Re Nguyen; Ex parte Official Trustee in Bankruptcy

[1992] FCA 150

Re: D. AND G. MAZZONE AND SONS PTY LIMITED; DOMENIC and GUISEPPINA MAZZONE
And: STATE BANK OF NEW SOUTH WALES LIMITED and QIFT HOLDINGS PTY LIMITED T/A
L.J. HOOKER FORSTER
No. G620 of 1991
FED No. 150
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Davies(1), Neaves(1) and Einfeld(1) JJ.

CATCHWORDS

Trade Practices - whether a bank committed itself to providing a loan to purchase a motel - whether misrepresentations were made by real estate agents as to the value of the property and as to the existence of other purchasers - whether representations relied upon.

HEARING

SYDNEY

#DATE 26:3:1992

Counsel for the Appellants: Mr R. Bell

Solicitor for the Appellants: Schrader and Associates

Counsel for the First Respondent: Mr P. Hallen

Solicitor for the First Respondent: Mr P.W. Kearns

Counsel for the Second Respondent: Mr P.T. Taylor

Solicitor for the Second Respondent: Baker and Borthwick

ORDER

1. The appeal be dismissed.

2. The Appellants pay the Respondents' costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

In this appeal from a judgment of a single Judge of the Court, the grounds are directed to his Honour's findings of fact and to the inferences which he drew. As, in our opinion, his Honour's findings were well founded on the evidence adduced before him, we can be brief in our discussion of the issues.

1. In early 1989, D and G Mazzone and Sons Pty Limited, a company controlled by Mr D Mazzone and his wife and whose affairs were directed by Mr Mazzone, was carrying on the business of concrete pumping. Mr and Mrs Mazzone decided that the business of the company should be sold and that the company would purchase a motel at Forster, a town which they had often visited for holidays. Mr Mazzone seems to have set his mind on purchasing "the Lakes Way Motel" at Forster, which was being offered for sale through the second respondent, real estate agents trading as L J Hooker, Forster.

2. In February 1989, Mr Mazzone spoke with Mr Glen Longbottom, a director of the second respondent. Mr Mazzone offered $600,000 or $650,000 for the property. On his return to Sydney, Mr Mazzone was telephoned by Mr Adrian Longbottom, another director of the second respondent, who said that the vendor wanted $800,000. After two discussions, Mr Mazzone and Mr Adrian Longbottom came to an agreement or understanding as to the purchase for $800,000.

3. The banker for the company and for Mr and Mrs Mazzone was the State Bank of New South Wales, Chester Hill, Sydney Branch, the manager of which at that time was Mr H.T. Pryce. In March 1989, Mr Mazzone approached Mr Pryce seeking $800,000 to enable the company to purchase the motel. Mr Pryce sought more information. In March 1989, the company sold its business and with the proceeds cleared the existing overdraft. On 21 April 1989, the company entered into a contract for the purchase of the Lakes Way Motel for $800,000.

4. In May 1989, Mr Pryce informed Mr Mazzone that the Bank had valued the Motel at $600,000. Subsequently he informed Mr Mazzone that the Bank could not lend the $800,000 for, even taking into account the value of a home owned by Mr and Mrs Mazzone at Bass Hill and another property owned by Mr and Mrs Mazzone at Forster, the security was insufficient to justify the loan. As the result, the company was unable to go ahead with the purchase. The contract was rescinded and the deposit of $80,000, which had been paid in April 1989 was forfeited. Accordingly, as the result of the rescission, the appellants lost at least the $80,000 and the expenses which had been incurred in relation to the purchase.

5. The proceedings before the trial Judge raised three main claims. As against the State Bank, it was alleged that Mr Pryce had committed the Bank to lending the $800,000. Breach of contract, estoppel, and breach of the Trade Practices Act 1974 (Cth) and of the Fair Trading Act 1987 (NSW) were relied on. As against the agents, it was alleged that Mr Adrian Longbottom had misrepresented that the motel was a good buy at $800,000 and had also misrepresented that he had 10 other persons wishing to purchase the property. Breaches of the Trade Practices Act and the Fair Trading Act were relied upon. The trial Judge found for the respondents on all issues.

6. As to the claim against the State Bank, the trial Judge thought that Mr Pryce was a reliable witness, that it was improbable that Mr Pryce had said anything that committed the Bank to lending $800,000 on a property at Forster as to which Mr Pryce personally knew nothing. His Honour felt that, even on Mr Mazzone's evidence, it was clear that Mr Pryce had asked for and, with considerable delay and only after the contract had been entered into, had obtained figures showing the financial position of the business of the Lakes Way Motel. The trial Judge concluded that Mr Pryce had made it clear that the Bank had to value the motel before approving the loan and required the financial details of the business in order to do so.

7. His Honour's finding was well based. He was entitled to take account of the nature and size of the proposed loan, the general manner in which finance is provided in the community, the usual requirements associated with financing and the ordinary perception of words used. See e.g. Gleeson C.J. in Australian Broadcasting Commission v XIVth Commonwealth Games Limited (1988) 18 NSWLR 540 at 549-51; Sydney Strata Securities Pty Limited v Elders Finance Limited (Davies J., 20 December 1990, unreported).

8. The case as presented to the trial Judge was a weak one. Evidence was given by both Mr and Mrs Mazzone. Neither spoke fluently in English; but even so, the evidence went no further than that, "He (Mr Pryce) said to me, okay" and "he told me everything okay, everything all right...". This was unpersuasive evidence in the light of Mr Mazzone's evidence that "Yes there (sic) still say they want figure to represent" and "They want some figure to show what the motel show - what is produced, how much money return." It is clear that Mr Pryce was asking for the figures of the motel business so that the Bank could value the property and assess the security of the proposed loan. In this context, the words used by Mr Mazzone in his evidence were too weak to justify a conclusion that Mr Pryce committed the Bank to lending $800,000 on a property as to which he had no personal knowledge, a loan which was outside the range of loans previously made to the company or to Mr and Mrs Mazzone.

9. Counsel for the appellants suggested in the course of argument that, because Mr and Mrs Mazzone were not fluent in English, Mr Pryce was under an obligation to take special care to explain to them in terms that could not be misunderstood that a loan had not been approved. However, not only was this contention not raised in the statement of claim or put to the trial Judge; there was nothing in the circumstances which placed any special obligation upon Mr Pryce. Mr Mazzone and the company had made several earlier applications for loans which had followed the ordinary course, that is to say, that the Bank valued the security and thereafter sent out a letter offering a loan at a specified rate of interest and subject to specified charges and conditions which Mr or Mrs Mazzone or the company accepted. It was against this background that Mr Mazzone spoke to Mr Pryce.

10. The finding of the trial Judge is supported not only by the improbability that Mr Pryce would have committed the Bank to a loan on a property which he did not know and had not seen but also by the evidence of the appellants' solicitor, Mr P.W. Zipkis which shows that Mr Mazzone went ahead with the contract knowing that the loan had not been formally approved by the Bank. Mr Zipkis kept notes of his conversations with Mr Mazzone. Mr Zipkis gave this evidence in cross-examination:-
    

"Yes, of course, in substance am I right in understanding that prior to exchange of contracts you gave your client advice that it was imprudent to proceed when finance hadn't been obtained formally?---In effect that, obviously I wouldn't have used those words but yes."

...

So, you gave him that advice and I think to use the words that you've used in your diary note of 11 April, `No written okay from the bank, say to proceed', those were his instructions to you to proceed in any event?---Yes."

1. On the whole of the evidence therefore, the probability seems to be that Mr Mazzone went ahead relying upon his own judgment that the Lakes Way Motel was worth at least $800,000. The valuer from the Bank did not agree with his valuation but that does not found the claim against the State Bank as it was pleaded and presented to the trial Judge.

2. In respect of the claims against the second respondent, the agents, the trial Judge did not make comprehensive findings of fact but held that, even on Mr Mazzone's evidence, the appellants could not succeed on the claim that Mr Adrian Longbottom represented the property to be worth $800,000. His Honour did not discuss the alleged representation that Mr Longbottom said that he had other purchasers waiting to purchase the property. This was unfortunate as oral judgments are as likely to be the subject of appeal to a Full Court as more carefully considered judgments in respect of which full reasons are stated. From the point of view of a Full Court, it is important to have findings of fact by the trial Judge. See Warren v Coombes (1979) 142 CLR 531.

3. As to the first of the alleged representations, that as to the value of the property, the trial Judge held that the appellants did not rely upon the representation. On this issue, the evidence justifies the finding of fact made by the trial Judge. Mr Mazzone was interested in the motel. He gave this evidence:-
   

"You were always interested in that particular motel?---Yes.

The Lakesway motel?---Yes. And you had seen that motel regularly since about 1986, had you not?---Any time I go, first I pass in the front, I look all the time there."

Mr Adrian Longbottom appeared to agree with Mr Mazzone's assessment of the property for he gave this evidence:-

"And what had you said?---I said to Mr Mazzone the property or the motel was a good buy. Why did you say that?---I felt the motel was a good buy and at the time the motels had been very scarce in this area and generally when they came on the market they sold very quickly and they were very desirous properties. Any other reason?---I thought the motel had potential, it had good real estate value in just the bricks and mortar, it had position - and I think I said potential. They're the main reasons that I said to him it was a good buy."

Thus, it may well be that there was something about the Lakes Way Motel, by virtue of its position and its design, which gave it a potential not reflected in the Bank's valuation of $600,000.

1. As the trial Judge held, Mr Mazzone seems to have acted on his own opinion as to value, not on what he was informed by Mr Adrian Longbottom. Mr Mazzone gave this evidence:-
   

"Why did you think it was a good buy at $800,000?---Because I can't get any better in the - I got to believe the real estate. I'm sorry, could you - say more and answer the question. I don't understand your answer?---You repeat again, please?

Yes. Remember, Mr Taylor asked you a question where he said, did you think the property - motel was a good buy for $800,000 and I think you said that you thought it was?---Yes. Why did you think it was a good buy for $800,000?--Because I push for the price cheap and I could not get any cheaper. I thought it was a good buy."

The words "I got to believe the real estate" seem to refer to the statement that the vendor would not sell for less than $800,000. There was no evidence that this was incorrect. Mr Mazzone must have seen this property over a considerable period. Although he did not give evidence about it, he must have made enquiries as to its value. It is probable that, before Mr Mazzone made any offer to Mr Glen Longbottom, he had firmed up his view that the motel was worth about $800,000. How he arrived at that valuation is not shown by the evidence but it is clear that he made the approach to the agents and offered either $600,000 or $650,000. When informed that the vendor would not sell for less than $800,000, Mr Mazzone merely said that this was "a little bit too much". Clearly, Mr Mazzone thought that he knew what the property was worth.

1. In this circumstance, the claim based upon value was properly dismissed.

2. The claim was bound to fail in any event as the Bank's valuation was not taken into evidence against the agents as evidence of value. Thus, there was no evidence that the representation by Mr Adrian Longbottom that the motel was a good buy at $800,000 was not correct.

3. The trial Judge did not discuss the last issue which was raised before him, that is whether an alleged representation by Mr Adrian Longbottom as to other purchasers for the motel had influenced Mr Mazzone to enter into the contract before the finance from the State Bank was secured.

4. The allegation made in the amended statement of claim was:-
   

"In or about February 1989 the Second Respondent, through its agents Glen Longbottom and Adrian Longbottom represented to the Applicants:

a) that unless they signed a contract quickly they would lose the property to another purchaser;

b) that there were 10 other purchasers interested in the property; c) that there were other contracts out on the property and that unless they exchanged quickly agreeing to pay the price of $800,000 the Applicants would lose the opportunity to buy the property; ..." (the emphasis is ours)

However, Mr Mazzone gave no express evidence that the company entered into the contract before the finance was secured because of what was said to him by Mr Glen or Mr Adrian Longbottom. Rather his evidence was to the effect that Mr Pryce had informed him that the finance would be okay and that he relied upon that.

1. The evidence in chief on this issue was as follows:-
   

"Did he (Mr Longbottom) say to you anything about other borrowings (sic)? --- Yes, he said to me I ring after if - sign the quickly contract, they got another ten buyer - want to buy.

Did you believe him when he said that? --- I believe in it, yes and not. ...".

When the matter was first mentioned in cross-examination by counsel for the agents, the evidence was given in these terms:-

"He never said to you did he that there were ten purchasers?---Yes, nearly. Nearly, what he suggested that there were some other people interested in the property?---Yes. But he never used the number 10, did he?--- Probably tell me there might be one, they said they got plenty more to buy another 10 here."

Subsequently, Mr Mazzone in his evidence firmed up the allegation that Mr Adrian Longbottom had said that he had another 10 purchasers for the Lakes Way Motel, though the date when the representation was made did not become clear. We should also mention that in earlier cross-examination by counsel for the Bank Mr Mazzone said:-

"Were you told by Mr Longbottom, either Glen or Adrian, that there were other contracts out on the property and that unless you exchanged quickly, agreeing to pay the price of $800,000, you'd lost the opportunity to buy the property?- --Yes."

However, we assume that this answer to a leading question did not impress the trial Judge.

1. Thus, although the trial Judge did not deal with the matter, presumably because it did not strike him as a seriously arguable point, there was some evidence from which it could be concluded that Mr Mazzone's company had entered into the contract when it did in order that it would not lose the motel to another purchaser. But that is not to say that his Honour should have found that the appellants were influenced by anything that Mr Adrian Longbottom said to Mr Mazzone.

2. The probability is that Mr Mazzone's company entered into the contract when it did because Mr Mazzone thought that the motel was worth $800,000 and that there would be no difficulty with the approval of the finance. Because the motel was on the market there was necessarily a risk that if the appellants did not act promptly somebody else would purchase the motel for $800,000. That was a risk which the appellants either had to take or had to exclude by entering into a contract. They chose to exclude it. That they did so accords with Mr Mazzone's evidence that he was interested in purchasing this motel before he ever spoke to either of the Messrs Longbottom or to Mr Pryce.

3. We have no doubt that the trial Judge thought that Mr Mazzone acted as he did because in early 1989 he had decided to purchase the motel, not because he was influenced by representations made to him by Mr Adrian or Mr Glen Longbottom. This view was well supported by the evidence.

4. It follows in our opinion, that the appeal should be dismissed with costs.