Scientific Management Associates (Operations) Pty Ltd v KARUMAX Pty Ltd
[2006] WADC 110
•27 JULY 2006
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: SCIENTIFIC MANAGEMENT ASSOCIATES (OPERATIONS) PTY LTD -v- KARUMAX PTY LTD [2006] WADC 110
CORAM: MARTINO DCJ
HEARD: 10-12 MAY 2006
DELIVERED : 27 JULY 2006
FILE NO/S: CIV 194 of 2005
BETWEEN: SCIENTIFIC MANAGEMENT ASSOCIATES (OPERATIONS) PTY LTD (ACN 008 645 618)
Plaintiff
AND
KARUMAX PTY LTD (ACN 088 881 412)
Defendant
Catchwords:
Torts - Negligent misstatement - Deceit - Trade practices - Misleading or deceptive conduct
Legislation:
Fair Trading Act 1987 (WA)
Trade Practices Act 1974 (Cth)
Result:
Plaintiff's claim dismissed
Representation:
Counsel:
Plaintiff: Mr M De Kerloy
Defendant: Ms R Aria-Retnam
Solicitors:
Plaintiff: Mony De Kerloy
Defendant: Jarman McKenna
Case(s) referred to in judgment(s):
Henville v Walker (2001) 206 CLR 459
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109
Case(s) also cited:
Australian Competition and Consumer Commission v Gary Peer & Associates Pty Ltd (2005) 142 FCR 506
Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592
Suncorp Metway Insurance Ltd v Landridge Pty Ltd (2003) 13 ANZ Insurance Cases 61660
MARTINO DCJ: In September 2004 the plaintiff ("Scientific Management Operations") wished to purchase a property known as Unit 1, 5 Rockingham Road, Hamilton Hill. Yupko Pty Ltd owned that unit and had appointed the defendant ("Collett Realty") as its real estate agent for the sale of the unit. Scientific Management Operations was not successful in purchasing the unit. Yupko agreed to lease the unit to Collett Realty and granted to Collett Realty an option to purchase it.
In October 2004 Scientific Management Operations purchased Unit 5, 5 Rockingham Road, Hamilton Hill from Yupko. Collett Realty was Yupko's agent on that sale.
Scientific Management Operations' claims
By its statement of claim, which was amended at the commencement of the trial pursuant to leave granted by me, Scientific Management Operations claims that Collett Realty made the following five representations to it:
1.that Yupko had been told of a verbal offer (ie an oral offer) by Scientific Management Operations to purchase Unit 1 for $205,000 plus GST;
2.that Yupko had rejected that offer;
3.that Yupko had made a counter-offer to sell Unit 1 for $215,000 plus GST;
4.that Unit 5 was available for sale at the same price as Unit 1, being $215,000 plus GST; and
5.that Unit 5 was the same value as Unit 1.
Scientific Management Operations claims that each of these representations was false, that Collett Realty knew or ought to have known that Scientific Management Operations relied upon them in its dealings with Collett Realty on Unit 1 and in deciding whether or not to acquire Unit 5 and that it relied upon the fourth and fifth representations in that it agreed to purchase and did purchase Unit 5. It claims from Collett Realty damages for negligent misstatement, deceit, misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act 1974 (Cth) and s 10 of the Fair Trading Act 1987 (WA) and for making a false or misleading representation concerning the price payable for land in contravention of s 53A(1)(b) of the Trade Practices Act 1974 (Cth) and s 12(2)(b) of the Fair Trading Act 1987 (WA).
Scientific Management Operations' requirement for new premises
Scientific Management Operations is part of a group of companies that provides consultancy services, particularly training for the defence department. The group also has extensive real estate investment investments. It owns property from which it carries on business and develops and sells property. In 2004 it owned approximately 100 properties.
There are at least two companies in the group. Apart from Scientific Management Operations another company in the group is Scientific Management Associates (Australia) Pty Ltd. The plaintiff in this action was Scientific Management Associates (Australia) Pty Ltd until the first day of trial, when an amendment was made.
In 2004 Scientific Management Operations required new premises from which to carry on business in Western Australia. Its staff in Western Australia included Mr Garry Coombe, a technical officer. The directors and senior management of Scientific Management Operations were based in other States. They included Mr Keith Snell, a director of the company who lived in Queanbeyan, New South Wales and Mr Owen Culley, a director of the company who worked out of its Melbourne office.
The only real estate Mr Coombe had ever bought was his house. He had been involved in several dealings where property had been purchased by Scientific Management Operations, but he had not purchased property on behalf of the company prior to the dealings that have resulted in this action.
In September 2004 Mr Snell instructed Mr Coombe to look for a suitable office in the Fremantle area. Mr Coombe knew that offices at 5 Rockingham Road, Hamilton Hill were for sale and that some of them had been vacant for some time.
Collett Realty
Collett Realty carries on business as a real estate agent. In September 2004 it did so under the business name Collett Realty. It had previously carried on business under the name Elders Real Estate Fremantle. The principal of Collett Realty are Mr Russell Collett and his wife. In 2004 Mr Mark Damjanovich and Ms Marlene Smith (who is also known as Ms Marlene Drummond‑Smith) were sales representatives employed by Collett Realty.
Yupko's engagement of Collett Realty
In mid‑2004 Yupko owned Units 1, 5 and 6, 5 Rockingham Road, Hamilton Hill. The principal of Yupko is Mr Amadeo De Santis. Mr De Santis is a builder and in 1998 he completed construction of a two storey office building at 5 Rockingham Road, Hamilton Hill. Six units made up the building. Units 1, 2, 3 and 4 were on the ground floor. Units 5 and 6 were on the first floor.
In or around 2000 Mr De Santis occupied Unit 5 and installed partitions, doors, telephones and telephone cabling in that unit. The cost of fitting out the unit was approximately $30,000 to $40,000. After Mr De Santis had fitted out Unit 5 Yupko leased it to a tenant and Mr De Santis moved to Unit 6.
Mr De Santis appointed various agents for the sale of the units. By June 2004 he had sold Units 2, 3 and 4 but had not sold Units 1, 5 or 6.
On 14 June 2004 Mr De Santis, on behalf of Yupko, signed a selling agency agreement appointing Collett Realty as Yupko's agent for the sale of Units 1, 5 and 6. He had previously appointed agents for whom Mr Damjanovich worked and when Mr Damjanovich moved to Collett Realty Mr De Santis appointed that firm as his agent so that Mr Damjanovich continued to act as sales representative for the units. In the agreement with Collett Realty Yupko specified an initial listing price of $235,000 for Unit 1, $190,000 for Unit 5 and $155,000 for Unit 6.
At that time Unit 5 and Unit 6 were occupied by tenants. Unit 1 was vacant. Mr De Santis no longer occupied a unit in the building, but used a home office. As Units 5 and 6 were occupied by tenants but Unit 1 was vacant Mr De Santis' wanted to sell Unit 1 more than he wanted to sell the other two units.
Collett Realty's requirement for new premises
When Yupko appointed Collett Realty as its agent Collett Realty carried on business from premises in Fremantle. In or around mid‑2004 the buildings around those premises were being demolished. The owner of the premises from which Collett Realty carried on business asked Mr Collett if Collett Realty would vacate them so that he could include the site in a development. Mr Collett did not consider it desirable to carry on business from premises surrounded by vacant land and so was considering moving.
Approximately two weeks after Yupko appointed Collett Realty as agent for the sale of units at Mr Collett began considering moving to Unit 1, 5 Rockingham Road. He inspected the unit, prepared floor plans and discussed moving the business from Fremantle to Hamilton Hill with a business consultant from whom he was taking advice. Mr Collett informed Mr Damjanovich that he was considering moving to the unit and he told Mr De Santis on several occasions that he was considering making an offer to purchase the unit.
Scientific Management Operations' approach to Collett Realty
On 16 September 2004 Mr Coombe telephoned Collett Realty. He spoke to Mr Damjanovich. Mr Coombe told Mr Damjanovich that he would like to inspect Unit 1. The following day Mr Coombe met Mr Damjanovich at 5 Rockingham Road and inspected Unit 1. At that meeting Mr Damjanovich gave to Mr Coombe a sheet of paper in which Collett Realty advertised Units 1, 5 and 6 for sale or lease. That advertisement contained the following table:
| UNIT NUMBER | FLOOR | AREA (SQM) | RENTAL RATE | SALE PRICE |
| 6 | 1st | 64 | $90 + og | $155,000 |
| 5 | 1st | 104 | $90 + og | $190,000 |
| 1 | Ground | 114 | $90 + og | $235,000 |
| TOTAL | 282 | $580,000 |
Mr Coombe's evidence was that Mr Damjanovich said of Unit 1 words to the effect of: "There has been a lot of interest in this unit and if you don't buy it, we probably will." Mr Coombe told Mr Damjanovich that he had to wait for directions from above before making a final decision about a purchase. Mr Damjanovich said that they would want to hurry up as Collett Realty had received many offers.
Mr Damjanovich's evidence of what occurred at the meeting was substantially the same as Mr Coombe's evidence.
Mr Coombe was sceptical about what Mr Damjanovich said to him. He knew that the unit had been vacant for some time. He thought that what Mr Damjanovich said was "sales talk" designed to hasten a decision.
Mr Snell and Mr Culley visited Western Australia. In the morning of 21 September Mr Coombe showed Unit 1 to Mr Snell. Mr Coombe gave to Mr Snell the advertising sheet that Mr Damjanovich had given to Mr Coombe on 17 September. In the afternoon of 21 September Mr Coombe showed the unit to Mr Culley.
Mr Snell noted that in the Collett Realty advertisement there was a difference of $45,000 between the price asked for Unit 1 and the price asked for Unit 5. He decided that Unit 1 was the best option for Scientific Management Operations. The fact that Unit 1 was on the ground floor was a factor in that decision. Mr Culley left Perth on 23 September and Mr Snell left the next day.
Scientific Management Operations' proposals to purchase Unit 1
On or about 23 September Mr Snell had a conversation on the telephone with Mr Coombe. He instructed Mr Coombe to make an offer of $205,000 for Unit 1. Mr Coombe understood the instructions to be to make an offer of $205,000 plus GST. Mr Snell's recollection is that the instruction he gave to Mr Coombe was to make an offer of $205,000, which he understood to be inclusive of GST.
Mr Coombe's evidence was that on Friday 24 September at approximately 9 am he telephoned Mr Damjanovich. In that telephone conversation he made an offer to purchase Unit 1 for $205,000 plus GST. Mr Damjanovich's evidence was that in that telephone conversation Mr Coombe did not make an offer, he asked whether the vendor would accept the price of $205,000 and that Mr Damjanovich said that all he could do was ring the vendor and ask him.
In my view there is no significant difference between the evidence of Mr Coombe and Mr Damjanovich as to the telephone conversation. I find that in it Mr Coombe intended to communicate to Mr Damjanovich that his company wished to purchase Unit 1 for $205,000 plus GST and that Mr Damjanovich so understood Mr Coombe. Because of his experience as a sales representative Mr Damjanovich did not regard the conversation as an offer, because it was not in writing. Mr Coombe was not trained or experienced in real estate transactions. He did not turn his mind to a legal analysis of what he was saying, nor whether it could result in a legally binding commitment.
Mr De Santis' evidence was that Mr Damjanovich telephoned him and told him that he could not get a price of $235,000 for Unit 1 and asked if Mr De Santis would accept $215,000. Mr De Santis told Mr Damjanovich that if he received a firm offer to purchase Unit 1 for that price he would consider it seriously and would talk to his wife and his bank and said to Mr Damjanovich "Give me an offer in writing". Mr De Santis had received many enquiries and expressions of interest in the Unit, but was frustrated that he had not received a firm offer. Mr De Santis did not give evidence that Mr Damjanovich told him of the proposal he had received from Mr Coombe for the purchase of Unit 1 for $205,000 plus GST.
Mr Damjanovich's evidence was that he enquired of Mr De Santis whether he would accept the proposal made by Mr Coombe. Mr De Santis told Mr Damjanovich that Mr De Santis would accept an offer of $215,000 provided he received it in writing.
Mr Damjanovich and Mr De Santis had dealt with each other for some time. The selling agency agreement appointing Collett Realty as Yupko's agent for the sale of Units 1, 5 and 6 recorded that GST would apply to the transaction. I conclude that when Mr Damjanovich and Mr De Santis spoke of prices to each other, and when they gave evidence of conversations with each other about prices, they each meant and understood that GST was to be added to a price they referred to. It is also my conclusion that Mr Damjanovich did tell Mr De Santis of the proposal from Mr Coombe. It was in Mr Damjanovich's interest to tell Mr De Santis of the proposal to show that a prospective purchaser had expressed interest in the unit. However, as the price proposed by Mr Coombe was less than the price for which Mr De Santis was willing to sell the unit it is likely that Mr De Santis has forgotten the specific sum mentioned by Mr Damjanovich as Mr De Santis had no reason to want to remember it. I also conclude that in the conversation Mr De Santis informed Mr Damjanovich that he did want to sell Unit 1 for $215,000 plus GST and that he wanted to receive an offer to purchase the unit for that price in writing.
At approximately 2 pm on 24 September Mr Damjanovich telephoned Mr Coombe and told him that the owner would accept $215,000 plus GST for Unit 1. Mr Coombe was unable to speak to Mr Snell. He spoke to Mr Culley who told him that the price was satisfactory, but that he should contact head office and obtain Mr Snell's approval.
On the same day Mr Coombe sent an email to Mr Snell's personal assistant and wife Mrs Margaret Snell in which he informed her that Mr Snell had instructed him to place an offer of $205,000 for an office, that the owner "had countered with $215,000 plus GST", that Mr Culley had recommended "to go with that price" and asked that she confirm the price with Mr Snell. At some time after he sent that email Mr Coombe received instructions from Mrs Snell to agree to purchase Unit 1 for the price asked for by the owner.
Mr Coombe's evidence was that at 9.30 am on Monday 27 September he telephoned Mr Damjanovich and accepted the offer of $215,000 plus GST. Later that day he met Mr Damjanovich at approximately 4.30 pm where he reiterated Scientific Management Operations' acceptance of the offer. Mr Damjanovich and Mr Coombe discussed paperwork and Mr Coombe asked Mr Damjanovich to prepare the offer and acceptance which Mr Damjanovich agreed to do.
Mr Damjanovich's evidence was that on that Monday he spoke to Mr Coombe who told him that he was happy with the price of $215,000 plus GST. Mr Damjanovich told Mr Coombe that the offer needed to be in writing and Mr Coombe said he would contact Mrs Snell and obtain information required for the offer and acceptance including the correct name of the purchasing company and its ABN so that Mr Damjanovich "could get a start" [T93]. In cross-examination Mr Damjanovich clarified this evidence by agreeing that he was to prepare an offer and acceptance and that Mr Coombe was to give him information as to which company was going to buy it
Mr Damjanovich also gave evidence that on the following day Mr Coombe telephoned him and told him that he wanted to look at a home unit that was for sale. Mr Damjanovich arranged an inspection and met Mr Coombe at the unit. After the inspection of the unit Mr Damjanovich told Mr Coombe that he had an offer and acceptance on him and asked Mr Coombe if he had received from Mrs Snell the information upon which he was waiting. Mr Coombe replied that he had not yet received the information, but would make sure that he contacted her to obtain it.
Mr Damjanovich's evidence was that when he informed Mr Coombe that the owner would accept $215,000 plus GST for Unit 1 he told Mr Coombe that this was "provided it was in writing". Mr Coombe did not give evidence that Mr Damjanovich added that proviso, but he acknowledged in cross-examination that he knew that he needed a written offer to purchase the unit. He thought that he had secured the unit by his conversations with Mr Damjanovich, not that he had purchased it. Mr Coombe denied that Mr Damjanovich told him that he needed information to enable him to prepare a contract in writing.
I conclude from the evidence of Mr Coombe and Mr Damjanovich that Mr Damjanovich did not expect Mr Coombe or Scientific Management Operations to prepare an offer and acceptance. Mr Damjanovich was to prepare that offer and acceptance. However he needed to know the name of the purchaser to do so.
It is my assessment of Mr Coombe that if he believed that he needed to provide further information to Mr Damjanovich to secure the purchase of the unit Mr Coombe would have taken steps to obtain that information promptly. However, I accept Mr Damjanovich's evidence that he did need to know the name of the purchaser to prepare a form of offer and acceptance. I also accept his evidence that he asked for the information. I find that there was a misunderstanding between Mr Damjanovich and Mr Coombe caused by the difference of their amount of experience in real estate transactions. Mr Damjanovich thought that he had conveyed to Mr Coombe that he needed the information but Mr Coombe did not appreciate that Mr Damjanovich was seeking information from him.
Mr Damjanovich did not tell Mr De Santis that the prospective purchaser with whom he had been negotiating had told him that his company did want to purchase Unit 1 for the price of $215,000 plus GST and that Mr Damjanovich was waiting on information from the prospective purchaser to enable Mr Damjanovich to prepare a written offer at that price.
Collett Realty's lease and option to purchase Unit 1
It was Mr De Santis' practice to telephone Mr Damjanovich and to visit the offices of Collett Realty to discuss the marketing of Yupko's units. As I have noted Mr Collett had mentioned to Mr De Santis on several occasions that he was interested in purchasing Unit 1. Mr De Santis told Mr Collett that he needed something he could take to his bank.
On a day the date of which was not specified in the evidence, but was probably Friday 24 or Monday 27 September Mr De Santis visited Collett Realty and spoke to Mr Collett. Mr Collett again told Mr De Santis that he was interested in purchasing Unit 1. Mr De Santis told Mr Collett to give him an offer in writing. On or about 27 September Mr Collett gave to Mr De Santis an offer in writing to lease Unit 1 with an option to purchase it.
Mr De Santis took the offer to his bank and spoke to his wife. Mr De Santis wished to make some changes to Collett Realty's offer. Mr De Santis and Mr Collett reached agreement on the matters raised by Mr De Santis.
By a contract to lease premises signed by Mr and Mrs Collett on behalf of Collett Realty and by Mr De Santis on behalf of Yupko on 28 September Collett Realty agreed to lease Unit 1 for 12 months from 1 November 2004. The contract included a special condition by which Yupko granted to Collett Realty an option to purchase Unit 1 with non refundable deposits of $2,000 per calendar month to be paid to Yupko until "settlement occurs with settlement anticipated to take effect at the expiration of this lease being 30 November 2005".
While Mr Coombe was dealing with Mr Damjanovich over Unit 1 Mr Damjanovich informed Mr Collett that he was negotiating with Mr Coombe. Mr Collett's and Mr Damjanovich's evidence was that Mr Collett did not tell Mr Damjanovich when Collett Realty made an offer to lease Unit 1 with an option to purchase it. The evidence of both Mr Collett and Mr Damjanovich was that Mr Damjanovich did not tell Mr Collett when Mr Coombe informed him that his company was willing to purchase Unit 1 at the price requested by Mr De Santis of $215,000 plus GST. I accept their evidence on these matters.
Mr Damjanovich knew that Mr Collett was interested in purchasing Unit 1. Mr Damjanovich had told Mr Coombe of that interest. The fact that the interest led to a contract being entered into after Mr Coombe informed Mr Damjanovich that his company was willing to purchase that unit for the price the vendor was seeking but before a written contract was prepared does not lead me to reject the evidence on oath of Mr Collett or Mr Damjanovich to which I have just referred.
The Code of Conduct for Real Estate Agents and Sales Representatives
The Code of Conduct for Agents and Sales Representatives prescribed by the Real Estate and Business Agents Supervisory Board under s 101 of the Real Estate and Business Agents Act 1978 provides in cl 10:
"10(1) An agent must not accept an engagement to act, or continue to act, where to do so would place his or her interest in conflict with that of the principal.
(2)An agent shall not without the prior written consent of the principal, directly or indirectly, purchase or take on lease or be in any way concerned or interested, legally or beneficially, in the purchase or taking on lease of any real estate or business which the agent is engaged to sell or lease."
Collett Realty did not obtain the consent of Yupko or Mr De Santis to lease Unit 1 before entering into the agreement to lease the Unit. It was therefore in breach of the Code of Conduct.
Scientific Management Operations' purchase of Unit 5
On Tuesday 28 September Mr Damjanovich sent an SMS message to Mr Coombe in which he informed Mr Coombe that Unit 1 had been sold. Mr Coombe telephoned Mr Damjanovich and expressed his displeasure and said that they had an agreement to purchase the office. Mr Damjanovich said to Mr Coombe that he should not have waited so long. Mr Coombe asked who had bought the property. Mr Damjanovich told Mr Coombe that Collett Realty had purchased it. Mr Coombe told Mr Damjanovich that he considered that "totally unacceptable" because Mr Damjanovich had Mr Coombe do all the leg work and then bought the unit out from under his company. Mr Damjanovich informed Mr Coombe that there were other units available in the building and asked if Mr Coombe wanted to look at them. Mr Coombe said that he did and that he would go to the units immediately. Around this time Mr Damjanovich informed Mr De Santis that a prospective purchaser who was disappointed to have been unsuccessful in purchasing Unit 1 was interested in Unit 5.
As I have noted when Yupko appointed Collett Realty as its agent the initial listing prices for Unit 1 was $235,000, for Unit 5 it was $190,000 and for Unit 6 it was $155,000. Subsequently the prices for Units 5 and 6 were altered on the selling agency agreement. The price for Unit 5 was altered to $215,000 and then altered again to $235,000. The price for Unit 6 was altered to $175,000 and then altered again to $190,000. The dates of those alterations were not recorded on the agreement. Mr Damjanovich and Mr De Santis both gave evidence that the price for Unit 5 was altered to $235,000 on the day that Collett Realty entered into the agreement to lease Unit 1 with an option to purchase it. I accept that evidence.
Collett Realty prepared another advertisement, similar to the advertisement that Mr Damjanovich had given to Mr Coombe on 16 September 2004. However on the new advertisement the price advertised for Unit 5 was $235,000 and for Unit 6 it was $175,000. Collett Realty's advertising logo did not appear on the new advertisement. The new advertisement was not given to Mr Coombe.
Mr Coombe and his colleague Mr Russell Fry met Mr Damjanovich and Ms Smith at the units. Ms Smith showed Mr Coombe the outside of Unit 5, which was locked. Mr Coombe's evidence was that Ms Smith told him that Unit 5 was the same size and the same value as Unit 1 and was available for the same price as Unit 1.
Ms Smith or Mr Damjanovich telephoned Mr De Santis who arrived with his cousin who worked with him. Mr De Santis did not have a key to Unit 5. He telephoned the tenant of Unit 5.
They waited at the nearby Newmarket Tavern for the tenant to arrive. Mr Coombe's evidence was that at the tavern he asked Ms Smith if the price for Unit 5 was the same as for Unit 1 and that Ms Smith said "Same size, same price." Ms Smith denied saying anything about the price or value of Unit 5 or Unit 1 to Mr Coombe.
While at the tavern Mr Coombe telephoned Mr Culley and told him what had occurred. Mr Snell was unavailable as he was suffering from severe angina for which he had been admitted to hospital. Mr Culley told Mr Coombe to purchase Unit 5.
After that conversation Mr Coombe returned to Unit 5 with Ms Smith, Mr De Santis and Mr Damjanovich. The tenant gave them access to the unit. Mr Coombe's evidence was that Ms Smith told him that the tenant had breached the lease and would vacate the office in a few weeks. Ms Smith denied saying anything to Mr Coombe about the tenant of Unit 5.
Mr De Santis' evidence was that the tenants of Unit 5 were good tenants who paid rent regularly and that the terms of the lease were favourable for him. His evidence was that he told Mr Coombe that he would have to speak the tenant to see if the tenant would move out and that if the tenant agreed to do so he would have to make a payment to the tenant.
Mr De Santis' evidence was that while Mr Coombe inspected the unit Mr De Santis told him that if he wanted to use the telephone system that was in the unit he would leave it there. The system was an old one and Mr De Santis had nowhere else to put it. Mr De Santis also gave evidence that after Mr Coombe had inspected Unit 5 Mr Coombe asked him outside the unit what the price for the unit was and Mr De Santis said that if the tenant did agree to move out the sale price for the unit would have to be at least at the same price as for Unit 1.
At the time of these discussions Mr De Santis had decided to increase the price he was seeking for Unit 5 to $235,000, which was the price at which Unit 1 had previously been advertised. Mr Damjanovich knew this and it is likely that Ms Smith also knew it. It is quite possible that Ms Smith did say to Mr Coombe that the owner was seeking the same price for Unit 5 as it had been seeking for Unit 1. I am satisfied on the balance of probabilities that she did. It was true and Mr De Santis told Mr Coombe the same thing.
I do not accept Mr Coombe's evidence that Ms Smith told him that Unit 5 was the same value as Unit 1. Ms Smith was acting as a sales representative on behalf of the owner of the property. Mr Coombe knew that. Ultimately the value of real estate is determined in a market. Mr Coombe did not suggest that Ms Smith was representing to him that she had expertise as a valuer. While Ms Smith may have said positive things about a property she was seeking to sell I do not accept that she represented to Mr Coombe that the property had a value nor that he so understood her.
Mr Coombe informed Ms Smith that his company would purchase Unit 5 for $215,000 plus GST. Mr Coombe gave to Ms Smith Scientific Management Operations' contact details in Canberra.
Mr Damjanovich's evidence was that he thought he told Mr Coombe that Unit 5 was about 10 square metres smaller than Unit 1. I conclude that Mr Damjanovich is mistaken in that recollection. It is my assessment of Mr Coombe that if he had appreciated that Unit 5 was smaller than Unit 1 he would have told Mr Culley and that Scientific Management Operations would not have offered the same price for Unit 5 as it had been willing to offer for Unit 1, even allowing for the fact that Unit 5 had partitioning and Unit 1 did not. However, Mr Damjanovich had communicated to Mr Coombe that Unit 5 was 10 square metres smaller than Unit 1 when he gave him the advertising brochure at their first meeting. Mr Coombe no longer had that brochure as he had given it to Mr Snell.
Mr Coombe was not further involved in the purchase of Unit 5. Ms Smith prepared an offer from Scientific Management Operations to purchase Unit 5 for $215,000 plus GST. The tenant agreed to vacate the unit. Yupko made a contribution to its moving and other costs. Yupko accepted Scientific Management Operations' offer. Settlement of the purchase took place in or around mid October 2004.
Mr Snell had surgery on 2 November 2004. Later that month he looked at the advertisement that Mr Coombe had obtained from Mr Damjanovich and given to Mr Snell when Mr Snell was in Perth in September 2004. He saw that Unit 5 was on the first floor, that it was smaller than Unit 1 and that the sale price for Unit 5 was less than the price advertised for Unit 1. He spoke to Mr Coombe and then consulted solicitors. That consultation has lead to this action.
Conclusions as to alleged representations
I return now to Scientific Management Operations's claims that Collett Realty made false representations.
That Yupko had been told of a verbal offer by Scientific Management Operations to purchase Unit 1 for $205,000 plus GST
I accept that Mr Coombe intended to communicate to Mr Damjanovich that his company wished to purchase Unit 1 for $205,000 plus GST and that Mr Damjanovich so understood Mr Coombe. I also accept Mr Damjanovich's evidence that he told Mr De Santis of this proposal. I conclude that this representation, was made by Mr Damjanovich on behalf of Collett Realty and that it was true.
That Yupko had rejected that offer
I accept the evidence of Mr Damjanovich that he informed Mr De Santis of Mr Coombe's proposal and that Mr De Santis told him that he would be prepared to sell for $215,000 plus GST. In communicating this to Mr Coombe Mr Damjanovich was making a true statement.
That Yupko had made a counter-offer to sell Unit 1 for $215,000 plus GST
I accept the evidence of Mr Damjanovich and Mr De Santis that Mr De Santis did tell Mr Damjanovich that he would be interested in selling Unit 1 for this price. While the term counter-offer was not used in telling Mr Coombe that the owner would accept $215,000 plus GST for Unit 1 Mr Damjanovich was accurately passing on his instructions from Mr De Santis.
That Unit 5 was available for sale at the same price as Unit 1, being $215,000 plus GST
I accept that Collett Realty told Mr Coombe that Mr De Santis was seeking the same price for Unit 5 as for Unit 1. It was a true statement.
That Unit 5 was the same value as Unit 1
I find that this alleged representation was not made.
I conclude therefore that Scientific Management Operations has not succeeded on any of its claims that Collett Realty made representations that were false or misleading or deceptive. It follows that its claim for damages fails. However, as I have heard argument from the parties as to other matters it is appropriate for me to express my conclusions on matters that were argued.
The value of Unit 1 and Unit 5
Scientific Management Operations called valuation evidence from Alan Peter Murphy. Mr Murphy is a licensed valuer. His opinion is that at 1 September 2004 the value of Unit 1, 5 Rockingham Road, Hamilton Hill was $240,000 and the value of Unit 5 on the same date was $190,000. Collett Realty called valuation evidence from Tony Michael Gorman who is also a licensed valuer. In Mr Gorman's opinion the value of Unit 1 at September 2004 was $217,000 and of Unit 5 was $215,000. Both valuers' valuations were exclusive of GST.
In carrying out his valuation Mr Murphy reviewed evidence of sales in Hamilton and adjoining suburbs. He included in his review the sale of Lot 5. The sale evidence provided to him was that that sale was at a price per square metre of $2,342. This price was much higher than other properties in Hamilton Hill including Lots 2 and 3, 5 Rockingham Road which had been sold in July 2004 for $1,594 per square metre. Mr Murphy acknowledged that sales have increased consistently and that there was an increase in values between July and November 2004. However, in his opinion an increase of 46.9 per cent from the price square metre for Lots 2 and 3 in July 2004 to the price per square metre for Lot 5 in November 2004 exceeded market expectations. In fact Unit 5 sold for a price per square metre of $2,159 so the increase in price was 33.6 per cent.
Mr Murphy noted that Lot 1 enjoyed convenient and prominent ground floor position, it was of open plan layout and that the lessee had installed signage to identify the tenancy. In his opinion an appropriate value was in the range of $2,000 to $2,200 per square metre giving a value of between $228,000 and $250,800 from which range he adopted a value of $240,000.
Mr Murphy noted that Lot 5 did not enjoy the convenience of a ground floor location, included partitioning and that the scope for the installation of external advertising signs was limited. He valued it at between $1,800 and $2,000 per square metre so that his value range for the unit was between $181,000 and $202,000 from which range he adopted a figure of $190,000.
Mr Gorman also reviewed sales in Hamilton Hill and nearby suburbs. His review included the sales of Units 2 and 3, 5 Rockingham Road and of Unit 5. He noted that Unit 5 was fully fitted out at the date of sale. In his opinion while it could be argued that Unit 2 was in a better location it required full internal fit‑out.
Mr Gorman valued Unit 1 at between $1,800 and $2,000 a square metre and adopted the middle of that range to reach his value of $217,000.
Mr Gorman noted that Unit 5 was on the first floor and had views towards the ocean and was fully partitioned office space. As Unit 5 was fully fitted out Mr Gorman considered the capitalisation approach to value as well as comparison of sales. At September 2004 Unit 5 was leased for a five year term with fixed increases in rental and the rental at the time was $15,710 per annum which equates to $156 per square metre. Mr Gorman reviewed the rent being paid for a property in Fremantle and a property in South Fremantle and considered that the rent of $156 per square metre for Unit 5 reflected market values. Using a yield of 7 per cent the capitalisation method produced a value for Unit 5 of $224,000.
In Mr Gorman's opinion good quality office space was selling in September 2004 for between $2,000 to $2,500 per square metre and in his view the price agreed to be paid by Scientific Management Operations of $2,129 per square metre was within the market range. In Mr Gorman's opinion the price agreed to be paid by Scientific Management Operations reflected the market value of the unit at the time.
It is my view that the capitalisation method is not appropriate to value Unit 5. I accept the evidence of Mr Murphy that it is difficult to get accurate and sufficient market rental comparison to assess market rent for the purpose of using rent to assess the value of a property. The properties in Fremantle and South Fremantle that Mr Gorman considered are in different suburbs and significantly smaller than Unit 5.
Both Mr Murphy and Mr Gorman were of the opinion that Unit 1, on the ground floor, was in a better location than Unit 5, on the first floor. I acknowledge that Unit 5 was fitted out and had views towards the ocean. However, in my view those factors would not significantly increase the value of the unit. Fit‑out is a deteriorating asset and the fit‑out that is suitable for one occupier of office premises will not necessarily be suitable for another occupier of those premises. I accept the evidence of Mr Murphy that the value of Unit 5 was less than the value of Unit 1.
As I have noted Units 2 and 3 had sold in July 2004 for $1,594 per square metre. Those units were in an inferior location to Unit 1 and the purchase price for the two units involved a far larger area. In the period between July 2004 and September 2004 prices had increased. In my view the valuation range for Unit 1 of $1,800 and $2,000 arrived at by Mr Gorman is too low and fails sufficiently to recognise these factors. I prefer the evidence of Mr Murphy whose range for Unit 1 was $2,000 to $2,200 per square metre and for Unit 5 was $1,800 to $2,000 per square metre. I conclude that the value of Unit 1 at September 2004 was in the range of $228,000 to $250,800 and for Unit 5 was in the range of $181,800 and $202,000.
Causation
Scientific Management Operations' case was that misrepresentations were made by Collett Realty in relation to both Unit 1 (the first three pleaded representations) and Unit 5 (the fourth and fifth pleaded representations). Where a plaintiff has suffered damage that has been caused by misleading or deceptive conduct the plaintiff is not barred from recovering the full amount of its loss if there are also other concurrent causes for that loss: Henville v Walker (2001) 206 CLR 459; I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 210 CLR 109. However, it is my view that there is no causal connection between the alleged misrepresentations concerning Unit 1 and the purchase of Unit 5. The effect of any misrepresentations concerning Unit 1 would have been that Scientific Management Operations had not been successful in purchasing that unit and was still seeking to purchase a property. It would not have led to the purchase of another property at greater than its market value. In my view for Scientific Management Operations to have succeeded in its claim in relation to the purchase of Unit 5 it would have needed to have succeeded in establishing that misrepresentations were made in respect of that unit.
For the reasons I have given I have concluded that Scientific Management Operations has not established that the misrepresentations as alleged Collett Realty made were made by it and its claim does not succeed.
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