S. & U. Constructions Pty Ltd v Westworld Property Holdings Pty Ltd

Re: S. & U. CONSTRUCTIONS PTY LTD
And: WESTWORLD PROPERTY HOLDINGS PTY LTD; DAVID JAMES REMAR and JUDITH EVE
REMAR
No. QLD G34 of 1986
Trade Practices - Contract - Vendor and Purchaser - Damages

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Pincus J.(1)

CATCHWORDS

Trade Practices - deceit alleged to induce purchase - whether presumption in favour of applicant on question of inducement - only part damages awarded.

Contract - condition requiring step by one party - whether contract void or voidable on breach of condition - affirmation.

Vendor and Purchaser - contract subject to condition - whether affirmation by delivery of requisitions on title.

Damages - Trade Practices claim for misleading conduct - two causes of loss - only part of loss awarded by reason of applicant's conduct after purchase.

Trade Practices Act 1974, ss.52, 75B, 87

Federal Court of Australia Act 1976, s.51A

Main Roads Act 1920-1976 (Q.), s.11A

HEARING

BRISBANE

#DATE 11:3:1988

Counsel for the applicant: Mr. R.N. Chesterman, Q.C. with Mr. R.A.I. Myers

Solicitors for the applicant: McLaughlin Gordon & Lennon

Counsel for the second respondents: Mr. H.G. Fryberg, Q.C. with Mr. R.J. Douglas

Solicitors for the second respondents: Cleary & Hoare

ORDER

The application against the second respondent, Judith Eve Remar, be dismissed;

The second respondent, David James Remar, pay the applicant the sum of $113,000;

The second respondent, David James Remar, pay the applicant's costs of and incidental to the proceedings, to be taxed.

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

JUDGE1

This is an application by the purchaser of a piece of land claiming relief against the vendor and its directors under s.52 of the Trade Practices Act and on other bases.

The case requires an analysis of a series of interactions between the vendor, the purchaser, various engineers and architects engaged by them, a prospective tenant of the building to be erected on the land (to house a "Big Rooster" franchise) and governmental authorities. Looking at the matter broadly, what happened was that the purchaser bought the land on the understanding that the "Big Rooster" organisation was prepared to take a lease of a substantial proportion of a building to be erected on the land, at such a rental as to make the transaction a worthwhile one for the purchaser, a building company. In the result, "Big Rooster" was not prepared to come in and that has been the main cause of the dispute.
Although the applicant's pleading raised other questions, the principal point ultimately made on behalf of the applicant was that the respondents sent it a misleading letter on 13 September 1985, giving the impression that all was in order to proceed towards settlement of the sale of the land and construction of the building I have mentioned. It is clear that the statements in that letter were untrue, and I am satisfied that the writer knew them to be untrue. The real difficulties in the case have lain in determining whether that letter caused the applicant any loss - more specifically, in determining whether it induced the applicant to settle the transaction, whether as a matter of contractual obligation the applicant had any choice but to settle, and whether having settled the applicant should, nevertheless, be held to have brought its misfortune on itself.

The Pleadings and the Case as Fought
To analyse the issues in more detail, the final version of the statement of claim, which was amended a number of times, made claims against the first respondent, Westworld Property Holdings Pty Ltd ("Westworld") and against David James Remo and Judith Eve Remo, the second respondents. While the case was pending the Remos changed their name to "Remar". The applicant's pleading said that David and Judith Remar were directors of the first respondent, that by a contract dated 23 August 1985 the applicant agreed to buy land near the Pacific Highway for $285,000, and that the contract contained a warranty that if a shopping centre, in accordance with certain plans and specifications made available to the applicant, was erected on the site, part of the centre would be leased by a "Big Rooster" franchise.
The pleading further set up that it was an implied condition precedent that the site would be suitable for such a franchise, "thereby implying that vehicular access to the site be available in accordance with representations depicted on plans". Neither the express term nor the alleged implied condition played much practical part in the litigation. The focus of the applicant's attack was that misleading statements had been made.
In the result, senior counsel for the applicant relied upon three matters of misrepresentation in his address, although he did not formally abandon any other allegation.
Firstly, he argued that the applicant was induced to complete the contract by the letter of 13 September 1985, mentioned above. Secondly, he said that on 8 October 1985, Remar should have corrected the false statements in that letter when he became aware of their falsity. Thirdly, he said that the contract had been induced by a misrepresentation, being the first mentioned in the pleading, namely that "Big Rooster" had agreed to take a lease.
Counsel for the respondents protested that the applicant had no right to rely in address upon the second complaint just mentioned, for that was not pleaded. I agree; although it seems a little unlikely that the matter's being raised for the first time in counsel's closing address made any difference to the evidence called, the case is not one in which the Court should extend any leniency to the applicant with respect to its allegations of unlawful conduct. The applicant was allowed to add to and reshape its case at the hearing by making amendments to the pleading, but should not, in my view, be allowed to rely upon any unpleaded allegation of misleading conduct.
The case proceeded only against David Remar and Judith Remar. It had initially been brought against Westworld. Discovery took place and a defence was delivered, but on 15 September 1986 Mr and Mrs Remar, the directors of Westworld, resolved to present a petition to the Supreme Court to wind the company up. In consequence of that, the applicant applied, successfully, to join the Remars as respondents.
The petition succeeded and Westworld was wound up. I infer from the circumstances mentioned at the hearing that a purpose of the winding up was to discourage or frustrate the present proceedings.
One issue was, of course, whether the Remars had such a connection with the misleading statements alleged as to make them liable under s.75B of the Trade Practices Act, as interpreted in Yorke v. Lucas (1985) 61 ALR 307. It is convenient to mention at this stage that there was no evidence suggesting that Mrs Remar had personal knowledge of the details of the events in question, and the application must fail, as against her.

The Sequence of Events
Rather than dealing separately, in the first instance, with the evidence relating to each topic in question, it appears convenient to discuss it chronologically.
Westworld agreed to buy the land from a company called Dransham Pty Ltd on 26 March 1985, by a contract providing for payment of a $10,000 deposit. Clause 30 made the contract subject to obtaining approval of a development application within 150 days from that date - i.e. by 23 August 1985. There was provision for a further extension for not more than 60 days if "the Logan City Council have given verbal approval and formal written approval is forthcoming".
In the same month, and in May 1985, there were discussions between representatives of Westworld and Mr S.C. Fyfe, the Managing Director of Moreshill Pty Ltd, trading as "Big Rooster", a chain of shops selling "fast food", mainly chickens. Fyfe had, at an earlier time, been invited by Westworld to look at a site on the eastern side of the Pacific Highway; the site the subject of these proceedings is on the western side. When the present site was mentioned as a possibility, Fyfe discussed access to it with Westworld. Fyfe regarded that as important, because there were not many houses close by, and he was concerned that there be easy access to the site for Brisbane-bound traffic. Fyfe said in evidence, "there was no way we would have gone into the site without the access". On 12 June 1985, Mr Bentley of the P.M.A. Group , of which Westworld forms a part, visited the site with Fyfe. Although there is some difference in the recollection of these two men as to what was discussed, I am satisfied that Fyfe made it clear that such access as I have mentioned was essential and that at that early stage the management of Westworld knew that it was. In my opinion, Bentley understood that Fyfe required that prospective customers travelling towards Brisbane be able to drive directly off the highway to the "Big Rooster" shop.
About the same time, the P.M.A. Group engaged a company called Heather Thiedeke Group Pty Ltd to do architectural work in connection with the then proposed development. That company's task was to prepare certain plans and lodge them with the local authority. On 12 June Fyfe wrote to the P.M.A. group saying that his company intended to "lease a Big Rooster Store at Loganholme". On 26 June, Bentley phoned Mr Ken White, an architect, and asked him to check with the Main Roads Department concerning the access to the site. On 2 July 1985, W.S. Heather, a director of the Heather Thiedeke Group Pty Ltd, sent Fyfe a "preliminary schematic site layout". Heather's brief was to prepare drawings for the shell of the building, and White was to design the interior. I assume the P.M.A. Group intended either to erect the building itself, or to sell the land complete with approved plans.
On 9 July, Fyfe wrote to Bentley complaining about Heather's plans and saying that they "show buildings which bear little resemblance to Big Rooster buildings". On 16 July, Bentley telephoned Mr John Stapleton of Sinclair Knight and Partners, a firm of engineers, and told him that Heather had advised that the Main Roads Department would not allow a break in the median strip in Pintu Drive, a street forming one of the land's boundaries - that being the means of access proposed. He asked Stapleton to look into the matter; on the same day he made Fyfe aware of the problem and the latter said he would discuss the matter with Russ Hinze, the relevant State Minister. Heather was told on that day that Sinclair Knight were going to "resolve the question of Main Roads approval of access onto the site". He was also asked to lodge "some sort of concept plan showing a site layout" that week with the Logan City Council.
On 17 July, Bentley wrote to Stapleton enclosing a copy of a Main Roads plan of the site and a sketch plan prepared by Heather, presumably being that mentioned above. The letter said that Heather's enquiries with "Main Roads have indicated that they will not allow a break in the median strip as indicated on the plan, otherwise access for northbound traffic to the site would be severely restricted. This is not acceptable to either Big Rooster or the convenience store tenant on the development."
In his evidence Bentley said that he had used these expressions "because I wanted to try for the optimum access which the Main Roads Department was prepared to approve". The implication of that evidence is that Bentley exaggerated the seriousness of the problem, but I think that unlikely; that is, it is my view that the statements I have quoted from Bentley's letter of 17 July were accurate. Again, the letter supports the view that the P.M.A. Group were continually aware that access to the site was a difficulty.
On 22 July, Stapleton told Bentley that he was not going to succeed in obtaining access through the median strip, but was looking at another way of solving the problem. On 23 July, Mr L.W.G. Juster of the Main Roads Department told Sinclair Knight that "access would be to the Pintu Drive frontage". On 29 July, Sinclair Knight and Partners wrote to Bentley about access to the site, pointing out that the Main Roads Department had said that there was an existing Department scheme providing a direct route past the eastern frontage of the site for northbound highway traffic. Sinclair Knight made suggestions in their letter as to how the access problem could be handled and asked for approval of them before presenting them to the Department. Heather saw that report and spoke to Bentley about it. At Bentley's request, Heather sent him a print of Heather's layout plan showing the proposed access on it. Bentley's response was to instruct that the plan be lodged in that form with the local authority. About the same time, Bentley told Sinclair Knight to submit their proposed plan to the Main Roads Department.
On 9 August, a representative of Sinclair Knight (Mr Laws) delivered that firm's sketch plan to the Main Roads Department and there was some discussion about the plan with Mr Juster. Although Juster cannot now remember what the discussion was, I infer from a letter written by Sinclair Knight on 12 August that he said to Laws something to the effect that he could see no major objection to the Sinclair Knight proposal; however, I am quite satisfied that Juster did not purport to commit the Department to acceptance of the proposal, nor did Sinclair Knight think that he had.
The letter from Sinclair Knight of 12 August, to which I have just referred, which said, inter alia, "No major objections are expressed", was sent to Heather and apparently convinced him that there was no remaining difficulty about access. Bentley says in his affidavit that on that day Stapleton, of Sinclair Knight, told him that "Main Roads are not opposed to the scheme" and that "he considered that it would be approved". Reading those two statements together, they should have been taken to convey some optimism on the part of Sinclair Knight, but no suggestion that the Department had expressed a definitive view. I do not consider that the P.M.A. Group regarded the access problem as having been resolved by the meeting of 9 August between Laws and Juster, just discussed.
At some time in the month of August, but before 21 August, Remar met the real estate agent Mr Morley for the first time, in a restaurant, and there was some discussion about the site. Shortly after that Morley told Remar that he had a party interested in it. I infer from later events (although Remar said nothing to support this) that Remar said that there would be guarantees of the income to be received from prospective tenants. On 21 August the matter was further discussed between Bentley and Morley at P.M.A.'s Southport office and Bentley suggested that if Morley had any interest in the site, he should put up a proposal. Morley approached Mr Chomicz, a director of the applicant, about the matter, with the idea of persuading him to buy. On 23 August the contract between Westworld and the applicant for the purchase of the property by the latter was signed. It seems very likely, from what Chomicz says, that he obtained a wrong impression about the project from Morley and statements made by Morley are relied on by the applicant, as mentioned above. They are further discussed below, under the heading "Misleading Statements".
On 4 September 1985, Remar wrote to Morley setting out "the requirements for Big Rooster at Loganholme". The letter explained that only the shell had to be constructed and mentioned that, for example, the electrical power supply had to be of a certain sort. On the same day, Bentley received from Heather two copies of a "concept plan".
On the next day, the applicant's solicitor wrote to Westworld as follows:

"We have received a copy of the letter addressed to Mr Morley from the PMA Property Group which is annexed to this letter. On the basis that these are the building requirements referred to in Annexure Clause 2 to the Contract of the 23rd August 1985 between yourselves and S & U Constructions Pty. Ltd., we confirm that they are accepted by our client in satisfaction of that condition."

There was considerable debate as to the true effect of this letter; I defer discussion of the point, but draw attention at this stage to the fact that, whereas clause 2 of the contract contemplated the purchaser's advising of its satisfaction with the plans and building requirements, the letter mentions only the building requirements. They are, plainly, those set out in Remar's letter of 4 September.
On 9 September, Heather told Bentley that his revised plan of the site, being the "concept plan" just mentioned, would meet all the Council's requirements, and on 10 September Heather wrote to the Council attaching a further revised site plan and asking for comment on the conformity of the plan with the Council's regulations and policies. The letter included the sentence:

"In addition, with M.R.D. approval of the proposed access off the Pacific Highway service road now forthcoming, our clients are prepared to forego vehicular ingress to the site from Pintu Drive."

The expression "now forthcoming" appears to have been used in the sense of "soon to come". Heather apparently misunderstood the outcome of the conversations Sinclair Knight had with Juster of the Main Roads Department on 9 August 1985, referred to above, perhaps because he was given an erroneous account of them. On 10 September 1985, the same day, the applicant's solicitor sent requisitions on title to the solicitors for Westworld. Those requisitions were supposed to have been delivered within 14 days from the execution of the contract and were therefore out of time.
On 12 September 1985 Dransham Pty Ltd, mentioned above, made an unconditional contract for the sale of the property to Westworld for a price of $230,000, completion to take place on or before 8 November 1985. On the next day, Bentley tried to find out from Heather the result of his dealings with the Council and Morley asked Bentley "if we would confirm requesting acceptance of the authorities of the plans so that his Client's Architect could then commence work on the working drawing".
On 13 September 1985 Bentley dictated a letter to L.J. Hooker, Scarborough, Southport, Queensland, for the attention of Mr Morley asserting, among other things:

"The enclosed plan has now been approved by

(a) Big Rooster

(b) Main Roads Department (re access)

(c) Logan City Council.

Your client is now free to commence his working drawings, providing nothing in the layout is altered in any way."

The letter, which was signed by Remar, concluded with a request that, in accordance with clause 2, "your client advise within 7 days of the acceptance or otherwise of the plans". The plan enclosed was Heather's most recent layout plan. Evidence was given on behalf of the respondents intended to minimise or eliminate Remar's connection with that letter. That is dealt with below.
Morley showed Chomicz the letter of 13 September 1985 and also read it to him; he told Chomicz that everything was ready to go ahead. Chomicz instructed Morley to engage an architect recommended by Morley, one Coyle, and on 20 September 1985 an approach was made to Coyle. On 23 September 1985 the applicant's solicitor wrote to Westworld's solicitor enclosing transfer documents for signing and asked that they be returned "on our undertaking, hereby given, to use the same for the purpose of stamping only prior to settlement". The idea was that the applicant's solicitor would lodge the transfer with the Stamp Office, presumably with the intention of disposing before settlement of any problems relating to duty. Again, a question arises as to whether sending the transfer documents adversely affected any rights of the applicant under the contract, and that is also discussed below. On the following day - i.e. 24 September 1985 - Coyle wrote to Morley recording the fact that he had been engaged and the conditions of his engagement. The letter sets out that he was to, among other things, prepare design and working drawings.

Despite these steps, which were taken at least partly because Chomicz thought there were no problems about approvals, Westworld's agents continued discussing with the Council and the Main Roads Department the matters which would, of course, have been resolved already if the assertions in the letter of 13 Sepember were true. On 26 September, Heather rang the Council to check progress and was referred to the Council's traffic engineer. After discussing the matter with him, Heather phoned Bentley and told him that "we have still got problems with Main Roads". Heather gave evidence that he was told by the development control officer in the Council that he did not believe any access from the highway would ever be approved by the Main Roads Department. The next day Juster, from that Department, told Sinclair Knight that there would be access only from Pintu Drive and that Sinclair Knight's proposal was unsatisfactory. Stapleton, with whom Juster had the relevant conversation, does not recall it, but I am satisfied that it occurred.
The news got worse. On 4 October 1985, the Council wrote to Heather saying that the Main Roads Department would allow access only at one location, about half way along the Pintu Drive frontage, and that there would be no break in the median strip, nor would access be allowed from any possible future roundabout at the intersection of Pintu Drive and Tanah-Merah Avenue. The Council suggested that the site plan be completely revised. The letter also made a number of objections to the Heather Thiedeke plan in points of detail. Heather passed this information on to Bentley and sent him a copy of the letter asking for further instructions "because we had come to a dead end". Heather never got any further instructions - "the job just went cold and we heard nothing more". However, Sinclair Knight continued its efforts to satisfy the Main Roads Department and sent a drawing showing proposed access points to Juster, on 4 October.
Although the job "went cold" so far as Heather was concerned, the other architect Coyle was, about this time, pursuing the matter on behalf of the applicant, in a rather desultory way. In his evidence in chief, Coyle said the first intimation he received that there was a problem with access to the site from the highway was on 4 November 1985 - which was after the date of settlement of the transaction. He passed the information on to Morley, who appeared to be surprised. However, in cross-examination he said that he spoke to Bentley early in October and received "some copies of letters from his file". It did not appear to me that he recalled what those letters were.
On 11 October 1985, the applicant's solicitor sent to the applicant an account for professional charges and, in effect, a requisition for the purchase price, so as to enable settlement to take place. It seems to me unlikely that Chomicz had been made aware, by that date, of the difficulties with the Council and the Main Roads Department. A week later, on 18 October, M.F. White, Big Rooster's architect, sent drawings for the layout of the tenancy and other information direct to Chomicz. If Chomicz then had the impression that everything was proceeding satisfactorily, White's letter would have reinforced that notion. However, on 21 October the district engineer of the Main Roads Department signed a letter prepared by Juster and addressed to Sinclair Knight saying that access would be allowed at one location only, about halfway along the Pintu Drive frontage, and that access would not be allowed at the location shown on Sinclair Knight's plan. On 21 October, Stapleton and Bentley discussed the access problem again; Stapleton came up with a further proposal and was told to proceed with it. On 22 October Mr Banks, the Leasing Manager of P.M.A., sent a telex to Fyfe saying, among other things "imperative that lease is executed tomorrow. Please advise where and when we can arrange for its collection". The note of urgency, in my opinion, derived from the circumstance that the settlement date was imminent. The next day Bentley told Banks to "chase up the agreement for lease".
Bentley says that shortly before the date of settlement he discussed the access problem, not only with Morley, but with Coyle. Morley was not called. Coyle's recollection was that discussion of the access problem did not take place until after the date of settlement. On 30 October 1985 Moreshill Pty Ltd executed an agreement for lease from Westworld and that was sent by Remar to Morley on the same day; Morley passed it on immediately to the applicant's solicitor. The agreement provided for erection of the requisite "Big Rooster" building by the landlord. On the next day, 31 October 1985, P.M.A. Property Corporation Pty Ltd and Mr and Mrs Remar executed a deed of guarantee and warranty in favour of the applicant, promising that the net amount the applicant would receive during a period of two years from the date on which the shops were open for business should be the aggregate of the sum of $31,080 plus outgoings. On the same day the sale was settled. Shortly after that, Coyle told Bentley that the Main Roads Department had withdrawn its access approval.
On 12 November 1985 there was a meeting between Sinclair Knight representatives - presumably still acting for Westworld - and Main Roads Department officers to discuss the access problem. Juster agreed in cross-examination that a proposal which was discussed was to construct a roundabout at the western end of the overpass; he also agreed with the proposition that his attitude and that of his superior (Mr Wogan) was that, provided the roundabout met with design standards, they would have no objection to it. On 14 November, however, Sinclair Knight wrote to Bentley referring to the roundabout proposal and saying that "the M.R.D. had no objection to such an arrangement provided a roundabout could physically fit into the available area of the intersection". He made no mention of design standards. I gather from Fyfe's evidence that about November he had discussions with Bentley about the access problem and the possible intervention of the Minister, Mr Hinze, was again mentioned. On 25 November Fyfe wrote to Banks a letter reading as follows:

"Further to our verbal discussion with regard to the proposal of your company's to lease a freestanding Big Rooster store at Loganholme to us at $36,000 per annum we are prepared to enter into an agreement to lease subject to the terms as specified in our letter of the 12th of June 1985, plus the condition as agreed in our conversations that you will provide us with a direct access off the highway to the site. We reserve the right to withdraw our agreement to lease the building if the Main Road approval for this access and or the Council approval to operate a Big Rooster Store is not finalized by June 1986.

This is what we have agreed together verbally and must be included in the agreement to lease."

Banks denies having received the letter, but I am satisfied that it was sent and think it probable that Banks got it. Fyfe's statement that "we are prepared to enter into an agreement to lease ..." is strange; he was, clearly enough, aware that an agreement had already been signed on 30 October. On 3 December Weathered Howe and Associates, consulting engineers, wrote to the Main Roads Department, apparently on behalf of the applicant, urging the merits of the "roundabout solution" to the access problem, but the Department replied on 27 December rejecting their submission.
On 3 February 1986 the applicant's solicitor wrote to Moreshill's solicitor saying that he held the agreement for lease between Westworld and Moreshill and that a lease would be granted to Moreshill, in accordance with the annexure to the agreement for lease, at the appropriate time. On 14 February, the same solicitor wrote to the solicitors for Westworld pointing out that under the agreement for lease, the lessor had to obtain a covenant from the applicant to be bound by the conditions of the lease; the applicant's solicitor asked for a suitable deed of covenant for signature by the applicant. On the same day, the solicitors for the applicant wrote to the solicitors for Moreshill saying that the applicant was the registered proprietor of the site and had covenanted to observe the conditions of the agreement for lease.
It will be observed that at that stage - well after it must surely have been disclosed to the applicant that there was still a problem with access - the applicant had shown no inclination to withdraw from the transaction. On 19 February the solicitor for the applicant sent to the solicitor for Moreshill a form of covenant entered into by the applicant, presumably being one by which the applicant undertook to comply with the provisions of the agreement for lease.
On 25 February 1986 the solicitors for the applicant wrote to the solicitor for Westworld enclosing a copy of the letter of 13 September 1985 referred to above, which asserted, contrary to the truth, that the approvals there mentioned had been obtained. The letter of 25 February, for the first time, gave direct warning of the present dispute and said that, because of the access problem, the projected building might not come about. On 4 March the same solicitors wrote again referring to the access problem, and suggesting a meeting with the Minister; that avenue was pursued further by Banks who wrote to Fyfe about it on 12 March. On 27 March the applicant's solicitor wrote to Westworld again, complaining of misrepresentation and asking for rescission of the contract. On 23 April the applicant instituted the present proceedings seeking rescission, and on 17 June the solicitors for Moreshill wrote to the solicitor for the applicant rescinding the agreement for lease on the ground that, among other things, the building had not been erected.
Misleading Statements
I have already disposed of one of the three allegations of misleading conduct finally relied on, on the ground that it was not pleaded. m
Of those remaining, the first in time is the allegation referred to above, of a misrepresentation made orally by Morley to Chomicz. Chomicz seemed to me an intelligent man, but he has only a poor command of the English language. I cannot rid myself of the suspicion that his difficulty in communicating in English is one of the sources of the problems he has encountered leading to this litigation. He said in evidence, in his broken English, that Morley told him "Big Rooster" would take the shop. The complaint made about that was that although Moreshill Pty Ltd had indeed made such a promise, that was conditional upon the availability of direct access from the Gold Coast Highway.
I have discussed aspects of this above and expressed the conclusion that Fyfe made it clear to Westworld that ready access to the site for Brisbane-bound traffic was essential. However, exhibit 21, a letter from Fyfe to Banks of 31 May 1985, which sets out "our companies (sic)" intention to take a lease of the "Big Rooster" store, says nothing about any particular sort of access. Fyfe wrote a similar letter to Banks on 12 June 1985.
Chomicz' evidence suggests that Morley gave him the impression that Moreshill's commitment through Fyfe was absolute and not merely a statement of intention; Mr Fryberg Q.C., senior counsel for the respondents, argued that the evidence did not establish that there was any such condition as pleaded, in the sense of a legally binding term. It is unnecessary to reach a conclusion on that point.
I accept Mr Fryberg's contention that it was not demonstrated that in the relevant conversations in which Morley introduced Chomicz to the idea of purchasing the site, Morley acted as agent for Remar. In his initial approach to Remar about the matter, Morley was not acting for anyone but simply trying to drum up some business. Morley subsequently told Chomicz about the matter, not as agent for Remar, but on the basis that he wished to interest him in negotiating for the site; Morley had had a number of previous dealings with Chomicz.
As to agency, it should be mentioned that Morley obtained a signed authority, that being necessary to enable him to recover commission from the vendor under the relevant statute; however, he got that well after the conversations with Chomicz which are relied on by the applicant, and the signed authority does not evidence an agency at any earlier time.
It follows from what I have said that I reject the applicant's case based upon Morley's conversation with Chomicz. It should be added, however, that in the end Mr Chesterman Q.C., senior counsel for the applicant, relied on this conversation, not so much as founding primary liability, but rather as an answer to the contention on behalf of Remar that the letter of 13 September 1985, now to be discussed, was not a relevant inducement since the applicant was legally obliged at that date to settle the transaction.
To come now to the second representation set up, being that principally relied upon, the relevant part is quoted above: it asserts that the "enclosed plan" had been approved by "Big Rooster", the Main Roads Department and the Council. It had not. Bentley, who was in general an impressive witness, equivocated about the letter but it was, clearly enough, false to his knowledge. His story was that he dictated it to a secretary intending to sign it himself, but, while Bentley was absent from the office, Remar signed it. Along the same lines, Remar gave evidence suggesting that he was unaware of whether the contents were correct, since it was Bentley's letter. Remar claims he said to the secretary who brought it to him for signature: "I hope the information is correct, as it is certainly something that I wouldn't know anything about." I think Remar made that up. The evidence as a whole, and the impression he gave at the hearing, are both inconsistent with Remar's having distanced himself from the transaction, as he claims. For example, Heather said, and I accept, that on 16 July 1985 he had a meeting with Remar and Bentley discussing detailed points relating to the project. Again, on 7 October 1985, as I have mentioned above, Heather wrote to Bentley about the project enclosing the Council's letter of 4 October 1985 referred to above; Remar noted on that letter "Looks a lot of problems still]" Further, I gathered from Bentley's evidence that Remar ordinarily made himself aware, in detail, of the progress of P.M.A. matters.
In my view, Remar's having signed the letter of 13 September 1985 provides some ground for thinking that he knew of the facts concerning the matters referred to in it, and the whole circumstances of the case support the inference that he did. I am satisfied that Remar signed the letter and caused it to be sent to deceive Morley, and through him the applicant. The letter was sent on the day after Westworld made an unconditional contract to purchase the property, in replacement of the previous conditional contract, and was designed to encourage the applicant to proceed with the transaction. I do not infer against Remar that he necessarily believed the sending of such a letter was essential to ensure that the sale was concluded; he may well have been uncertain whether or not, at that stage, the applicant could have withdrawn, but he wanted, I believe, to reduce the risk that that would occur.
There is little trouble in arriving at the conclusion that the letter of 13 September was written with dishonest intention; a more difficult point is whether it was a relevant inducement - whether it caused the applicant to do anything it was not obliged to do.

Contractual Position
The rock on which the applicant's case is built is the letter of 13 September 1985 just discussed; it was false and known by its author or authors to be so. Counsel for the respondents sensibly did not press the argument that the assertions in the letter were true or thought by Bentley to be true. Their answer to the applicant's case based on it was twofold:

(i) The letter did not induce the applicant to complete the

transaction;

(ii) Even if it had, that caused no loss, for the applicant was,

in any event, obliged to complete.

In fraud cases there is a presumption of fact in favour of a party to whom a representation was made calculated to induce him to enter into a contract: see Gould v. Vaggelas (1985) 157 CLR 215 at p 236, 250. The presumption is that the representation did in truth have an inducing effect. Since exhibit 4 was fraudulent, this principle should apply in favour of the applicant and should, in my view, be extended so as to cover the case where what is complained of is not entering into a contract, but completing it. I therefore approach resolution of the question which must be answered under s.82 - namely whether the applicant suffered "loss or damage by conduct" of the respondent - on the basis that there is a prima facie case that exhibit 4 caused or helped to cause the applicant to complete the contract on 31 October 1985. Assisted by that presumption, I have concluded that the letter of 13 September 1985 operated as an inducement, in fact.
Counsel for the applicant argued that there was no obligation to complete the contract, because clause 2 made it conditional upon an approval which was not given, and for other reasons, to be mentioned. Counsel for the respondents, on the other hand, argued that the facts of the case demonstrated that the applicant was satisfied as required by clause 2, that the letter of 5 September 1985 exhausted the applicant's rights and that by sending transfer documents on 23 September 1985 the applicant waived any right it might otherwise have had to bring the contract to an end.
The starting point in consideration of these submissions must be the contract itself. Clause 2 reads as follows:

"This contract is subject to and conditional upon the Purchaser advising the Vendor in writing on or before seven (7) days of the date hereof that he is satisfied with the plans and building requirements for the said "Big Rooster" franchise outlet."

The "date hereof" means the date the contract bears, namely 23 August 1985. Seven days from that date was 30 August and the purchaser did not advise the vendor in writing of its satisfaction by that date. I read the condition as being a condition subsequent, not precedent.
The result of non-fulfilment of the condition was that on 31 August 1985 the applicant had an election to escape from the contract if it chose. It is true that the clause is not framed so as expressly to give that right; it rather reads as if the intention was simply that the contract should come to an end if the condition was not fulfilled. However, there has been a strong tendency to read conditions of that sort as not being self-executing, but as requiring a positive election: Suttor v. Gundowda Proprietary Limited (1950) 81 CLR 418, Gange v. Sullivan (1966) 116 CLR 418. It appears to me that even where the condition requires action or inaction by one of the parties to the contract (not an extrinsic event) the same presumption applies; there being nothing to counter the presumption here, I hold that the contract did not become void on 31 August, but merely voidable. The purchaser's mere inaction - failing to give such advice as the clause contemplated - did not itself bring the contract to an end.
If the view that I have adopted, that the contract survives non-fulfillment of the condition in Clause 2, is incorrect, a different path leads to much the same result. Should Clause 2 be read as terminating the contract, on failure of the condition, then there was no obligation on either side to complete, after 30 August 1985. The question then becomes: did the parties thereafter implicitly agree to deal with each other as if there were no condition? Its answer requires an analysis of subsequent events of a kind rather like that I have undertaken in considering affirmation.

There was some debate before me as to whether the clause was one solely for the benefit of the purchaser, or whether it was one upon which the vendor might also rely. That does not matter here, for there was no question of the vendor's attempting to escape from the contract.
As I have mentioned, the argument for the respondent was that the applicant elected to proceed with the contract and unequivocally waived its right to avoid it, so that by 31 October (when the applicant settled) it had no choice. The question which is necessary to be considered, however, is whether there was an affirmation. If there was, it does not matter that the applicant was induced to complete by the letter of 13 September 1985; on that view, it had to complete anyway. If there was an affirmation, it had to be constituted by some event between 30 August 1985 and the date of settlement, namely 31 October 1985 - i.e. during a period of about two months.
There are three possible affirming events. The first is the letter of 5 September 1985 quoted above; the second, the sending of requisitions on title; and the third, the sending of transfer documents for execution.
As to the letter of 5 September 1985 written by the applicant's solicitor to Westworld, its second sentence read:

"On the basis that these are the building requirements referred in annexure clause 2 to the contract of 23 August 1985 between yourselves and S. & U. Constructions Pty Ltd we confirm that they are accepted by our client in satisfaction of that condition."

The argument for the respondent was that the words from "we confirm" to the end were an unequivocal affirmation. The applicant contended, on the other hand, that the confirmation was conditional, because the words "on the basis that" meant "if" and because the letter related only to the building requirements, not the plans.
In my opinion, the second contention should be accepted and it is unnecessary to reach a conclusion as to the first. That is, I agree that reading the sentence as a whole, it could not reasonably be taken to be a declaration of satisfaction with the plans, which are not mentioned in it. It will be recalled that the clause in question (Clause 2) required advice as to satisfaction with both the plans and the building requirements.
I am encouraged to reach the conclusion just mentioned by the fact that Westworld does not appear to have attached any particular significance to the letter; it might have, for example, have treated the letter of 5 September as making the contract unconditional, but did not do so. That omission seems to have been deliberate; as I have pointed out, the letter of 13 September 1985 concluded with a request that the applicant "advise within seven days of the acceptance or otherwise of the plans".
Before coming to the second and third possible affirmations, it is desirable to say something of the law applicable. There are three cases in vol.131 of the Commonwealth Law Reports, immediately following one another in that volume which are relevant.
The first is Sargent v. A.S.L Developments Limited (1974) 131 CLR 634 in which there was held to be an affirmation constituted by conduct which was said to be "unequivocal in the sense that it is consistent only with the exercise of one of the two sets of rights and inconsistent with the exercise of the other" (p.646) at a time when the affirmer had knowledge of the facts giving rise to a right of rescission.
The facts of the next case, Turner v. Labafox International Pty Ltd (1974) 131 CLR 660, have some analogy with those of the present case. There was a condition in a contract of sale which gave, in the circumstances, the right to rescind. After becoming aware of the existence of the facts giving that right, the purchaser's solicitor required the delivery of proper particulars of title by the vendor.
That seems to me to be a step comparable with the delivery of requisitions and the Court held that there was an election to go on with the contract. However, the facts were somewhat stronger for the vendor than those of the present case. At p.670, Mason J. said:

"... the evidence clearly reveals a positive affirmation of the contract by the appellant's solicitor on 15th February in his conversation with Mrs. Jarvis. As he admitted in cross-examination, he insisted upon performance of the contract and the furnishing of the particulars of title required by cl.3. In so doing he was acting within the scope of his authority from the appellant. What he did was adverse to the respondent and was justifiable only on the footing that the contract was subsisting."

The last of these cases, Wallace v. Hermans (1974) 131 CLR 672 was rather similar to Turner's Case but had an opposite result because of a finding as to knowledge. The right to rescind having arisen, the vendor wrote to the purchaser, firstly, a letter furnishing particulars of title in accordance with the provision in the contract, and, secondly, a letter saying, "We shall notify you when transmission has been effected." The case of affirmation failed because the Court held there was not the requisite knowledge of the facts giving rise to an election; the implication appears to be that there would otherwise have been held to be an affirmation.
To come back to the facts of this case, I have already recounted that on 10 September 1985, the purchaser's solicitors sent requisitions on title (out of time) and on 23 September 1985 the purchaser's solicitor enclosed transfer documents for signing asking that they be returned for stamping.
Of these two communications, the more important is the former; that is so because it preceded the misleading letter of 13 September and cannot be disregarded as having been wholly or partially induced by it. It has to be conceded that the contention that the requisitions indicated an unequivocal affirmation has some strength.
In Champtaloup v. Thomas (1976) 2 NSWLR 264, the contract gave a right to rescind in certain events which occurred thereafter. On the last day for making requisitions under the contract, the purchasers' solicitors sent them, purporting to reserve their clients' rights under the clause allowing rescission. Glass J.A. said, in effect (at pp.268 and 269) that the purchasers had kept their options open by reserving their rights and were entitled to do so, that the sending of the requisitions did not induce the vendors to believe that the "performance of the contract was being unequivocally and unconditionally required", and that the purchasers' conduct was "justifiable as proper and reasonable behaviour while the position was being further explored". Mahoney J.A., however, appeared to take a slightly different view, emphasising the effect on the vendors, and said that where it was sought to impute an election -

"... the distinction between the exercise of a right which is neutral and one which is adverse to the other party is one which has a functional basis.... If the thing done, though it assumes the existence of a contract, is neutral as far as concerns the other party, the fact that what is done is done in pursuance of a contractual right is, of itself, no sufficient reason to impute an election. But it is otherwise if that which is done is adverse to or, a fortiori, detrimental to, the other party" (p.278).

His Honour went on to say at p.280 that "In some cases, requisitions may be sent in the context in which it is clear that an election to affirm is to be imputed". He held that was not so in the case before him, because the vendor knew that the purchaser did not intend to make an election and purported to reserve the right to elect when certain information came to hand.

Here, there was no express reservation of rights, but I am nevertheless of the opinion there was no affirmation constituted by the sending of the requisitions. As I have mentioned, three days later, the vendor wrote asking for advice "within seven days of the acceptance or otherwise of the plans"; it regarded acceptance of a plan as necessary to enable to matter to move forward. There is no question of the vendor's having been disadvantaged. I have held that the true effect of Clause 2, there being no such communication as contemplated by it, was that an election to put an end to the contract arose. But that does not appear to have been the way in which the parties looked at the matter; the vendor, at least, thought the condition was still a live issue and had not been satisfied.
I have therefore concluded that, in all the circumstances, there was no such unequivocal affirmation constituted by sending the requisition as to deprive the applicant of its right not to proceed.
The sending of the transfer documents presents less difficulty to the applicant, because that occurred at a time (23 September) after the misrepresentation complained of and after Morley, relying on the letter, had told Chomicz that everything was ready to go ahead. Apart from that, it would appear that the sending of the transfer documents would have constituted an election to affirm: cf. the decision of the Full Court of the Supreme Court of Queensland in Alleyn v. Thurecht (1983) 2 QdR 706 at p 712C per McPherson J. and 718E per Thomas J. There, the transfer documents were sent by the vendor, not the purchaser, but the one act has a character similar to that of the other.
The conclusion, then, is that although after 13 September a step was taken - the sending of the transfer documents - which might otherwise have been regarded as an affirmation, that cannot assist the respondents because it appears to have been done under the influence of the misrepresentation of 13 September. Of course, the settlement of the transaction on 31 October would have constituted as clear an affirmation as one could wish, but it was also induced by misrepresentation.

Loss
Mr Fryberg argued that, assuming all else against the respondents, the applicant should not be held to have suffered any or any significant loss, because it could have achieved the result that Moreshill took a tenancy. It will be recalled that Moreshill executed an agreement for lease the day before settlement but eventually (on 17 June 1986) rescinded on grounds including the fact that the building mentioned in the agreement for lease had not been erected.
I infer from the events which occurred between the settlement of the transaction on 31 October 1985 and Moreshill's rescission on 17 June 1986 that a substantial problem was, or was thought to be, access. Moreshill's attitude, which presumably came soon enough to the knowledge of the applicant, was that it was unprepared to proceed unless there was direct access off the highway to the site.
Mr Fryberg argued that:

1. Access sufficient to satisfy Moreshill was available.

2. The applicant was legally entitled to insist on access.

3. Moreshill was bound to execute the lease in accordance with the agreement.

Fyfe said in evidence, in effect, that the "roundabout solution" referred to above would have been acceptable to him but was not discussed. In my view, however, that evidence is insufficient completely to destroy the applicant's case. I have quoted above Fyfe's letter of 25 November 1985 insisting on "direct access off the highway to the site". It appears very likely that the proposal to construct a roundabout, which was discussed on a number of occasions in November and December, came to Moreshill's knowledge, particularly as Fyfe seems to have been in touch with Bentley, about that time, concerning the access problem. However that may be, there is no evidence that Fyfe ever suggested (before the trial) that anything less than what he claimed to have been agreed - direct access off the highway - would do.
As to the second point, Mr Fryberg relied upon the decision of Campbell J. in Eggar v. Commissioner of Main Roads (1979) QdR 501. It was held there that no provision in the Main Roads Act 1920-1976 empowered the Commissioner of Main Roads to prohibit completely vehicular access from land abutting on a declared road to the road.
The evidence on the point in question was unsatisfactory. Mr Juster was cross-examined about departmental practice with respect to access off the road and referred to an Urban Road Design Manual, rather vaguely. However, the legal availability of access appears to depend upon the question whether there was likely to be brought into existence a recommendation confirmed by proclamation, as contemplated by s.11A of the Main Roads Act. That rather complex provision need not be set out in detail; it permits limitation of access to "any State highway, main road, urban arterial road or urban sub-arterial road" by a particular procedure. The practice as to use of that means of limitation was not investigated at the trial; it remains unclear whether the provision was ever availed of by the department in any way relevant to the case or whether it was likely that it would have been, if an owner of land abutting on the highway attempted to enforce his common law right.
In that state of the evidence, I am not prepared to hold that the applicant could certainly, as a practical matter, have enforced access to the site from the main highway. Apart from that, there was a time problem. If the department, which seems to have been opposed to allowing direct access, had dug its heels in, one would have to be doubtful whether the problem would have been resolved quickly enough to enable the applicant to enforce its rights against Moreshill.
As to the last point mentioned above, namely whether Moreshill was bound to execute a lease, Mr Fryberg pointed to the fact that Clause 8.06 of the agreement between Westworld and Moreshill excluded liability for misrepresentations made by the lessor. He did so because he wished to meet the evidence of Fyfe, to the effect that that from the start it was made clear that the basis of the deal was that easy access to the site from the highway would be available.
It will have appeared from the account of events set out above that after settlement, i.e. in November 1985, representatives of Westworld continued to work on the access problem. Westworld did not then take the stance now adopted by counsel for the respondents, namely that there was, legally speaking, no access problem because Moreshill could be forced to execute a lease on construction of the requisite building, whatever access was available. One might perhaps infer from that, and from the terms of Fyfe's letter of 25 November 1985 quoted above, that it did not occur either to Moreshill or to Westworld that Moreshill could be forced to complete the transaction without direct access from the highway to the site. Putting that more shortly, there was in a practical sense still an access problem; it did not disappear on 30 October 1985 when the agreement for lease was signed.
Nevertheless, it is arguable, and has been argued, that the applicant could have avoided any, or in any event, most of its loss by performing the building work contemplated by the agreement for lease and forcing Moreshill, if necessary by legal proceedings, to take a lease.
It has to be kept in mind that the prima facie measure of damages in a case of this sort is established to be that in deceit, i.e. the difference between the price paid and the true value of the property transferred: Gates v. The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at pp 7 and 12. The arguments I have been considering above operate, if correct, by way of exception to that general rule. It is at least conceivable that, by taking appropriately aggressive steps against the Main Roads Department or Moreshill or both, the applicant could have mitigated, if not eliminated, its loss; but that cannot be said certainly to be so.

Damages
Evidence was given of values of the land at various dates, but there is no justification here for assessing damages on the basis of the value at a date later than the date of settlement. This is an important point, because there is evidence (which I accept) that the value of the property has fallen substantially since settlement, which occurred on 30 October 1985. There is something to be said for the view that a period of some months after settlement should be allowed as being sufficient time for the applicant to ascertain the truth. In my opinion, however, the lack of vigour with which the applicant pursued the unravelling of the project's apparent difficulties after settlement should weigh in favour of the respondents in considering whether there should be a departure from the ordinary date of assessment of value.
The two valuers called, Messrs Crane and Rogers, were substantially at variance as to the value at settlement. Crane said the property was worth $150,000 then, and Rogers said it was worth $205,000. Crane was attacked on the basis that his valuation assumed access from Pintu Drive only. He said, and I accept, that the history of the strip showed that the land was not really suited to the zoned purpose, namely "special business". In that zone there is a right to erect a substantial retail or warehouse building.
Crane's view of the matter gains some strength from events in the area subsequent to settlement, for example, forced sales. It is my view that a reasonable and well-informed purchaser would not have formed the opinion at the date of settlement that the land would be likely to be in good demand as a site for shops or any other commercial use.
Rogers' valuation was more than a third higher than that of Crane. He claimed to be impressed with the potential of the site for use in building shops and offices combined, but, in my opinion, he rather exaggerated that aspect; in cross-examination by Mr Chesterman, he said, in effect, that development of the site as a small retail shopping centre (which was what he had recommended) would be five to ten years away. He appeared to be of the view that a speculator would be the most likely purchaser, but said that he would not recommend the site as an investment for such a person.
It is impossible to be dogmatic, as I thought each valuer tended to exhibit a bias in the favour of his customer, but I have arrived at the opinion that the value of the property at settlement was $165,000. The difference between that figure and the price paid is $120,000.
The statement of claim also seeks special damages, being legal costs and disbursements and architect's fees. It is true that the legal costs and disbursements were expended, at least in part, as a result of the misrepresentation of 13 September and that has added to the cost of acquisition. Had there been no difference between price and value, however, precisely the same sum would have been incurred. There does not appear to have been any evidence as to what the architect was paid.
The prima facie assessment of damages is therefore $120,000. The next question is whether the applicant should recover all or only part of the figure I have mentioned. Section 87(1) of the Act reads in part as follows:

"Without limiting the generality of section 80, where, in a proceeding instituted under ... this Part, the Court finds that a person who is a party to the proceeding has suffered ... loss or damage by conduct of another person that was engaged in ... in contravention of a provision of Part IV or V, the Court may, whether or not it ... makes an order under section 80A or 82, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention ... if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage ..."

The Court is empowered, in my opinion, to assess the relative weight of causes of action or inaction resulting in the loss complained of. Here, one cause of the loss was the letter of 13 September 1985. After having settled, however, the applicant did little to resolve the difficulty of which it must be taken to have been aware. Under the general law, once a plaintiff in an action of deceit shows a causal connection between the fraud and a purchase, the Court may award as damages the difference between the price and the real value. It has been held in Gates v. The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 that ordinarily this measure is applicable to awards of damages for breaches of s.52 of the Trade Practices Act.
After the contract was settled, the applicant's lack of activity in its own interests helped to turn what may have been an avoidable loss into a definite one. Chomicz acted, I believe, on the assumption that no urgent or vigorous steps were required to satisfy the requirements of Moreshill and get the project under way. He but dimly understood the rather intricate impasse which had developed and he may have over-relied on Morley to preserve the applicant from harm. As far as one may draw inferences from the relative somnolence of the applicant's solicitors, they had no instructions of such a kind as to cause them to assume active control of the management of the problem. The possibility of getting the building up and Moreshill installed as a tenant was allowed to slip away; if it had not, then the loss or much of it might have been avoided.
Gates' case has nothing to say about the possibility of divided responsibility for a loss, nor have I found any guidance in reported authority as to the way in which one should allocate the loss; but under s.87 it appears to me to be within the power of the Court, in an appropriate case, to award only part of the loss actually suffered, on the basis that it had two causes. This is such a case, and the applicant will be awarded two-thirds of the difference between the price and the value, namely $80,000.
The next matter requiring discussion is a claim for interest made pursuant to s.51A of the Federal Court of Australia Act 1976. That permits an award of interest in respect of causes of action arising after the commencement of the section, namely 22 November 1984. It therefore catches this case. It does not appear to be necessary to set the terms of the section out, but it should be noted that it requires the exercise of a discretion as to rate.
The applicant's counsel said the rate should be 18.75%. I propose to allow interest at 17.5% from the date of settlement, 31 October 1985, to the date of delivery of this judgment which sum will be rounded off. There will be judgment, then, in the sum of $113,000 plus costs against the respondent, David Remar, for the reasons I have set out above. The claim against Judith Remar will be dismissed.
I shall give counsel an opportunity to address me on costs.

[1988] FCA 80

11 MARCH 1988