions as to use. Page 20 of the draft contract shows a driveway coming from the southern end of the property with the word "ramp" written on it. Closer to the units there is a bifurcation, one marked "to level 6 carpark" and the other marked "to level 5 carpark", and at the exit end of the driveway there appear to be two gates indicated.
There was nothing said to them or shown to them to indicate that a road licence would be necessary to gain access from the block to Picture Point Crescent.
Mrs Ramensky said:
"In fact, on page 20 of the draft agreement there is a

picture of the driveway and it looks as though the boundary of the property is the outside line where the left-most line of trees is, and it looks as though all of the driveway is within the boundaries of the property."

Mr Ramensky's evidence is to the same effect.

Mr Miller says that he drove the Ramenskys to the northern end of Edgar Bennett Avenue and then turned left into Picture Point Crescent, to the end of that crescent where it runs into the unmade section of Edgar Bennett Avenue. He says it was from that spot that the three walked to the site. He says he had an architectural plan with him during that visit to the best of his recollection. He says:
"During the course of our conversation Mr and Mrs Ramensky

asked me how vehicular access would be provided to the site. I told them parking would be under the rear of the building and the vehicular access would be from Picture Point Crescent. At this time I pointed out the proposed parking area and vehicular access on the plan..."

The Ramenskys deny that Mr Miller had any architectural plans with him on the occasion of the site inspection, or that he pointed out any proposed parking area, or said that vehicular access would be from Picture Point Crescent.

Both the Ramenskys and Mr Miller, in my opinion, sought to give truthful evidence. Such differences as emerge are the fault of imperfect recollection, on one side or the other. I accept the account of the Ramenskys as to the absence of plans at the site, and their denial that they were told vehicular access would be from Picture Point Crescent. Mr Miller went on very many inspections and I think his recollection is somewhat of a reconstruction based on his usual practice.
In my opinion, nothing turns on where precisely the vehicle stopped prior to walking down through bushland to the site, although I think it more likely that the vehicle stopped where indicated by Mr Miller. That position abuts the unmade section of Edgar Bennett Avenue and is closer to the development site than the position indicated by the Ramenskys.
Nothing was said by Mr Miller to indicate that a road licence was necessary over part of the Edgar Bennett Avenue road reserve to permit access to the development. Mr Miller agreed that "someone looking at that driveway, the gates, the word driveway and so on, would think it a private driveway, not a public road". Mr Miller admits that he did not point out that the driveway would be on land owned by the Crown and licensed to Demagogue. He said that he knew nothing about a road licence. Neither Mr Miller nor the Ramenskys say that he said in terms that the driveway access to the development would be on common property.

As indicated above, I accept Mrs Ramensky as a truthful witness, and I am satisfied that she believed, as a result of what Mr Miller told her about access, and what was reasonably conveyed by the draft contract, that the driveway shown at page 20 of the contract (which is the same drawing as drawing 101 in the folder of drawings) was within the boundaries of the property.
While a detailed and almost microscopic examination of drawing 101, together with the location plan on that drawing, might hint that that conclusion might not be sound, I am satisfied, particularly from the dense black line surrounding the site and driveway, that a prospective purchaser, acting reasonably, would be led to the conclusion Mrs Ramensky reached. A fortiori, if the inspection was not of the original drawing 101, but of a photocopy as appears in the draft agreement given to the Ramenskys by Mr Miller.
This is reinforced by the total silence as to any road licence by Mr Miller, or in any of the documentation, and it is further reinforced by a location drawing in an advertising brochure given to the Ramenskys by Mr Miller, which shows the site of the development as a regular block abutting "Edgar Bennett Drv."
In short, there was nothing to suggest any complication like a road licence attached to the transaction, or that it was in any way different from the usual situation where vehicular access to a road from a block of units is over a driveway located on the common property of the unit site.
It appears the land on which the development was to be constructed is a wedge-shaped block with a narrow finger running southwards from the wedge to Picture Point Crescent, but it would not be possible without a road licence over what was an unmade part of Edgar Bennett Avenue to have vehicular access to the block.
The draft form of contract was obtained by Mr Miller from Virgil Power, Bothwell and Co., the solicitors for Demagogue, and Mr Miller says he gave Mr and Mrs Ramensky a 'selling brochure' and a feasibility study regarding "Picture Point Terraces". On Friday 13 January he introduced them to Mr Drew Pearson, a solicitor, of Sykes Pearson and Miller of Noosa Heads. On 13 January Mr and Mrs Ramensky paid a holding deposit of $50.00. On 2 March 1989 there was publication in the Government Gazette of temporary closure of an area the subject of a road licence. The Ramenskys were unaware of that publication.
On 14 March 1989 a contract for sale of Lot 5 for $405,000.00 was signed and a part deposit of $20,250.00 was paid. The Ramenskys had, for their part, signed the contract in late February 1989. There is no mention anywhere in the contract of sale of any road licence. On 16 May 1989 the road licence issued to Demagogue. On 13 September 1989 the Ramenskys paid the balance of the deposit of $20,250.00.
Shortly before 20 September 1989 Mr Miller received a telephone call from Mrs Ramensky who told him that they had suffered a severe financial setback. Mr Ramensky, having recently suffered a stroke and undergone a full heart transplant operation, had not been working from May 1989 and his current income was reduced substantially. Mrs Ramensky said that because of their altered financial position and Mr Ramensky's health, they would be unable to keep the unit as they originally planned and gave instructions to him to market the unit at a price which would recoup their outlays. On 8 December 1989 Mr Miller was instructed by Mrs Ramensky to list the unit with Mr Miller's firm for $460,000.00. Mr Miller was told by Mrs Ramensky that she had also put the property in the hands of a real estate agent at Neutral Bay and asked Mr Miller to contact that agent to give him all assistance in selling the unit. Mr Miller says he took steps to market the unit and had some interest in the property towards the end of February 1990 at a price of $425,000.00 but that interest did not result in a sale.
In January 1990, Mr and Mrs Ramensky visited Noosa and inspected the site and saw that there was a road leading to Picture Point Crescent from the development. On the January 1990 visit Mrs Ramensky says that the driveway, construction of which had only just commenced at the time of that visit, would swing around on to Picture Point Crescent and would not go straight up the hill to meet Edgar Bennett Avenue as she had previously believed.
On 8 February 1990 they received information from Cannan and Peterson, solicitors acting for the applicants' financier, Challenge Bank Limited, that access to the site was subject to a road licence in the name of Demagogue. The request for an extension of the date for settlement was on 7 February, which is before the applicants learnt anything of a road licence. The extension was sought to accommodate the requirements of Challenge Bank Limited. On 9 February 1990 agreement was reached extending the date of settlement to 16 February 1990. On 12 February 1990, Mr and Mrs Ramensky wrote a letter of rescission in respect of the contract.
I am satisfied that notwithstanding Mr Ramensky's health problems and the deterioration in their financial position, the applicants were ready, willing and able to settle, and the decision to send the letter of rescission of 12 February was made solely on their learning of the existence of the road licence for vehicular access to the site and after taking advice on that matter. I believe Mrs Ramensky to be speaking the truth when, in response to a question as to what she would have done if in late May 1989 she had received "a statement from the vendor disclosing that a road licence had been entered into", she said:
"...I would have instructed them to make extensive inquiries

as to what the road licence meant; what area it covered; what the conditions were and had I received the advice then that I received in February of this year, I would have terminated the agreement."

On 12 February, Demagogue executed a surrender of the road licence and lodged that surrender with the Land Administration Commission. Mr Norman Oliver, the managing director of Demagogue, said that the reason for this was "(s)o that we would not have a road licence to contend with." On the following day the surrender of the road licence was not accepted and was withdrawn by the vendor and in March 1990, Demagogue proposed to transfer the road licence to each proprietor of a lot in the building units plan. No such offer of transfer was made to the Ramenskys prior to the date for settlement of the contract.
Costs of $3,504.50 were paid to Sykes Pearson and Miller for acting on behalf of the applicants in respect of the transaction, and the applicants paid costs of $1,295.50 to Cannan and Peterson for legal fees incurred by Challenge Bank Limited in respect of the transaction, and stamp duty was paid by them of $12,650.00 in respect of the contract of sale. Correspondence in evidence indicates that if the Court rules the contract was validly rescinded, that amount would be repaid.
By letter of 22 January 1990 the applicants were advised that settlement was required to take place on 12 February 1990. The applicants' Sydney solicitors wrote to Cannan and Peterson, the solicitors for the applicants' financier, Challenge Bank Limited, by letter of 6 February and also on 9 February. On 9 February, Sykes Pearson and Miller by facsimile wrote to the solicitors for Demagogue in these terms:
"We confirm our telephone discussion today wherein it was

agreed that the date for settlement of this matter be extended.

Whilst we requested an extension until Friday 16th February 1990, our clients' financier advises that it will be in a position to effect settlement by Wednesday 14th February and as a consequence we hereby request that you confirm your client's agreement to extending to that date on the basis that interest be paid in accordance with the terms of the contract and time remain of the essence.

We look forward to your reply. "

By letter on the same day by facsimile the solicitors for Demagogue wrote to Sykes Pearson and Miller:-
"We refer to our discussions of 9th instant and confirm

settlement of the above transaction has been extended to Friday 16th instant on the following basis:

1. The purchaser pay interest on the balance purchase price as at 12th instant from the 12th instant to the date of settlement.

2. The purchaser is entitled to settle earlier upon giving reasonable notice to us.

3. The balance contract price shall be as at 12th instant.

4. Time shall remain of the essence of the contract."

On 12 February 1990, Sykes Pearson and Miller on behalf of the applicants wrote in these terms:
"Re: RAMENSKY PURCHASE FROM DEMAGOGUE PTY. LTD.

We hereby notify you that the purchasers rescind the contract dated 14th March 1989 between Nicholas Ramensky and Gisela Elisabeth Ramensky as purchasers and Demagogue Pty. Ltd. as vendor with respect to Lot 5, Picture Point Terraces, Noosa Heads and regard the contract at an end on the following grounds:-

1. The vendor has contravened the provisions of Section 52 of the Trade Practices Act by failing to disclose to the purchasers that the access road to the property was subject to a road license dated 2nd March 1989 issued to Demagogue Pty. Ltd.

2. The vendor has failed to give to the purchasers a statement in compliance in every respect with Section 49(2)(d) of the Building Units and Group Titles Act by failing to disclose the access road to the property is subject to a road license dated 2nd March 1989 issued to Demagogue Pty. Ltd. and the purchasers are materially prejudiced by such failure. The purchasers hereby require repayment of the deposit paid by them under the said agreement together with all accrued interest, and hereby reserve any rights they may have against the vendor under the terms of the said contract or at general law."

By letter dated 12 February, Virgil Power, Bothwell and Co. on behalf of Demagogue replied:
"Re: DEMAGOGUE PTY. LTD. SALE TO RAMENSKY

We refer to your letter of even date wherein you purport to avoid the contract.

Our client takes the view your client is not entitled to do so and requires settlement by the due date. Our client denies it has entered into a prescribed arrangement of a type -

1. of which your client was not aware;

2. of which has caused your client to be materially prejudiced.

In respect to the alleged breach of Section 52 of the Trade Practices Act we refer you to clause 14 of the contract. Our client denies any such representations were made by anyone with authority to bind our client or at all. We advise that Demagogue Pty. Ltd. has executed a Surrender of Road Licence No. 21/8247 and has lodged same with the Land Administration Commission."

Virgil Power, Bothwell and Co. on 15 February wrote to Sykes Pearson and Miller concerning, inter alia, "DEMAGOGUE PTY LTD SALE TO RAMENSKY" in these terms:-
"We confirm our verbal advices of the 13th instant that the

Surrender of Road Licence 21/8247 was not accepted by the Department of Lands and has been withdrawn by Demagogue Pty. Ltd. "

On 29 May 1990 Demagogue executed a transfer in Form 31 pursuant to the provisions of the Land Act and the Land Regulations of the Road Licence No. 21/8247 in favour of the proprietors of Lots 1-13 inclusive in Building Units Plan 9758, County of Marsh, Parish of Weyba. The transfer was executed by Demagogue both as transferor and as transferee of units which had not been sold. Mr Oliver says that the company is prepared to transfer its interest in the road licence to the applicants in the event that they become the registered proprietors of Lot 5. The current yearly licence fee for the road licence is $1,500.00 which, if paid by the thirteen proprietors, amounts to $115.38 per proprietor. Mr Oliver says that Demagogue at all material times was ready, willing and able to complete the contract of sale in respect of Lot 5. Mr Oliver was asked what Demagogue's intention was, up to 16 February, regarding the road licence. He replied "(w)hatever was necessary to complete the sales." When asked to be more specific, he said, "I cannot at that stage, because at that stage...I was waiting on the situation from my consultants to tell me what I had to do."
It is clear from drawings by Anthony Todd and Partners (N.C.) Pty. Ltd., who were consulting engineers for Demagogue, that it was known to Demagogue at least before 23 November 1988 that there would need to be a road closure with respect to access to Picture Point Crescent.
Mr Jeffrey Southwall, a registered valuer, said that the value of each unit in "Picture Point Terraces" would be the same if the land on which the access driveway is constructed was part of the common property of "Picture Point Terraces" instead of being land the subject of Road Licence No. 21/8247. No reason is given for this opinion, except "a buyer would not be terribly interested in - or may not be very interested in - in the road licence when they are looking at the purchase of a unit." Mr Southwall was unable to find any similar situation on the Gold Coast, in Brisbane or on the Sunshine Coast. He expressed his view on the basis that the road licence would be transferred from Demagogue to "the body corporate and also each of the thirteen proprietors". His opinion was also based on the assumption that it was the responsibility of all councils to supply access to properties.
I was not impressed by Mr Southwall and I reject his opinion. I am quite satisfied that the need for a road licence, its conditions and annual fee is a factor which adversely affects the value of a unit at "Picture Point Terraces" in a non-trivial way.
The documents annexed to the statement of Virgil Power dated 2 October 1990 show that the proposal made to the proprietors of the units of "Picture Point Terraces" was that the road licence be transferred to the unit owners as tenants-in-common in equal shares and that the body corporate secretary be appointed power of attorney to execute any transfer of the road licence, as both transferor and transferee on behalf of all unit holders (other than those unit owners transferring their interest in the said road licence). Reference is made to a proposal for legislative change to permit the body corporate to hold the road licence. There is annexed a deed requiring the purchaser of a unit to covenant that, in the event he sells the lot, he will obtain from the new purchaser of the lot a covenant in favour of the proprietors which will contain terms that, in the event that the new purchaser shall sell the lot, he shall first obtain from such purchaser of his lot a power of attorney in the form annexed to the deed and, in the event that the new purchaser shall sell the lot, he shall obtain a covenant from such purchaser of his lot in favour of the proprietors that such purchaser shall, so long as he remains a proprietor of the lot, be responsible for the payment of a share of the annual licence fee for the road licence in proportion to the unit entitlement of the lot.
Demagogue was advised by letter dated 21 December 1987 that the application for town planning consent for a multiple dwelling of thirteen units on the subject site was approved subject to, inter alia, a condition that the plans submitted for building approval were to comply with the following:,
"Access is to be generally in accordance with Drawing

No. 109 and 110 received by Council on 10th November, 1987."

The approval also required the applicant to upgrade the existing Picture Point Road construction across the frontage of the site.
On 16 May 1989 the Road Licence No. 21/8247 was granted to Demagogue. Mr Denis Moretto, the Acting Secretary of the Land Administration Commission, says an application for cancellation of that licence by any person other than the licensee would not be entertained by the Minister for Land Management unless there was a demonstrated requirement by some other responsible authority that the part of Edgar Bennett Avenue Road the subject of the road licence was required for the purposes of constructing thereon a public road or for some other public purpose. Mr Moretto says that under current provisions of the Land Act and the Building Units and Group Titles Act the Minister is unable to allow a transfer of Road Licence No. 21/8247 to any body corporate. The Minister is able to allow a transfer of Road Licence No. 21/8247 to the proprietors of lots in Building Units Plan No. 9758.
The Shire Clerk of the Council of the Shire of Noosa, Mr Victor Davidson, says that, in the event that Road Licence No. 21/8247 is held by proprietors of "Picture Point Terraces" and such road licence is terminated by the Minister for Lands unilaterally, the Council will not require the removal of the improvements on the land the subject of the road licence, provided that such termination was not instigated or any way contrived at by the proprietors or body corporate of "Picture Point Terraces" or any of them or did not arise from any default by the said proprietors or body corporate or any failure to carry out the requirements of the Land Administration Commission in relation thereto. There is a question of whether a statement by the Shire Clerk as to the Council's present attitude is such as to bind the conduct of future councils.
Both Mr and Mrs Ramensky say that if the s. 49 statement in the contract for sale had disclosed that there was an arrangement between the respondent and the Land Administration Commission for the grant of a road licence in favour of the respondent over a portion of Edgar Bennett Avenue, inquiries would have been made into the terms and conditions attaching to the road licence and the exact area to be covered by the road licence, and Mrs Ramensky says she would have realised that the proposed driveway was not wholly on common property.
The Ramenskys say that they would not have purchased the property if they had been aware of the conditions attaching to the licence because the road licence could be cancelled if the licensor failed to comply with the conditions attaching to the licence; if the licence were cancelled, surrendered or forfeited, then the Land Administration Commission had the right to demand that the improvements be removed and there was therefore no guarantee of continued access to the property. Mrs Ramensky says:-
"We would have been totally dependent upon the Licensor, the

Respondent, continuing to pay the licence fee and otherwise comply with the conditions of the Licence in perpetuity."

Mr Ramensky tersely says:

"Had I known that there was no access to the property other

than by way of a Road Licence to be held by the Respondent I would not have purchased this particular property."

The correspondence and evidence makes it clear that Demagogue at all relevant times was aware of the nature of the proposed access driveway. On 27 October 1987 Noosa Planning Services on behalf of Demagogue wrote to the Secretary of the Land Administration Commission. The letter was headed:
"Re Proposed Unit Development - Noosa Heads Request for

permission to construct and advice on appropriate administration of proposed access driveway in Edgar Bennett Avenue on unformed road reserve."

The letter later said:

"It is stressed that the Noosa Shire Council has no objection

to the driveway (in principle) or to the development. This has been confirmed in discussions with senior council staff. Council intends to impose suitable conditions for approval of the driveway and its administrative status."

On 13 January 1989 the Land Administration Commission advised Virgil Power, Bothwell and Co.:
"With reference to previous correspondence regarding an

application for temporary closure of a road in the parish of Weyba as advertised in the Government Gazette of 20 February 1989 at page 975, I have to advise that it has been approved to seek Executive Authority for the temporary closure of the area of road as advertised and to issue a Road Licence to Demagogue Pty. Ltd. thereover.

The Road Licence to be issued will authorise you to enclose the road area and keep it enclosed until required for public use, such Licence being terminable upon prior notice being given by this Department and subject to payment of an annual rental of $1,500.00."

The letter specified the conditions to which the licence was subject. On 2 February Demagogue, by its solicitors, accepted the conditions and enclosed Demagogue's cheque to the Commission in the sum of $1,585.00, being the first year's rental and the other fees required by the Land Administration Commission.

A temporary road closure was published in the Government Gazette of 4 March 1989 at page 1502. The licensee of the licence is expressed to be Demagogue and the licence is in respect of a strip of road with a maximum width of about 9.2 metres abutting part of the eastern boundary of Lot 11 on Registered Plan No. 183640 and the specified conditions state, inter alia:
"This licence commences on 2 March, 1989."
It is convenient to deal with the applicants' claim under the Trade Practices Act first.
For the reasons earlier expressed I am satisfied that the representations relied on by the applicants were made and constituted conduct by Demagogue in trade or commerce that was misleading or deceptive or likely to mislead or deceive. While in my view it adds nothing to the position that obtains under s. 52, I am also satisfied that the conduct constitutes a contravention of s. 53A.
There then arise three questions, the first of which is whether, in truth, the applicants were induced by that conduct in contravention of s. 52 to enter into the contract of sale. This I found the most difficult aspect of the matter. The second is whether the effect of clause 14 of the contract of sale means that the applicants are estopped from asserting that the representations were made or, alternatively, were relied on by them in entering into the contract. The third aspect is whether, knowing of the fact that they had been misled, they nonetheless in full knowledge of those circumstances, affirmed the contract.
As to inducement, I am satisfied that the Ramenskys were concerned at the prospect of cancellation of the road licence. Mr Ramensky said that as he understood the position, the vendor had the road licence and he and his wife had no ability to make sure the licence was maintained. He said that if Demagogue had gone broke or something like that had happened, they would be left in a landlocked situation. It was a matter generating some apprehension.
Mr Ramensky was quite frank about his position. It was put to him that they were fairly enthusiastic purchasers, with which he agreed. He was asked:
"And the fact that there was a road licence or would potentially be a

road licence would not necessarily have deterred you then?"

to which he replied:

"I think it would have."

He was asked:

"...if you had been given assurances, or if you had made inquiries of solicitors and they came up with answers that seemed to be satisfactory, you may very well have gone ahead with the contract. This is in February and March of 1989?"

to which he answered:

"I do not know what I would have done. I would have been - it would

have entirely depended on the sort of assurances I would have got."

It was put to him that there had been a dramatic deterioration in his financial position as from February 1989 and he agreed. It was then put to him:
"...you were anxious to find, if you could, a way that would make it

unnecessary to complete settlement on this unit?"

to which he answered:

"We were - we were not anxious to find it, but when - but we were

certainly very glad when - when this opportunity arose."

I think this statement truthfully and frankly reflects the position of the Ramenskys when they learnt in early February 1990 for the first time anything of the existence of a road licence.
In the view I take of the matter, the need for a road licence for vehicular access was so unusual and unexpected in a development of this kind, that it was in all th circumstances incumbent on Demagogue to reveal the true position: Henjo Investments Pty Ltd v. Collins Marrickville Pty Ltd (1988) 79 ALR 83; Rhone-Poulenc Agrochimie SA v. UIM Chemical Services Pty Ltd (1986) 12 FCR 477.
Whether silence constitutes conduct which is misleading or deceptive of course depends upon the circumstances. Here the circumstances were special and out of the ordinary. Moreover, the express representations by Demagogue were such as to indicate that there was nothing unusual at all about this aspect of the development. In this case, there was both a positive misrepresentation, and a misrepresentation conveyed by a failure to say anything about a road licence. In the opinion I hold of the circumstances, Demagogue through Mr Miller and the draft contract created a clear but erroneous impression that there was nothing unusual concerning the access to this site and, in particular, there was no suggestion that a road licence from the Lands Administration Commission was necessary to provide such access. The vendor was silent as to conditions which might affect the continued existence of the licence and as to the fact that a small but not trivial financial contribution would be required.
On the question of inducement I place much reliance on the judgment of Jenkinson J. (with whom Ryan J. agreed) in National Australia Bank Ltd v. Cunningham (1990) ATPR 41-047. In that case Jenkinson J. held that, in an action for damages for misrepresentation in breach of s. 52, it is sufficient for the applicant to show that he might have abstained from the course of action or inaction alleged to have been induced if the misrepresentation had not been made. It would not be necessary to show that he would have so abstained. That principle naturally accompanied the entrenched principle that the misrepresentation is actionable whether or not it is the only consideration influencing the mind of the applicant to the action or inaction which caused damage.
In National Australia Bank Ltd v. Cunningham, Davies J. said at 51,622-3:
"On principle, apart from authority, it would seem illogical

to give a plaintiff damages for being led into a contract by fraud if he would have made the same contract in any event even if no such fraud has been practised on him. For in such a case the fraud has not been in truth the cause of any loss to him. But when the question relates not to damages but to the validity of the contract such a consideration is not in point. It would be quite logical to hold that a contract was invalid in every case in which misrepresentation, whether fraudulent or not, was actually operative as one of the inducing causes of it, even though not as an indispensable and essential cause. It is possible, therefore, that the law may develop a distinction in this respect between actionable and invalidating misrepresentation."

It is always difficult to attempt to answer with conviction what would have happened had a state of affairs been different from the state of affairs in which the decision was taken. This is particularly so if, at a later time, circumstances have come about which bear on whether the original decision was a sound or wise one. That is acutely so in the circumstances of the present case. So much has been frankly acknowledged, in particular by Mr Ramensky.
I am satisfied as a fact that, had the Ramenskys been aware of the existence of the road licence at any time prior to their entry into the contract dated 14 March 1989, it is likely that they would not have entered into that contract. While it is a possibility that further inquiry and assurances might have led to them nonetheless at some later time entering into the contract, I do not think that that would have been likely. I am satisfied that, if they were aware of the circumstances that then obtained concerning the road licence and access to the site, they would not have then entered into the contract of sale, and it is probable that they would not have entered into the contract at any time.
It follows that the misrepresentations which I have held occurred did induce the applicants to enter into the contract of sale. I reach this conclusion notwithstanding the provisions of clause 14 of that contract. The clause cannot operate so as to absolve compliance with the Act. Moreover, the factual circumstances are such that the misrepresentation under which the Ramenskys were labouring was brought about by the reticence of Demagogue to disclose the true position and by its conduct representing as the state of affairs that applied to the site that which in truth did not so apply. I am satisfied the representations were made and they did affect the decision to enter into the contract of sale.
I am satisfied that the applicants have suffered loss and damage as a result of the conduct in contravention of s. 52 or s. 53A. I reject the view of Mr Southwall that there was no financial consequence of the licence. The quantification of that loss and damage is left uncertain, but I have no doubt that the circumstance of the road access and the need for either Demagogue to hold a licence or for the licence to be held as tenants-in-common by the proprietors of the respective units was a circumstance which, in a not immaterial way, reduced the attractiveness and value of the respective units.
In all the circumstances, in my opinion, the applicants are entitled to relief pursuant to s. 87 of the Act. Demagogue deliberately chose to be silent about the question of the road licence in circumstances where its product was towards the top end of the range and where prospective purchasers were entitled to be told what in truth they were buying.
As to affirmation, common law rescission is no longer sought, but in my opinion, the Ramenskys when seeking an extension of time, did so when they were not aware of the full circumstances surrounding the road licence and its implications. As a consequence, they did not affirm the contract and thereby lose their right to rescind. The evidence in this respect is that Mr Pearson on 7 February 1990 read the conditions of the road licence and, either on the evening of that date or early on 8 February, sent them to Mrs Ramensky. There was a discussion with Mr Power on Thursday, 8 February, about the road licence, but I do not accept that Mr Pearson, as the result of that discussion, was "satisfied concerning the road licence". The terms of the diary note of Mr Power reflect uncertainty as to the position of the road licence and its relationship to either the body corporate or the individual proprietors.
I am satisfied that the extension of time for completion was prompted by the requirements of Challenge Bank Limited for further time to complete its documentation and that prior to the agreed extension the Ramenskys, either by themselves or by their agent Mr Pearson, were unaware of the full circumstances attaching to the road licence. This is confirmed by the fact that the Ramenskys sought and on 10 February obtained copies of the road licence and the relevant sections of the Building Units and Group Titles Act and took advice as to their effect. In my view, by seeking an extension of time for completion, in the state of the knowledge that they then had, the applicants did not unequivocally affirm the continuation of the contract.
As to the issues arising out of the Building Units and Group Titles Act, that Act relevantly provides in s. 7 as follows:
"'prescribed arrangement' means any agreement or

arrangement...between -

in the case of a proposed lot, the original proprietor and any other person,

being an agreement or arrangement -

...

(c) entered into pursuant to section 37(2)(a), (b),

(c), (d) or (e) or section 38C; ...

(f) under which the rights of the proprietor of a lot are or are likely to be affected to a material extent;"

Section 49 deals with the duties of an original proprietor. By subsection (1), prior to a person contracting to purchase a lot or a proposed lot from an original proprietor, the original proprietor shall give to him (or to his agent) a statement in the prescribed form signed by the original proprietor, in compliance in every respect with this section.
By s. 49(2), the statement amongst other things is to set out or be accompanied by details of any prescribed arrangement entered into in respect of the plan or proposed plan, including the terms and conditions of that prescribed arrangement and the cost or estimated cost thereof to the proprietor of each lot.
Under s. 49(3), the statement is to be given by the original proprietor before the purchaser signs any contract or, alternatively, shall form part of any such contract, agreement or document.
By s. 49(4), if, at any time before the purchaser becomes proprietor of a lot, a statement in writing of a description referred to in subsections (1) and (2) is given and is not accurate as at the time it is given, or contains information that subsequent to the time it is given becomes inaccurate in any respect, it is the duty of the original proprietor to give (forthwith upon the inaccuracy becoming known to him) to the purchaser a notice in writing that rectifies the inaccuracy.
By s. 49(4)(c):-
"If the purchaser has been materially prejudiced (proof of

which shall lie on him) by any matter referred to in a notice given pursuant to paragraph (a) and he has not agreed to be bound by that matter, he may avoid the contract, agreement or other document by notice in writing given to the original proprietor or his agent within 30 days of the date of receipt by him of the notice given by the original proprietor or his agent."

Section 49(5) relevantly provides:
"If the original proprietor fails to give to a purchaser -

(a) a statement in compliance in every respect with subsections (1), (2) and (3);

or

(b) a notice prescribed by subsection (4), and the purchaser is materially prejudiced by the failure (proof of which shall lie on him) the purchaser may, by notice in writing given to the original proprietor, avoid the contract, agreement or other document within 30 days after he first becomes aware of the failure:..."

It was submitted by Demagogue that no prescribed arrangement for the purpose of s. 49(2) was entered into at the time the contract was made, namely 14 March 1989; that no prescribed arrangement was subsequently entered into; there was accordingly no failure to comply with 49(1) nor did the statement in the contract of 14 March 1989 contain information that, subsequent to the time it was given, had become inaccurate in any respect. It was submitted that if in fact, contrary to Demagogue's submissions, a prescribed arrangement was entered into after the agreement was made and no notice of the prescribed arrangement was given, the right to rescind only arises where a purchaser is materially prejudiced by the failure and no material prejudice was demonstrated by the evidence.
The definition of 'prescribed arrangement' picks up as prescribed arrangements various agreements and arrangements which a body corporate might enter into but does not include s. 37(2)(f). That paragraph permits a body corporate to "accept and deal with a lease, licence or permit that may be issued or granted under the Land Act 1962- 1962-87 to any person in respect of any Crown land which abuts on the parcel". No licence at any time was proposed to be granted to the body corporate and, in my view, whether the arrangement for or the grant of a road licence is a prescribed arrangement as defined in s. 7 depends on whether, by the road licence, the rights of a proprietor of a lot are or are likely to be affected to a material extent.
It was submitted by the respondents that the licence does not reduce the rights of proprietors. It was said that it gives them additional rights, namely, a right to enclose the road and to maintain a private driveway on it, which right is determinable for breach of the conditions. The licence it was said therefore gives the licensee additional though determinable rights which will only be retained by their meeting certain obligations. It seems to me this submission is correct. While the question of road access is a matter of concern to the proprietors of the unit, an arrangement by which a road licence is granted to Demagogue or to the proprietors of the units as tenants-in-common does not deleteriously affect the rights of a proprietor to a material extent.
The question is quite different from the question of misrepresentation as to the nature of access to the block. It seems to me that concerning the road licence there are no rights qua proprietor which are affected. The Ramenskys rights as proprietor are their rights as the owners of building unit Lot 5 and the common property.
In Deming No. 456 Proprietary Limited v. Brisbane Unit Development Corporation Proprietary Limited (1983) 155 CLR 129, the High Court considered the provisions of s. 49. Mason, Deane and Dawson JJ. at 145 noted that the provisions of s. 49 are penal in character and held that the requirements of the section were to be construed in favour of the giver of the notice. The same approach in my view is to be taken to the construction of "prescribed arrangements": see also the judgment of Williams J. in Gold Coast Carlton Pty. Limited v. Wilson (1985) 1 Qd R 182 particularly at 198.
Next it was submitted that, even if the arrangement for a licence or the grant of it was a prescribed arrangement, the rights of the licensee were not affected to a material extent. It was said that the additional cost to the unit holder of a little over $100.00 could hardly be said to be material. This is so particularly having regard to the total commitment for the purchase price of the unit, the expected borrowings to purchase the property, and the projected outgoings for the unit. In context it was submitted by the respondent that the payment of the annual fee for the licence can hardly be said to constitute material prejudice. The maintenance costs cannot constitute material prejudice because they would be incurred whether the driveway was on common property or on the road and it was said that the risk of cancellation is slight. I accept that this is so. Having regard to the likely amount that the applicants would have to pay in respect of the road licence should it be transferred to them as tenants-in-common with the other proprietors, consistent with the judgment of McPherson J. in Brisbane Unit Development Corporation Pty. Ltd. v. Sokola Pty. Ltd. (1983) 1 Qd R 292, I hold that this would not constitute an effect to a material extent on the rights of the purchasers in respect of Lot 5.
In that case his Honour was concerned with a difference amounting to $76.10 per annum or slightly less than $1.50 per week in respect of contributions levied for two particular lots. His Honour said at 295:
"Having regard to the smallness of that amount both in itself

and in the context of a total purchase price for Lot 9 of $175,000.00 and for Lot 11 of $172,000.00, I do not consider that the change in lot entitlement can be regarded as having, within the meaning of s. 49(5) a 'material' effect on the rights of the purchasers in respect of either lot. It follows that in respect of those two lots the first defendant was not entitled pursuant to s. 49(5)(b), to give notices avoiding the contracts because of the change in lot entitlement and in aggregate lot entitlement."

I think the better view is that as at the date of when the Ramenskys executed the contract, which was in late February 1989, there was no agreement or arrangement for the purposes of s. 7, but there was a proposal to grant a temporary road closure and a road licence. These acts involved acts by the Governor-in-Council under s. 363(3) of the Land Act and the Minister under s. 366(1) of the Land Act. In my opinion, at the time of the execution of the contract it cannot be said that there was an arrangement for the grant of a road licence.
The grant of the road licence occurred on 16 May 1989. For the reasons earlier expressed, I do not think this grant comes within the definition of 'prescribed arrangement' under s. 7, and accordingly there was no obligation to give any notice of it under s. 49. The reason for this is that it did not affect their rights as proprietors in a material respect. In my opinion, the question of the road licence did materially affect the value of the unit but this is not a matter to which s. 7 is directed. I therefore decline to grant relief based on the Building Units and Group Titles Act.
For the above reasons, I propose to make the declarations in paragraphs 1, 2 and 4 of the application.
In determining to declare the contract void ab initio, I have had regard to the observations by the Full Court in Munchies Management Pty. Ltd. v. Belperio (1988) 84 ALR 700, particularly at 713, and the approach by Fisher J in Platz v. Creative's Landscape Design Centre Pty. Ltd. (1989) ATPR 40-947, affirmed by the Full Court at (1989) ATPR 40-980.
The deposit of $40,500.00 has been accruing interest. I order that the respondent pay forthwith to the applicants the deposit of $40,500.00 together with all accruals.
In addition I order that the respondent pay to the applicants $4,800.00 as consequential costs the applicants were obliged to pay as a result of the respondent's conduct in contravention of the Trade Practices Act. I will allow interest at 15% for three years, making a total of $6,960.00.
The respondent is to pay the applicants' costs, including reserved costs, to be taxed if not agreed.

[1992] FCA 289

19 MARCH 1992