Shalhoub v Buchanan

[2004] NSWSC 99

CITATION:	Shalhoub v Buchanan [2004] NSWSC 99
HEARING DATE(S):	17/2/04 - 20/2/04
JUDGMENT DATE:	29 March 2004
JURISDICTION:	Common Law
JUDGMENT OF:	Campbell J
DECISION:	Proceedings dismissed with costs
CATCHWORDS:	TORTS - NEGLIGENCE - where economic or financial loss - allegations that defendant made statements at auction of land of the plaintiffs tending to discourage bidders - no question of principle
LEGISLATION CITED:	Fair Trading Act 1987 Local Government Act 1919 Supreme Court Act 1970
CASES CITED:	Azzopardi v R [2001] HCA 25; (2001) 75 ALJR 931; (2001) 205 CLR 50 Blatch v Archer (1774) 1 Cowp 63; (1774) 98 ER 969 Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 Herron v McGregor and Others; Gill v McGregor and Others (1986) 6 NSWLR 246 Jones v Dunkel and Another (1959) 101 CLR 298 Perre and Others v Apand Pty Ltd (1999) 198 CLR 180 Watson v Foxman and Others; Commonwealth Bank of Australia v Foxman Holdings Pty Ltd (Receiver and Manager Appointed and Others (1995) 49 NSWLR 315
PARTIES :	Neville John Shalhoub - First Plaintiff Lorna Rose Shalhoub - Second Plaintiff John Buchanan - Defendant
FILE NUMBER(S):	SC 20145/02
COUNSEL:	G Melick SC; E White - Plaintiffs M Joseph SC; R O'Keefe - Defendant
SOLICITORS:	Firmstone Lawyers - Plaintiffs Phillips Fox - Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION
COMMON LAW LIST

CAMPBELL J

29 March 2004

20145/02 NEVILLE JOHN SHALHOUB v JOHN BUCHANAN

JUDGMENT

HIS HONOUR:

Nature of the Case

1 The plaintiffs owned a parcel of land. The local council rezoned that land, and other land immediately near it, then granted the plaintiffs a development consent permitting erection of a block of flats. The plaintiffs submitted the land to auction soon after the development consent was granted.

2 The defendant is an Alderman of the local council, who had been opposed to the granting of the development consent. He attended the auction.

3 The plaintiffs allege that, at the auction, the defendant stated either to, or in the hearing of, potential bidders that the development consent was either liable to be rescinded, or was going to be rescinded. The plaintiffs allege that, by reason of these statements of the defendant, no sale of the property was effected, either at, or immediately following, that auction. They say that, but for the defendant making these remarks, they would have sold their property at the auction, or soon after, for a sum in the vicinity of $1.75m. Instead, the plaintiffs sold the property several months afterwards, for $1.25m. They say that the defendant was negligent in making the statements he made at the auction, and sue him for the difference between the price they say would have been achieved at the auction and the price for which the land was eventually sold, basing their claim upon the tort of negligence.

Procedural History

4 The auction in question took place on 21 September 1991. The plaintiffs began some proceedings against the defendant in 1993, number 19213 of 1993 in the Common Law Division Defamation List. I am informed by counsel that those proceedings remain on foot and, because they will require a trial by jury, the present proceedings were started as a separate action, pursuant to an order made by Simpson J on 2 November 2001.

5 The defamation action had at one time pleaded the case in the alternative as an action for the tort of injurious falsehood. However that cause of action came to be omitted from the pleadings. By judgment delivered 30 July 2003, Levine J refused to permit the injurious falsehood allegations to be reinstated.

6 The present action at one time pleaded in the alternative the tort of misfeasance in public office, and misleading and deceptive conduct contrary to s.42 of the Fair Trading Act 1987. By a judgment delivered on 12 July 2002, Simpson J struck out those causes of action. Hence the only cause of action which is now relied on by the plaintiff in the present proceedings, is a cause of action for the tort of negligence. The plaintiffs rely on the reasoning of the High Court in Perre and Others v Apand Pty Ltd (1999) 198 CLR 180 in submitting that the defendant owed to the plaintiffs a duty of care.

7 The Statement of Claim on which the trial was conducted contains a claim for exemplary damages, but that claim was abandoned at the hearing.

8 Both parties wished to defer the tendering of evidence which went to the question of whether interest under s.94 Supreme Court Act 1970 should be awarded on any verdict, and if so at what rate and for what period, until after the Court’s decision on other matters in the case was known. Consequently I made an order that the hearing before me was a trial of all issues in the case, save issues relating to whether interest should be awarded, and if so how much, in the event that the plaintiffs are otherwise entitled to a judgment.

The Parties

9 The plaintiffs, Mr and Mrs Shalhoub, are husband and wife. For many years prior to 1991 they had been the owners, as joint tenants, of land located at 65-67 Coogee Bay Road, Coogee (“the Land”). The Land had erected on it two cottages which had been joined together and adapted for use as a nursing home. The Land was in the area administered by Randwick City Council (“the Council”).

10 The defendant has professional qualifications in chemical engineering (in which he has a PhD) and he worked as a university teacher until about 1990 when he retired. He was first elected as an Alderman of the Council in September of 1980, and continued to be an Alderman until the year 2000. He served as Mayor during the 1983/1984 council year and again during the 1991/1992 council year. (A “council year” runs from September to September.) He was the sole representative on the Council of a small party called the Independent Action Party. He had a particular interest in planning matters, and was trying to promote lower density development rather than high-density development.

Events Leading to the Approval of the Development Application

11 On 17 January 1990 Mr Shalhoub wrote to the Town Clerk of the Council explaining that he and his wife wished to construct residential accommodation on the Land, and “seeking approval in principle to allow preparation of an application for a residential building of six floors …”.

12 On 31 January 1990 the Chief Town Planner, Mr Messina, reported to the Town Clerk that there was no statutory provision for council to give any such “approval in principle”, but that if council was sympathetic to Mr Shalhoub’s request Mr Shalhoub should be advised to seek amendment of the planning scheme by requesting council to prepare a Local Environmental Plan.

13 On 6 February 1990 the Health, Building and Town Planning Committee of the Council recommended that Council prepare a Local Environmental Plan in relation to land bounded by Coogee Bay Road, Carrington Road and Dudley Street Coogee, and that the land be zoned with a residential zoning containing a six level height restriction. The area bounded by Coogee Bay Road, Carrington Road and Dudley Street is a triangular area of 1.78ha, which includes the Land. It is sometimes referred to as the “Dudley Street Triangle”.

14 On 20 February 1990 the Council adopted that recommendation of the Committee.

15 On 14 March 1990 a draft plan went on exhibition at the Council’s administrative centre. It was also advertised in the local press. It was controversial – 41 submissions, including two separate petitions signed by a total of 167 local residents, were received objecting to the proposal, while one submission, and a petition containing 75 signatures, were received in support of the proposal. On 11 April 1990 the Chief Planner reported to the Town Clerk on these matters, and also informed him that the proposal was inconsistent with the objectives of a Draft Local Environmental Plan number 71 which was likely to be gazetted during April 1990. The Chief Planner recommended that:

“If council wishes to proceed with the proposal the draft plan should be referred to the Department of Environmental Services for a report to be prepared by the Director of Environmental Planning pursuant to Section 69 of the Act to the Minister.”

16 On 1 May 1990 the Health, Building and Town Planning Committee meeting recommended:

“(A) That the Council amend the Draft Local Environmental Plan by deleting the reference to a six level height limit and then forward the Draft Local Environmental Plan to the Department of Planning for the Minister to make the plan; and
(B) That the Council resolve to prepare a Development Control Plan over the subject land controlling the height, bulk and impact of any proposed development on existing residential amenity.”

17 At a meeting of the Council on 15 May 1990 that recommendation was adopted by a 7:5 majority. Later that day three councillors, including Alderman Buchanan, gave notice of a motion to rescind that adoption resolution. That rescission motion was put at the Council meeting held on 19 June 1990, and was lost by a margin of 8:7.

18 On 18 September 1990 the Council passed a resolution approving of a Development Control Plan applying to the land in the Dudley Street Triangle, which imposed a 15m height restriction. That resolution was passed by a majority of 8:7. Later that day three councillors (including Alderman Buchanan) gave notice of a motion to rescind that resolution. That rescission motion was put at the Council meeting on 16 October 1990 and was lost 8:7.

19 On 26 October 1990 Mr Shalhoub was notified that the Draft Local Environmental Plan had been approved by the Council, that it had been submitted to the Minister, and that gazettal was expected within four to six weeks.

20 On 10 December 1990 a financier appointed a receiver and manager to the assets of Shalhoub Holdings Pty Ltd, and an agent in possession to certain property which included the Land. Shalhoub Holdings Pty Ltd and Mr and Mrs Shalhoub began proceedings in the Equity Division of the Supreme Court on 30 January 1991 seeking declarations that those appointments were invalid, and damages. Those proceedings had not been heard by late April 1992.

21 On 17 June 1991 Max Sgammotta, an architect engaged by Mr Shalhoub, lodged with the Council a development application, seeking consent to demolish the nursing home on the Land and erect a six-level residential building containing 21 apartments. Advertising of the development application commenced on 10 July 1991. During the 14 day period of the advertising, 50 submissions were received by the Council from local residents. It appears, from a town planner’s report of 1 August 1991, that all of those submissions were opposed to the development.

22 On 19 July 1991 Mr Shalhoub, purporting to act for himself and his wife, signed an exclusive agency agreement with Welcome Homes Real Estate Pty Limited, a Randwick real estate agency. It gave an exclusive agency for three months from 19 July 1991, for a sale of the Land subject to the Council’s development approval for 12 two-bedroom flats, 7 three-bedroom flats, and 2 penthouses. Mr Jack Ziade runs Welcome Homes; he signed the Exclusive Agency Agreement on its behalf. The Exclusive Agency Agreement included an opinion from Mr Ziade (who is not a registered valuer) that the current reasonable selling price of the property was $1.8m, and an instruction from Mr Shalhoub that the price at which the property was to be offered was $2.1m. There was a special term whereby, if the vendors were “offered over $2.1m only by other agent”, no commission was payable. In some fashion, this Exclusive Agency Agreement came to be overtaken by events – the development application was modified so that it related to 13 two bedroom units and 6 three bedroom units plus 2 penthouses, the development application was granted, and the property came to be put to auction. However it is the only real estate agency agreement in evidence in the case.

23 On 6 August 1991 the Health, Building and Town Planning Committee recommended that Council approve the development application.

24 On 20 August 1991 that recommendation came before the Council. It was adopted by a majority of 8:7.

The Motions to Rescind the Approval of the Development Application

25 To follow what next happened it is necessary to digress to consider some matters of council procedure, and politics. Of the 15 Aldermen on the Council, there was a significant group of Aldermen associated with the Liberal Party, a significant group of Aldermen associated with the ALP and several Aldermen (including Alderman Buchanan) who were independents or associated with minor parties. Council elections were due to be held on 14 September 1991, so that the meeting of 20 August 1991 was the last council meeting before the elections.

26 Procedure at meetings of the Council was governed by Ordinance number 1 made under the Local Government Act 1919. It contained the following provisions:

“15. Except as by the Ordinances is otherwise provided, any business other than business arising out of matters already before the Council shall not be taken into consideration at any meeting of the Council unless notice thereof in writing, signed by a member, has been given within such time before the meeting as the Council may by resolution fix, and business shall not be brought before the Council unless notice of such business has been posted or given to the members within the time prescribed by the Council.
16.(1) Notwithstanding any provision to the contrary, business of which due notice has not been given may be brought forward at any meeting of the Council if a motion which may be moved without notice to grant permission to bring it forward be carried, and —
(a) if all the members of the Council (disregarding any extra-ordinary vacancies) be present; or
(b) if the business proposed to be brought forward be ruled by the chairman to be of great urgency.
…
18.(a) The Mayor … shall have the right of directing attention at any meeting to any matter or subject within the jurisdiction or official cognisance of the Council by a minute signed by himself, and such minute shall, when introduced, take precedence of all business before or to come before the Council, and the adoption thereof may be put by him from the chair as a motion, without being seconded.
(b) The recommendation made in the minutes of Mayor … shall, so far as adopted by the Council, be resolutions of the Council.
…
25.(a) A resolution which has been passed by the Council shall not be altered or rescinded except by a motion to that effect of which notice has been duly given: Provided that where notice of motion to rescind a resolution is given at the meeting at which the resolution is carried such resolution shall not be carried into effect until such motion of rescission has been dealt with.
…
(c) A notice of motion to alter or rescind a resolution … shall not be in order unless it is signed by three members … Provided that this shall not apply where three months have elapsed since the resolution was passed …
(d) Where a motion to alter or rescind a resolution has been negatived … no similar motion shall be brought forward within three months thereafter; and the effect of this provision shall not be evaded by substituting any motion differently worded, but in principle the same.

27 At the Council meeting on 20 August 1991, after the resolution that the report of the Committee relating to the Land be adopted had been passed, three of the Aldermen who had voted for that resolution moved that it be rescinded (“the First Rescission Motion”). The thinking behind this apparent volte-face on their part was that they expected that the First Rescission Motion would be lost, and that clause 25(d) of the Ordinance would have the effect that no other rescission motion could be brought for another three months. In this way, those in favour of the granting of the development consent could increase the chances that the Council, however it might be made up after the elections which were imminent, would not subsequently revoke that development consent. In accordance with this plan, the First Rescission Motion was put to the meeting on 20 August, and was lost.

28 Alderman Buchanan did not accept that that was the end of the matter. When the First Rescission Motion was introduced, there was no motion to suspend the ordinary order of business, nor any motion to receive the First Rescission Motion as a matter of urgency. The procedure under clause 16 of the Ordinance was not followed. Further, the Mayor introduced the First Rescission Motion orally, without any written or signed minute of the type which clause 18 of the Ordinance allows. In these circumstances, Alderman Buchanan had doubts about whether the First Rescission Motion had been validly put to the meeting and passed. In the supper room after the conclusion of the Council meeting on 20 August 1991, he and two other Aldermen signed a notice of motion, seeking rescission of the resolution approving the development application (“the Second Rescission Motion”). As notice of that Second Rescission Motion had not been given at the Council meeting, the Motion would not be able to be dealt with until the next council meeting, after the election, at the earliest.

29 On 21 August 1991 the Town Clerk notified Mr Sgammotta of the passing of the resolution granting the development consent.

30 On 22 August 1991, the Town Clerk wrote to Alderman Buchanan, saying that the Second Rescission Motion could not be dealt with “at this time”, because of the provisions of clause 25(d) of the Ordinance.

31 On 13 September 1991 Alderman Buchanan and two other Aldermen wrote to the Town Clerk, thanking him for his letter of 22 August, and saying:

“We are satisfied that a true record of the proceedings will show that the purported rescission resolution on the 20th August was not validly made. Our notice of rescission therefore stands. This transaction has already caused much ill feeling within Council and in the community. It would do little for Council’s good name if the matter were to end with a further piece of dubious procedure. … If the rescission motion is carried we intend to move that the DA be refused.”

32 Meanwhile, an auction of the Land had been fixed for 21 September 1991. Advertisements for the auction appeared in local newspapers from 27 August 1991, including a drawing of a six-storey building, and text which stated “Must be sold, D.A. approved site for 21 luxury apartments … plans and contracts available.”

33 On 19 September 1991 the poll for the Council elections was declared. Alderman Buchanan was returned, but there were around seven or eight new Councillors. By the time of the auction Alderman Buchanan was not aware of how these new Councillors were likely to vote on any rescission motion concerning granting of the development approval.

34 On 19 September 1991 Alderman Buchanan and Mr Ziade spoke on the telephone. The substance of the conversation is as follows:

BUCHANAN: “Thank you for calling me back. I was ringing you about Coogee Bay Road. You should mention to your buyers that we might be rescinding the approval.”
ZIADE: “John, you know you can’t do that.”
BUCHANAN: “We might if we can prove that it was approved without the proper procedures.”
ZIADE: “You still can’t do that. If you do, Council can be sued. In any case, I can not mention the possible rescinding. How can I tell potential purchasers that the site we are about to sell them might be rescinded?!’
BUCHANAN: “That’s true but I feel the purchasers should be aware.”
ZIADE: “John, you know Council can not rescind, as it would cost them a fortune in compensation, besides I have never seen any council including Randwick ever rescind approval.”

BUCHANAN: “No, you are right but this one might be different.”

The Auction

35 The auction was held on the site at 2.00pm on Saturday, 21 September 1991. Estimates in the evidence of the number of people attending ranged from 15 to 50. It seems more likely that the number attending was somewhere between 20 and 40. Those attending stood outside the property, some of them on the footpath. Mr Shalhoub was present. Mr Jack Ziade was present, and acted as the auctioneer. He was assisted by two or three salespeople from his office. Mr Judd Moores, Mr Kosmos Papadopoulos, Mr Jack Atallah, Mrs Leslie Goodwin, and Alderman Buchanan were amongst those present. The recollection of all the witnesses who gave evidence in the case concerning the precise course of events at the auction was, understandably after the lapse of around 12½ years, hazy.

36 The plaintiffs’ pleaded case alleged, in paragraph 14B:

“On 21 September, 1991 at the auction the defendant made the following representations in respect of the plaintiffs’ land:
(a) the Development Consent in respect of the proposed development of the plaintiffs’ land was liable to be rescinded (“the first representation”); and
(b) the Development Consent in respect of the proposed development of the plaintiffs’ land was going to be rescinded (“the second representation”)”

The plaintiffs sought to prove that case by the calling of three witnesses, Mr Moores, Mr Ziade, and Mr Papadopoulos, and by the tender of documents.

37 Some things concerning the auction are clear. Only two people made bids, Mr Moores and Mr Atallah. After a few bids against each other Mr Moores bid $1.6m, Mr Atallah bid $1.65m, and there the bidding stopped. The bidding was all over in five minutes or so, possibly less. The agents had negotiations with Mr Atallah and Mr Moores immediately after the auction, but no contract was signed.

Mr Moores

38 Mr Moores gives evidence that he went to the auction willing to purchase the Land for up to $2m. He does not recollect hearing Alderman Buchanan saying anything at the auction. He says he did not try to top the bid of $1.65m because it seemed to him that once that bid had been given the auction stalled. He gives evidence that he negotiated, after the auction, with one of the men from the real estate agent who was not the auctioneer. He says:

“The real estate gentleman said to me that the highest bidder was prepared to go to $1.7; that wasn’t accepted; would I go to $1.75 and if I did I would buy it. I agreed to do that, I said, “Yes, I’ll pay $1.75.” Then I thought it was going to be my property.”

39 He says that he did not sign a contract that day, but that he was going to do it on the Monday morning.

40 Mr Moores also gives evidence that, about one hour after he had left the site where the auction was held, he returned and had a conversation with a lady, who he thought was a neighbour, as follows:

“She said, “You were the gentleman bidding at the auction?” I said, “Yes I was.” She said to me, “Do you know this is not going to happen here? They are not going to build any units here. You should be very careful.” I said, “What are you talking about?” She said I won’t be building any units on this site. I said, “How do you know?” She said Alderman Buchanan would have it rescinded. She said that, “Did you see a man with a camera at the auction?” I said, “Yes I did.” She said “That was Alderman Buchanan”.”

41 Mr Moores’ evidence is that this conversation caused him concern, so he rang the planning department at Randwick Council the following Monday morning. He spoke to a man there, who told him that the development application had been approved, but an attempt would be made to rescind it, and named three Aldermen (including Alderman Buchanan) as ones who would be voting against the development application. Mr Moores says that this news caused him immediately to decide not to go ahead with buying the property. He telephoned Mr Ziade, and had a heated discussion in which he accused Mr Ziade of trying to sell a site “that was going to be rescinded”. A transcript of Mr Ziade’s contemporaneous note continues:

ZIADE: “That is rubbish.”
MOORES: “Look, I have been told by a Council Alderman that the development consent is going to be rescinded. I am going to report your firm to the Real Estate Institute.”
ZIADE: “I can assure you it can not.”
MOORES: “There are ample sites on the market. I do not need hassles with Council. Good Bye.”

42 Notwithstanding what is recorded there, Mr Moores does not now say that he had been told by any Council Alderman that the development consent was going to be rescinded. He gives no evidence of any discussion with any Alderman on the topic, and says he did not talk with Alderman Buchanan.

43 Even if Mr Moores’ evidence is taken at face value, the information which the lady passed on to him when he returned to the site after the auction is not shown to have, more likely than not, derived from anything which Alderman Buchanan said at the auction. In its terms, the information which the lady gave him does not purport to be derived from anything which Alderman Buchanan said at the auction, or indeed from anything that Alderman Buchanan said anywhere. In any event, Mr Moores’ evidence about the remarks the lady made to him cannot be used as evidence of the truth of the statements the lady made (because of both the hearsay rule, and the basis upon which evidence of the conversation was admitted at the trial).

44 The controversy surrounding the redevelopment of this site was longstanding, and well publicised in the local community. Mr Ziade accepted that there would be difficulties in selling the property because of that publicity, and that there had been “a lot of bad press”. Some of the publicity in the local press reported on not only the debate about the merits of the rezoning and development application as a matter of town planning, but also on the fact that Mr Shalhoub was prominent in the affairs of the Liberal Party in the area, and Aldermen who had supported the rezoning and development application were also members of the Liberal Party. There was no specific evidence of publicity about the moving of the Second Rescission Motion by Alderman Buchanan on 20 August 1991, but neither was the topic one concerning which one would expect secrecy to be maintained.

45 Mr Moores gives evidence he was “pretty sure” he had seen the lady at the auction, and that “I think she was near Mr Buchanan”. She is not otherwise identified. The lady was not Mrs Goodwin, however, because Mrs Goodwin left the site soon after the auction had concluded, and did not return that afternoon. The evidence establishes that there was a Mrs Schramm, who was a neighbour, and had been (with her husband) very active in opposing the development. There is a realistic possibility, on the evidence, that the lady in question might have been Mrs Schramm (though it cannot be said that the evidence makes it a probability) and if it was Mrs Schramm there was no reason to think that her only source of information about the Second Rescission Motion was Alderman Buchanan, or anything Alderman Buchanan said at the auction.

46 However, I have considerable doubt about whether Mr Moores’ evidence should be accepted at face value. In chief, he said that prior to 1991 “I had done quite a few – bit of developing.” On probing in cross-examination, it emerged that the only developments he had done were, building a block of six units in Bexley in 1964, and a block of 12 units in San Souci in 1969 or 1970. In the year after the auction, 1992, he demolished his own home and built a new home on the same site. Thus, in 1991 he had done no development work for over 20 years. His business was, in 1991, running licensed premises which included a 360 seat restaurant in Coogee. He had been involved in running restaurants for many years prior to that. He says he was attracted to the plaintiffs’ site by a sign outside it advertising the auction – “I wasn’t a developer until I seen that sign, I wasn’t a developer.” He says that, once his interest in the plaintiffs’ site was aroused, he looked around at what places were selling for in the Coogee area, but he did not keep a folder or file of his researches. He had not engaged a lawyer to look at the contract before attending the auction. While he gives evidence that he had financial facilities which would have enabled him to purchase the plaintiffs’ site for $2m or more, and a relationship with his financier which enabled him to telephone the financier on the day after the auction to discuss the purchase of the site with him, there is no documentation tendered concerning his financial facilities. He says that he did not pay a deposit on the day of the auction because there was no pressure to do so – this seems very strange, as one would expect a real estate agent to try hard to obtain a binding commitment, on the day of the auction, from a person who had been an underbidder at the auction, and who was prepared to pay the highest price of anyone who was there that day. It is at odds with Mr Ziade’s account of the post auction negotiations:

“What I recall is we are trying to get the price up from the highest bidder. That didn’t work. We tried and eventually we just walked away from it.”

47 Mr Moores’ evidence about his state of mind after the negotiations immediately following the auction had concluded is not consistent with his having made a firm offer, which was accepted in principle, to purchase the site for $1.75m. He said:

“I didn’t have to pay the deposit until such time as, I know now I had time to look things over and I went down and did a little bit more investigation shall I say, that’s all, no pressure whatsoever.”

He said:

“I was making sure I was being able to get my faculties right, finance right. Everything had to be done, I wasn’t pressured at an auction. I know I could get the finance but I wasn’t no longer pressured at an auction.”

48 When asked a clear and simple question on this topic, his answer is imprecise and unsatisfactory:

“Q. The two are not consistent, you say on the one hand you had an agreement and on the other hand you have told the agent you wanted the weekend to think about it?
A. You see somewhere in life, to answer your question, if I bought something I have now got time to do what I want to do, to think about it, time to write the cheque, talk to the financer, set everything in place, make sure everything is right and so on and so forth, to think about it over the weekend, no reason why I would think about it not going ahead. I was quite pleased at buying it at 1.75. Even if I didn’t develop I thought I stood to make quite a bit of money.”

49 Other evidence about his business dealings - for example, an account of how on one occasion he purchased at an auction a nursing home or kindergarten, as if on an impulse, but that the contract was subsequently rescinded by mutual agreement – cause one to look more closely at his evidence than one otherwise might.

50 His account of why he went back to the site an hour or so after the auction was to “convince my mind everything was good, what my first thoughts were, I never had an advisor.” His evidence is that after the post auction negotiations he regarded himself as at liberty to pay less than 10 percent deposit, and that all of the terms of sale, other than the price, were still negotiable.

51 As well – though this would not be a problem if he were otherwise a satisfactory witness – he is not an independent witness. He knows Mr Shalhoub well, has visited Mr Shalhoub’s home on occasions from the early 1990’s, paid his own airfares to come to Sydney from Queensland to give evidence in this case, and has lent Mr Shalhoub money which has not been repaid. Mr Moores had lunch with Mr Shalhoub on the Friday before the court case started, and drove Mr Shalhoub to and from counsel’s chambers on the day before the court case started. He is a witness who I accept only on matters where his evidence is corroborated by other evidence or the inherent probabilities emerging from other evidence.

Mr Papadopoulos

52 Mr Papadopoulos gives evidence that he had been a builder and developer many years prior to 1991. He was, around September 1991, near finishing one development, and became interested in the Land for another project. He says he was happy to pay $100,000 per apartment for the Land, or a bit more than that. He obtained the contract from the real estate agent, and on three or four occasions visited the architect who had drawn the plans, to go through the drawings. Mr Papadopoulos knew the architect, as he had previously used his services to design two other developments.

53 Mr Papadopoulos’ evidence is that, at the auction, he heard Alderman Buchanan saying on at least three occasions that he would rescind the development approval, that Alderman Buchanan could have said this as many as five times, on each occasion within Mr Papadopoulos’ hearing. He says that on each of those occasions Alderman Buchanan was within about one metre of Mr Papadopoulos. Mr Papadopoulos says that Alderman Buchanan was “speaking to all the people at the auction”, (which I took to mean speaking to them individually or in small groups, rather than speaking to them all at the one time, as at a public meeting). He says he thinks Alderman Buchanan was “speaking loud enough for the people on the other side of the ramp to hear as well as those around him”. Mr Papadopoulos said that Alderman Buchanan was “speaking about the pitch I am speaking now” – which was a volume where Mr Papadopoulos, while not speaking particularly loudly, was speaking loudly enough to be heard clearly anywhere in the courtroom. Mr Papadopoulos said “he wasn’t yelling, he was speaking out like I am here now …”. His evidence was that what Alderman Buchanan said was “whoever buys this property must know that I am rescinding it at the next council meeting”; something like that”. He says that Alderman Buchanan was walking around talking to people, and that he was accompanied by two ladies.

54 This is the only direct evidence of Alderman Buchanan making such statements at the auction. I do not accept it.

55 A very serious obstacle to accepting Mr Papadopoulos’ evidence in this respect is evidence from Mr Ziade. Mr Ziade says, concerning Mr Papadopoulos:

“Q. Did you think he was a possible bidder?
A. No, he already talked to me before the auction.
Q. Did you know him to be a potential bidder?
A. No, not to my knowledge because he was scared of touching that because he has already had a run-out with council over his two sites what you mentioned earlier.
Q. So even before he got to the auction you didn’t believe he was going to be a bidder?
A. Because he was scared and he outlined to me that he wasn’t going to touch it because he has already been through problems of his own and he didn’t want to touch another problem site.
Q. When did he tell you that?
A. Before the auction, leading to the auction. We have a list of developers that we ring beforehand and he on a couple of occasions we are dealing with his sites we put it to him and he wasn’t going to touch it.”

56 That evidence from Mr Ziade is consistent with evidence from Mr Papadopoulos, that Mr Ziade is one of his sources of information about properties which are coming up for sale. Mr Melick SC submits that Mr Ziade must have been mistaken in the dating of this conversation, because otherwise Mr Papadopoulos would hardly be likely to have turned up at the auction at all. While that submission has something in it, I do not find it a sufficient reason for rejecting Mr Ziade’s evidence on this score – there are reasons why a builder/developer might go to an auction of a development site in the area in which he operated, even if he was not contemplating purchasing it.

Mrs Goodwin

57 As well, Mrs Goodwin gives evidence that she attended the auction, arriving 20 minutes or so before it began, met Alderman Buchanan there, that he stayed with her before the auction started, did not move during the auction, and that she does not recall him speaking to anyone apart from her. She had not known Alderman Buchanan personally prior to the day of the auction, though she knew of him by reputation. The conversation between the two of them did not include anything about rescission of the development consent. While her recollection is understandably hazy, she is independent of all the parties in this case. She and her sister had owned the Land about 30 years previously, and she was attending the auction out of curiosity. I accept her evidence, but, because of her difficulties of recollection, do not regard it as of sufficient weight on its own to establish that the representations sued on were not made.

The Defendant

58 Dr Buchanan gave evidence that he attended the auction for two reasons – to see whether Mr Ziade said anything about the rescission motion, and to see whether the Land was sold. Dr Buchanan says that both those matters could influence the way that the rescission motion could be handled. He recognised that if the property was not sold, it would be easier to get the development application rescinded. These are matters which could provide him with a motive for attending the auction, quite apart from any desire himself to tell people at the auction about the rescission motion.

59 Dr Buchanan accepted that he was passionate about attempting to keep Randwick as a low-density area, and that he was passionately against the granting of the development approval for this particular site. These are matters which could provide him with a motive for making the statements he is alleged to have made.

60 Dr Buchanan accepted that at the time of the auction he thought that if he went along to the auction and in any way interfered with it by causing speculation or by commenting to the effect that the development application might be rescinded, he might be leaving himself open to legal action. He recognised that if such a statement was made at the auction, it could have the effect of substantially lowering the price. He says that, while he had no hesitation in ringing Mr Ziade and suggesting that Mr Ziade should warn people that the development application might be rescinded (and indeed would be happy if Mr Ziade did so), he regarded it as Mr Ziade’s business to make such a statement, and was not prepared, on the day of the auction, to do anything to interfere with it. These are matters which could provide him with a motive for not making the statements he is alleged to have made. The following exchange occurred in cross-examination:

“Q. Is it not possible that you did make comments to people to the effect that the development application would or may be rescinded, at the auction?
A. Well, possibilities are - anything is possible.”

If that answer is an acceptance of the proposition which was posed in the question, it is an acceptance of it on an extremely limited (indeed unrealistic) understanding of the meaning of the word “possible” . Most importantly, he explicitly denies making the remarks which Mr Papadopoulos attributes to him.

61 Apart from on one topic (where he said that he did not know that the applicant for the development application had been notified of the council’s approval resolution of 20 August 1991, when it seems to me that he probably was aware of that matter), Dr Buchanan was a credible witness. Seeing him in the witness box, he seemed an intelligent, quietly spoken and fairly cautious man. I recognise, though, that the passage of 12½ years, particularly in post-retirement years, can quieten enthusiasms which once existed, so I do not place much reliance on what I saw of his character in the witness box. Subject to the qualification I have mentioned, I accept his evidence.

62 Both Mr Ziade, and Mr Moores, gave evidence of not hearing Dr Buchanan saying anything at the auction. Mr Ziade’s attention was drawn to Alderman Buchanan because Alderman Buchanan had a camera with him. While Mr Ziade says that he recalled Dr Buchanan speaking to people, he does not know what was said. Nobody told Mr Ziade, after the auction, that Alderman Buchanan had said he would be rescinding the development approval. That Mr Ziade did not himself hear, or have reported to him, any of the representations alleged to have been made by Alderman Buchanan provides some support to the defendant’s evidence. Mr Moores’ evidence of not hearing Dr Buchanan saying anything at the auction I place no reliance on.

Absent Witnesses

63 Of some significance is the list of potential witnesses who were not called. I accept the evidence of Mr Ziade that Mr Shalhoub was at the auction. Mr Ziade gives evidence (though not with great confidence) that Mr Shalhoub was watching and roaming around in the crowd. There is also evidence from Mr Moores that Mr Shalhoub was standing with the auctioneer when Mr Moores first arrived at the site, and Mr Moores thinks that Mr Shalhoub stayed there throughout the auction, but he is not sure. In light of evidence from Mr Moores that he did not know Mr Shalhoub until after the auction, I am not prepared to act on Mr Moores’ evidence about Mr Shalhoub being at the auction – though I recognise the possibility that Mr Moores’ evidence should be taken as meaning that he recalls a man, who he later knew to be Mr Shalhoub, being at the auction. Mr Ziade’s evidence about his own client being at the auction, coupled with there being (at the least) no inherent implausibility in a man attending an auction of his own property, suffices to satisfy me that Mr Shalhoub was there. It is not possible to make any finding about precisely where Mr Shalhoub was while the auction was going on, save that he was present in the general area where the auctioneer and other people attending the auction were congregated.

64 There was some attempt to provide an explanation for Mr Shalhoub’s failure to give evidence. In substance it is that to Mr Moores’ observation Mr Shalhoub looks very ill and frail, that he no longer drives a car, that the topic of this case causes Mr Shalhoub to seem to be irrational, and that on the Friday before the hearing began, at a lunch attended by Mr Shalhoub, Mr Moores, and their respective sons, Mr Shalhoub became excitable and needed to be taken to the doctor and given an injection. No medical evidence was tendered in the case to explain Mr Shalhoub’s absence. Mr Shalhoub had spent the day before the hearing began, from 9.00am to 4.00pm at his counsel’s chambers. In all these circumstances I do not regard his failure to give evidence as adequately explained.

65 Another person not called was Mr Atallah. At the time the hearing began, the first of the particulars given of the allegations in paragraph 14B of the Third Further Amended Statement of Claim was:

“the representations were made orally to a female at the auction after the conclusion of bidding for the plaintiffs’ land and in the hearing of Jack Atallah, one of the bidders for the plaintiffs’ land.”

Those particulars were amended in the course of the hearing, in a way which deleted all reference to Mr Atallah. As recently as 3 February 2004 Mr Atallah was on a list of witnesses which the plaintiffs’ solicitors notified to the defendant’s solicitors, as being intended to be called at the hearing. That letter said that “Mr Atallah will be attending the hearing to give evidence and will be available for cross examination.” Not the slightest scrap of an explanation for his absence from the hearing has been offered.

66 Nor were any of the other spectators or potential bidders present at the auction called. If Alderman Buchanan had made the remarks which Mr Papadopoulos attributes to him, in the manner in which Mr Papadopoulos says they were made, other people must have heard them. No explanation is given for why none of these other spectators or potential bidders were called.

67 The salespeople from the real estate office, besides Mr Jack Ziade, were not called. Those salespeople would ordinarily arrange to stand near the people that they thought were potential bidders. Mr Papadopoulos, having obtained a copy of the contract and plans, was identified by Mr Ziade at one time as being a potential bidder. If one of the salespeople, at the time of the auction, was not standing near Mr Papadopoulos this could confirm Mr Ziade’s evidence about Mr Papadopoulos having decided before the auction that he would not purchase the site. If, however, one of them was standing near Mr Papadopoulos, he would be in a position to confirm or deny Mr Papadopoulos’ evidence about the making of the representations. No explanation is given for the failure to call any of these salespeople.

68 Counsel for the defendant reminds me that failure to call a witness who is available to give evidence, where that witness would naturally be called by a particular party, and was likely to have knowledge of the matters in dispute, can justify the drawing of two Jones v Dunkel (1959) 101 CLR 298 inferences. The first is that the evidence of that witness would not have helped the party who failed to call him or her. The second is that any inferences otherwise available, which might have been drawn unfavourable to that party, and which might have been cut down by evidence from that witness, can be drawn more strongly. If I were to accept and apply that reasoning, Mr Shalhoub is one of these witnesses not called who I would regard as being clearly one who would naturally be called by the plaintiff. In the circumstances where the plaintiffs were indicating, until very shortly before the trial began, that they would call Mr Atallah it seems to me he has also become a witness who would naturally be called by the plaintiffs. Applying Jones v Dunkel in the present case, concerning the failure to call Mr Shalhoub and Mr Atallah, would involve reasoning: I can conclude that the evidence of Mr Shalhoub and Mr Atallah, if called, would not have helped the plaintiff’s case; further, there is evidence in the case from which I could infer that the representations on which the plaintiffs sue were not made; the absence of Mr Shalhoub and Mr Atallah entitles me to draw that inference more strongly.

69 However, it is a strained use of language to say that in the present case, when deciding whether the representations were made, I am “drawing an inference” at all. There is evidence of Mr Papadopoulos that he actually heard one such representation, evidence of Alderman Buchanan and Mrs Goodwin that it was not said, and a variety of surrounding circumstances that affect the probabilities. Deciding whether the representations sued on were made is really a question of which evidence I accept.

70 Because of the artificiality of trying to apply the Jones v Dunkel type of reasoning in the present circumstances, I do not do so, even if I am entitled to do so.

71 Failure to call all those witnesses still has a consequence, even though I do not go through the process of drawing any Jones v Dunkel inferences concerning them. I would infer that Mr Shalhoub, Mr Atallah, one or more of the salespeople, and at least some of the other people who attended the auction, were available. I shall assume that all of these witnesses, apart from Mr Shalhoub, were available to be called by either party. Even making that assumption, failure of a party who bears an onus of proof to call an available witness who could cast light on some matter in dispute can be taken into account in deciding whether that onus is discharged, in circumstances where such evidence as has been called does not itself clearly discharge the onus. This is an application of Lord Mansfield’s maxim that “all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted” (Blatch v Archer (1774) 1 Cowp 63 at 65; (1774) 98 ER 969 at 970), recently quoted with approval by Gleeson CJ in Azzopardi v R [2001] HCA 25; (2001) 75 ALJR 931; (2001) 205 CLR 50 at 59.

Other Matters Relevant to Whether the Representations Were Made

72 No complaint was made by either of the plaintiffs to Alderman Buchanan, concerning his alleged representations at the auction, for a period of more than two years. The first information which Alderman Buchanan had, to the effect that it was alleged that he did something at the auction which caused damage to Mr Shalhoub, was during the first week of an enquiry, in early December 1993, being conducted by the Independent Commission Against Corruption into various planning issues concerning the Council, part of which involved the Dudley Street Triangle. Alderman Buchanan received the Statement of Claim in the defamation action referred to in para [4] above shortly after that. It was in May 1992 that the quantum of the plaintiffs’ damage, according to their own case, became ascertainable.

73 As well, in deciding whether an onus of proof has been discharged, the Court bears in mind that oral testimony concerning events of as long ago as 1991 has an inherent risk of being unreliable: Herron v McGregor and Others; Gill v McGregor and Others (1986) 6 NSWLR 246 at 254-255; Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 at 551; Watson v Foxman and Others; Commonwealth Bank of Australia v Foxman Holdings Pty Ltd (Receiver and Manager Appointed) and Others (1995) 49 NSWLR 315.

74 The evidence of Mr Moores is insufficient, when Mr Papadopoulos’ evidence is not accepted, and in light of Mrs Goodwin’s evidence (para [57] above) and the plaintiff’s late complaint and the circumstances of that complaint (para [72] above), to make it more likely than not that Alderman Buchanan made the representations alleged.

75 In all these circumstances, I am not persuaded that the representations on which the plaintiffs’ case is founded were made.

Events After the Auction

76 On 24 September 1991, Alderman Buchanan became Mayor of Randwick. On 26 September 1991 he wrote to Sly & Weigall, seeking advice about the two rescission motions. The terms of his request for advice demonstrate that he knew the detail of the relevant provisions of the Ordinance which governed council meetings.

77 On 4 October 1991 Sly & Weigall provided that advice. It was, in substance, that the tactic of the supporters of the development application, in immediately giving notice, in the Council meeting on 20 August 1991, of the First Rescission Motion, had backfired. They had given a valid notice of motion to rescind, in the meeting, and therefore had triggered the proviso to clause 25(a) of the Ordinance prohibiting the carrying out of the resolution approving the development application until the motion of rescission had been dealt with. However, because the procedural requirements for dealing with a motion at the same meeting of council at which notice of the motion is given had not been gone through, the First Rescission Motion had not been validly dealt with. Thus, it would need to be dealt with at the first meeting of the new council. As well, the Second Rescission Motion would need to be dealt with by the new council. Because the First Rescission Motion had not been validly dealt with, the prohibition under clause 25(d) on considering a second rescission motion within three months had not come into effect.

78 According to Sly & Weigall’s advice, even though the new council could consider these rescission motions, the passing of a rescission motion would probably not suffice, when notice of approval of the development application had been given to the applicant, to deprive the development consent of validity. Further, even if passing of a rescission motion meant that the consent was not valid, council might have a liability to the applicant in damages. It is unnecessary to decide, for the purposes of this case, whether the Sly & Weigall advice is accurate in all respects.

79 At the Council meeting on 15 October 1991 both rescission motions were on the notice paper. The Council gave approval for both rescission motions to be withdrawn. From that time there was no question about the validity of the development consent for the Land. In October and November of 1991 Dr Buchanan made some efforts to have the Council revoke the Local Environmental Plan applying to the Dudley Street Triangle (which would have prevented other development in the Dudley Street Triangle in accordance with that Plan, but would not have affected the validity of the development consent relating to the Land), but failed.

80 On 24 April 1992 Mr Shalhoub swore an affidavit (seeking a prompt hearing of the Equity Division proceedings mentioned in para [20] above) in which he estimated the value of the Land at $1.15m.

81 The property did not sell at an auction sale held on 9 May 1992, but on 18 May 1992 a contract for sale of the Land, for $1.25m, subject to a building approval being consented to, was entered. That building approval, for 21 apartments, was granted on 29 July 1992, and the sale settled on 14 August 1992.

Causation of Damage

82 The difficulties I have mentioned earlier concerning Mr Moores’ evidence lead to a conclusion that I cannot find that it is more likely than not that he would have entered into a contract to purchase the property for $1.75m in September 1991, if he had not had the conversation with the unidentified lady an hour or so after the auction.

83 There is another difficulty, however, with the plaintiffs’ proof of damage, concerning the other parties to any such contract. The closest there is to evidence of Mr Shalhoub being prepared to enter into a contract, in September 1991, to sell the property for $1.75m is the evidence I have quoted at para [38] above. The real estate gentleman referred to in that evidence has been neither identified, nor called. If Mr Moores’ evidence is taken at face value, he did offer $1.75m, yet after he made that offer there was no pressure on him to sign a contract. Just over two months earlier, on 19 July 1991, Mr Shalhoub had wanted the property listed at $2.1m, and was being told by Mr Ziade that Mr Ziade thought it would bring around $1.8m. Particularly when Mr Shalhoub has not given evidence, I cannot conclude that, had Mr Moores been willing to sign a contract for sale at $1.75m on the Monday (or any time shortly thereafter), Mr Shalhoub would more likely than not have signed it too.

84 Any contract would also have required Mrs Shalhoub to be party to it. There is no evidence at all of her views about the sale of this property. There is no evidence that she habitually left matters of business to her husband, or habitually did as she was asked by him concerning business matters. No explanation is given as to why she was not called as a witness. Faced with this evidentiary void on the topic of whether she would have entered a contract, I cannot conclude that it is more likely than not that she would have entered a contract to sell the property for $1.75m in September 1991.

85 As well, there is evidence of a financier appointing an agent in possession to the Land in December 1990. Whether that agent in possession continued to exercise any functions concerning the Land in September 1991, and if so what they were, has not been explained in the evidence.

86 In all these circumstances, I cannot conclude that it is more likely than not that a contract for the sale of the property for $1.75m would have been entered in September 1991, if Mr Moores had not had the conversation with the unidentified lady. The case about causation of damages which was presented was that Mr Moores would have bought it, or Mr Papadopoulos would have bought it. Each of those cases fails.

87 When I have reached the conclusions expressed so far about whether the representations were made, and about causation of damage, it is unnecessary to decide whether, as a matter of law, Dr Buchanan owed a duty of care to Mr and Mrs Shalhoub requiring him to take reasonable care in making statements at the auction. Nor is it necessary to decide whether, if the statements the plaintiffs allege were made had actually been made, making them would have amounted to a breach of any such duty of care.

Orders

1. Proceedings dismissed.

2. Plaintiffs to pay costs of the defendant.

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Last Modified: 03/30/2004