Shaw v Director of Housing and State of Tasmania
[2000] TASSC 115
•22 August 2000
[2000] TASSC 115
CITATION: Shaw v Director of Housing and State of Tasmania [2000] TASSC 115
PARTIES: SHAW, Stuart Gordon
v
DIRECTOR OF HOUSING
STATE OF TASMANIA
TITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: 592/1990
DELIVERED ON: 22 August 2000
DELIVERED AT: Hobart
HEARING DATES: 24 - 28 July 2000
JUDGMENT OF: Underwood J
CATCHWORDS:
Torts - Negligence - Essentials of action for negligence - Where economic or financial loss - Careless advice, statements and non-disclosures - Particular persons and situations - Public authorities - Officers of Director of Housing made misrepresentations with respect to Director's intentions for future development for housing subdivision.
Shaddock & Associates Pty Ltd v The Council of the City of Parramatta (1981) 150 CLR 225; San Sebastian Pty Ltd v The Minister (1986) 162 CLR 341; Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) (1997) 71 ALJR 448, applied.
Aust Dig Torts [52]
Torts - Negligence - Essentials of action for negligence - Where economic or financial loss - Careless advice, statements and non-disclosures - Particular persons and situations - Public authorities - Measure of damage - Plaintiff would not have expended any money on purchase of property had the representation not been made - Entitled to be put in the position in which he would have been had the tort not been committed.
Shaddock & Associates Pty Ltd v The Council of the City of Parramatta (1981) 150 CLR 225; Hungerfords v Walker (1989) 171 CLR 125, applied.
Aust Dig Torts [52]
REPRESENTATION:
Counsel:
Plaintiff: S B McElwaine
Defendants: P Turner
Solicitors:
Plaintiff: S B McElwaine
Defendants: Director of Public Prosecutions
Judgment Number: [2000] TASSC 115
Number of Paragraphs: 62
Serial No 115/2000
File No 592/1990
STUART GORDON SHAW v DIRECTOR OF HOUSING
and STATE OF TASMANIA
REASONS FOR JUDGMENT UNDERWOOD J
22 August 2000
Introduction
On 16 April 1987, the plaintiff entered into an agreement with the Director of Housing to purchase land at Blackwood Drive, Rocherlea ("the Blackwood Drive land"). Clause 6 of the agreement obligated the plaintiff to construct a shopping centre on that land within one year of the date of the contract or within such longer time as the Director may agree.
Pursuant to the contractual obligation, the plaintiff commenced the construction of a shopping centre in about November 1988. It comprised a small supermarket and two adjoining shops. The construction was completed in December 1989. The plaintiff sold the supermarket in June 1991 and the other two shops in March 1993. The plaintiff's case against the defendants is that he entered into the contract in reliance upon certain misrepresentations made by an officer of the Director of Housing, that the representations were made negligently and, in result, the plaintiff suffered financial loss. The claim is for damages and interest. The pleadings raise the following issues of fact and law:
· were the pleaded representations made?
· if yes, were they misrepresentations of fact?
· if yes, were they made in circumstances that gave rise to a duty of care on the part of the Director of Housing?
· if yes, was there a breach of that duty of care?
· if yes, did the plaintiff rely upon the misrepresentations in embarking upon a chain of events that led to the signing of the contract and the building of the shopping centre?
· if yes, did the plaintiff thereby suffer financial loss? and
· if yes, what is the measure of that loss, including interest and taking into account the plaintiff's obligation to mitigate his loss?
The development of Rocherlea
Some time prior to 1978, the Director of Housing, a corporation sole pursuant to the Homes Act 1935, to whom I shall refer to in these reasons for judgment as "the defendant", acquired land at Rocherlea off the Lilydale Road. The land was bought for the purpose of providing public housing in accordance with the provisions of the Homes Act.
In conformity with the defendant's then practice, overall development plans were drawn up. One of them is dated 21 April 1978. It was tendered in evidence. It shows a proposed housing subdivision to be built in seven stages, together with proposals for a water reservoir, pumping station and the like. Mr Sproule, who was the defendant at the time the land at Rocherlea was purchased, agreed that the plan was to provide broad acre development of up to 700 building allotments and to provide land for schools, a shopping centre and other community needs. The defendant's plans for Rocherlea are disclosed in the annual report of the Director-General of Housing and Construction for the year ended June 1980 in the following terms:
"Rocherlea ¾ An agreement has now been completed with the Lilydale Council for the financing of head works.
Work involving 95 lots commenced in the first stage of this new development. With the completion of Ravenswood, all broad acre development for the Launceston area will be concentrated on the Rocherlea subdivision which has a potential yield of 700 lots. An additional 3.97 hectares, for inclusion in this subdivision was purchased during the year."
Building continued at Rocherlea. The following appeared in the annual report of the Director-General of Housing and Construction for the year ended June 1983:
"Rocherlea ¾ During the year fifty-five houses and four villas were completed. Thirty-three houses and fourteen villas were under construction at the end of the year. Ten of the houses are funded from money made available from the Commonwealth Wage Pause funds. Tenders were called on 16 April 1983 for construction of a neighbourhood house at Rocherlea and construction commenced during the year.
…Substantial contract works were carried out and, during the year, the ninety-five lot Rocherlea Stage II was completed, and a major contract let for 106 lots on Stage III.
In addition, a joint contract was let by the Lilydale Council for the full reconstruction of Reservoir Road as the second major access to the subdivision. Final payments were also made on contracts for water and sewerage headworks in accordance with agreements made with the Lilydale Council."
However, not long after the publication of that report, Mr Sproule, who remained the defendant until 1989, began to have different ideas about the manner in which public housing should be provided. Mr Sproule became committed to the concept that broad acre development for public housing should be reduced and in lieu thereof, emphasis should be placed on "infill development" and "spot purchase". The former involves the purchase of small numbers of allotments in private subdivisions and the latter involves the purchase of individual suitable homes in various locations when they become available on the open market. Mr Sproule said that in about 1983 (although I find it was more likely to have been early 1984) he began to think that he should "pull back from Rocherlea" and instead concentrate on infill developments and spot purchases. However, Mr Sproule had to convince the Minister at the time to change the policy of the Department by placing emphasis on infill developments and spot purchases, instead of broad acre development. Mr Sproule explained that this proposed change of policy did not mean that there would be no broad acre development at all, only that it should be reduced where possible. It took Mr Sproule from about 1983 until 1989 to bring about a change of policy. It was a gradual process. There was no identifiable moment in time when broad acre development at Rocherlea was abandoned. I conclude from Mr Sproule's evidence that from about early 1984, he continued to regard Rocherlea as a possible development of 700 homes but his preference was to satisfy the demand for public housing by way of infill development and spot purchases wherever possible, using broad acre development when that was not possible.
A description of Rocherlea
There was no evidence of the precise acreage of land purchased by the defendant at Rocherlea. I infer from other evidence that it was in the order of 70 hectares. This land lies to the south-east of Lilydale Road, less than a kilometre from its junction with the East Tamar Highway. Close to the north-eastern boundary is Russell Plain Road. Close to the south-western boundary is Reservoir Road. As now constructed, Reservoir Road and Waratah Road, the latter to the north-east of the former, are the only access roads into Rocherlea from Lilydale Road.
The plaintiff
In 1984, the plaintiff was a young builder working in Victoria. He was in partnership with his father (or his mother and his father) in a house construction business called Camelot Constructions. In addition, the plaintiff's father, Mr Gordon Shaw, had employment as a bank officer. In that year, the plaintiff's parents came to Tasmania to see if they could find a small business for their retirement which was imminent. They bought two properties. One was the motel/reception centre, Archers' Manor on Alanvale Road, Newnham, and one was a parcel of land at 32 Reservoir Road, Rocherlea ("the Reservoir Road land"). The idea was that the plaintiff's parents would run Archers' Manor in their retirement and if the plaintiff also decided to come to Tasmania, he would have a "spec" building site on which to start up his building business in this State.
The plaintiff and his parents moved to Tasmania on 1 April 1985. The plaintiff completed the contracts for the purchase of the Reservoir Road land and became the registered proprietor. His intention was to construct, and when complete, to sell, a doctor's surgery, a chemist and a small supermarket/take-away shop with a residence attached. Either just before or just after the completion of the contracts, the zoning of the Reservoir Road land was changed from residential to commercial.
In May 1985, the plaintiff engaged an architect who drew up plans for his proposed shopping centre. The plaintiff was then negotiating with a doctor, a chemist and a man who was interested in buying the supermarket/take-away store. The plaintiff said, and I accept his evidence in this respect, that in May 1985, about 320 houses had been constructed at Rocherlea. At that time, there was some, but not a lot, of building work in progress. There were then no shops at Rocherlea. The houses that had been built were located between the Blackwood Drive land and the Reservoir Road land. Accordingly, Reservoir Road was the main access road to the estate. For all these reasons, the plaintiff considered that his proposed shopping centre would be successful. It was at this stage of events that the defendant entered into the plaintiff's business affairs.
The representations
In 1985, Mr Lieberknecht was a planning officer with the defendant. Although he lived and worked in Hobart, his responsibilities were state-wide and included Rocherlea. It was Mr Lieberknecht's job to design subdivisions, deal with town planning matters and, as he said, "act as an interface with local government".
In about August 1985, the defendant's Executive Officer (Property) considered that there were enough houses built at Rocherlea to sustain a small shopping centre. In the defendant's view, the best site for such a centre was the Blackwood Drive land. This site was identified as the shopping centre on the defendant's structure plan for Rocherlea. Although the Blackwood Drive land was on the edge of the 320 houses that had been built by 1985, it would be right in the middle of the Rocherlea estate if the defendant built all 700 houses that the estate could accommodate.
The defendant proposed to put the Blackwood Drive land out to tender and in order to facilitate this, Mr Lieberknecht was asked to ensure that the zoning was changed from residential to commercial. The requisite approval was forthcoming in about October 1985, but shortly before then, the defendant became aware for the first time that the Reservoir Road land was zoned commercial and that the plaintiff planned to build a doctor's surgery, chemist and supermarket/take-away with residence there. The defendant considered that it would be inappropriate to have two shopping centres at Rocherlea and, in due course, Mr Lieberknecht was asked to get in touch with the plaintiff and, to use the witnesses' words, "advise him of what the Department's proposals were and to see if there could be a mutually beneficial outcome". I am satisfied from the whole of Mr Lieberknecht's evidence that one possible "mutually beneficial outcome" at the forefront of his mind was that the plaintiff build his centre on the Blackwood Drive land, instead of the Reservoir Road land.
Mr Edwards was the defendant's Property Clerk in Launceston. In early 1986, at the request of Mr Lieberknecht, he arranged a meeting with Mr Shaw at Archers'' Manor. On arrival, Mr Lieberknecht and Mr Edwards met the plaintiff's mother and when they told her that they had come to speak about the Reservoir Road land, Mrs Shaw explained that this land was owned by their son who was out of the State on that day. Mrs Shaw said that her husband might be able to assist and she went off to find him. Mr and Mrs Shaw returned to the foyer together and spoke to Mr Lieberknecht and Mr Edwards.
According to the evidence of Mr Shaw, one of the officers said, "Well you moved far too fast, you've had that land zoned commercial" and when Mr Shaw said, "That's right", one of the officers said, "Well we want it, don't move on it". According to Mr Shaw, one of the officers told him that they needed the Reservoir Road land for a recreational centre. Mr Shaw said he was taken aback by this information and told the officers that his son stood a good chance of losing his customers over this proposal. He said that one of the officers then said to him, "Well, we can offer you a substitute piece of land". According to Mr Shaw, the officer explained that the land was at Blackwood Drive. Mr Shaw was generally familiar with the Rocherlea estate and knew the area to which the officer made reference. Mr Shaw said that he could not see how the Blackwood Drive land could be of interest to his son as it was so far away and he was then told:
"We are going to let you in on some confidential information … We are going to double the size of the estate, we are going to put a service road through to Ravenswood and it will have a child-minding centre right next to where the end of that site is."
According to Mr Shaw, there followed some general discussion about this and then he said to the officers:
"It seems like we've done this cold because if we don't relinquish that land you'll compulsorily acquire it in any event"
and the officers said:
"Well we wouldn't normally say that but that would be the outcome."
Mr Shaw said that the conversation with the officers lasted for about an hour. During the course of it, he said that the officers said that the estate would be doubled in size in the next three to five years, but did not put any time frame on the other matters of which they had spoken. Mr Shaw said that the conversation concluded with him advising the officers that as soon as his son came back from interstate, he would take him to the Blackwood Drive site and talk this over with him, but it would be his decision. Mr Shaw said that he gave the officers his assurance that he would ask his son not to commence any work at the Reservoir Road land until this had been sorted out.
Mr Shaw said that this conversation took place in an office at Archers'' Manor and that his wife joined them for part of the time. Mrs Shaw confirmed this in her evidence. She said that after her husband had taken the two men into the office, she finished off what she was doing, and a little later joined the three men. She said that she heard the defendant's officers say that they wanted the shopping centre to be built on the Blackwood Drive land and not on the Reservoir Road land. Mrs Shaw said that she heard them say:
"We're going to build that many more houses and that will double the estate and your shops will be in the middle of the housing department."
Mrs Shaw also said that the two men said there was going to be a link road through to Ravenswood by way of extension of Waratah Road.
Mr Edwards has no useful recall of what was said at the meeting between him, Mr Lieberknecht and Mr and Mrs Shaw. He said that his only function was to arrange the meeting and attend it with Mr Lieberknecht. It was a routine meeting for him and Mr Lieberknecht did most of the talking for the defendant. Mr Edwards was not involved in the development of Rocherlea and knew only that the purpose of the meeting was to try and avoid two commercial sites at Rocherlea. Mr Lieberknecht has no recollection of anything at all that was said at that meeting.
I accept the evidence of Mrs Shaw and I accept the substance of the evidence of Mr Shaw. Although there is some basis for the submission made by Mr Turner, counsel for the defendant, that Mr Shaw showed a tendency to exaggerate some parts of his evidence, there is no reason to doubt the substance of his evidence with respect to the making of the representations. In this respect, Mr Shaw's evidence was corroborated by Mrs Shaw. Mrs Shaw's evidence was totally unshaken in cross-examination. Mr and Mrs Shaw's account was not contradicted by direct evidence. Mr Lieberknecht agreed in cross-examination that at the time of his meeting with Mr and Mrs Shaw in early 1986, he saw Rocherlea as a subdivision with a potential for up to 700 houses, although he said that he was then aware of the defendant's wish to scale back broad acre development in favour of infill developments and spot purchases. Mr Lieberknecht said that at the time of the meeting, he knew of no plans to double the size of the estate within two to three years. However, Mr Lieberknecht must have believed that a considerable number of houses would be built at some time in the future, otherwise there would be no reason for him to prefer the Blackwood Drive land over the Reservoir Road land as the preferred site for a shopping centre. Indeed, unless the subdivision expanded, the better commercial site was the Reservoir Road land for it was situate on the main access road. Further, Mr Lieberknecht said in his evidence that he believed that Waratah Road would be extended across the subdivision in the direction of Ravenswood to the eastern boundary of the defendant's land as that was something the defendant was obliged to do to give the adjoining land access to a public road. As the Blackwood Drive land is located on the corner of Blackwood Drive and Waratah Road, an extension of the latter across the estate would place a shopping centre built at that location on a main access road. At the time of the meeting, building at Rocherlea was continuing. Evidence was led on behalf of the defendant that the defendant does not provide child minding centres and it was argued therefrom that it is unlikely that Mr Lieberknecht would have said that there will be a child-minding centre right next to the end of the Blackwood Drive site. However, the defendant's witnesses said that the defendant provided "neighbourhood houses" in broad acre developments, albeit from separate funding. With the defendant's approval, these houses were used by community groups such as child carers. The plaintiff's evidence was that such a house was in fact built next to the Blackwood Drive land. Accordingly, the evidence of Mr and Mrs Shaw was not only uncontradicted and unshaken in cross-examination, but it cannot be regarded as an unlikely account of what was said when it is compared to the evidence of Mr Lieberknecht and that of other witnesses.
Further, the evidence of Mr and Mrs Shaw about what was said at the meeting is consistent with the first letter of complaint that Mr Shaw wrote about this matter to the defendant in June 1988. The letter states, in part:
"We were assured at the time by the Officer's [sic] concerned that, (a) the Estate was to be doubled in size in the near future, (b) a link road was to be constructed to Ravenswood, and (c) necessarily, the proposed Shopping Complex in Waratah Road would be in the centre of the large housing development."
I have some reservations about the uncorroborated evidence of Mr Shaw that the defendant's officers agreed with his statement to the effect that if his son did not agree to move to the Blackwood Drive land, the defendant would compulsorily acquire the Reservoir Road land. I accept the evidence that at some early stage in the planning process that followed the acquisition of the Rocherlea land, the site adjoining the Reservoir Road land was marked for use as a high school, but that proposal was not developed and there appears to have been no need to compulsorily acquire the Reservoir Road land. It could not be acquired simply to prevent the plaintiff developing it. Mr Shaw said that the defendant's officers told him that the Reservoir Road land was wanted for a recreational centre. It is quite likely that during the hour long discussion, reference was made to compulsory acquisition of land and to the provision of a recreational centre, but I accept the evidence of the defendant's witnesses that such centres are not provided by the defendant and there is no evidence the defendant planned to use the Reservoir Road land for that use.
However, I am satisfied that it is more probable than not, that in early 1986, Mr Lieberknecht represented to Mr and Mrs Shaw that:
· the defendant's then intention was to double the number of houses in the Rocherlea subdivision;
· the defendant's then intention was to double the number of houses in the Rocherlea subdivision within three to five years;
· that Waratah Road would be extended in an easterly direction and form the beginning of a link road which would be constructed at some unspecified time in the future, to link Rocherlea with Ravenswood;
· in consequence, the Blackwood Drive land would be in the centre of approximately 700 houses and on a busy access road.
These representations are not quite as pleaded. The statement of claim, par6 provides:
"In or about late 1985 or early 1986 two officers, the identity of which [sic] the Plaintiff does not know, but being employees of the Firstnamed Defendant … advised, orally, one Gordon Arnold Shaw and Doreen Elizabeth Shaw at Archers' Manor in Launceston that:-
(a)Work on the proposed development was not to commence, as the Reservoir Road land was to be acquired by the Housing Department for alternative use;
(b)A housing development to be constructed by the Housing Department would include the Reservoir Road land;
(c)The Plaintiff would be offered an alternative site to development [sic] at land then situate on Blackwood Drive Rocherlea, which would form a part of the housing development to be undertaken by the Housing Department;
(d)The development to be undertaken by the Housing Department would double the size of the housing estate within the next three to five years;
(e)A link road would be constructed from the estate development through to Ravenswood;
(f)The Blackwood Drive site offered to the Plaintiff was well suited to the type of commercial development then proposed by the Plaintiff for the Reservoir Road site;
(g)When the housing estate was developed the Blackwood Drive site would be in the centre of the housing estate;
(h)A welfare centre to be established next to the Blackwood Drive site would be a 'draw card' to any commercial development to be established by the Plaintiff."
However, the findings are in accordance with the evidence of Mr and Mrs Shaw given on the first day of the trial. The trial was conducted upon the basis that such evidence constituted the representations in issue between the parties and in his final address, Mr Turner did not rely upon any variance between that evidence and the pleadings. Accordingly, this litigation will be determined upon the basis that the representations that I have found were made by the defendant's officers are the representations put in issue by this litigation.
Were the representations, misrepresentations of fact?
Each of the representations that I have found was made was a statement of the present intention of the defendant or, in the case of the link road to Ravenswood, some other authority. I venture to repeat the classic expression of Bowen LJ in Edgington v Fitzmaurice (1885) 29 Ch D 459 at 483, that "the state of a man's mind is as much a fact as the state of his digestion", a theme to which his Lordship returned in Angus v Clifford [1891] 2 Ch 449 at 470 - 471. I find that each of the representations were representations of fact. Mr Turner did not contend to the contrary. Further, the evidence satisfies me that the defendant did not have the represented intention at the time the representations were made, nor did any other authority then have the intention of constructing a link road to Ravenswood. Again, Mr Turner did not contend to the contrary, indeed, it was a large part of his case that in 1986, the respondent did not have the represented intentions and thus it was argued that it was unlikely that the representations were made.
Were the representations made in circumstances that gave rise to a duty of care?
The common law of negligent mis-statement has seen considerable development since Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556, but there is no need to trace its historical development over the last 30 years for the purpose of determining this case, nor to examine whether or not tortious liability for negligent mis-statement rests upon the underlying unifying principle of proximity. See Neighbourhood, Proximity and Reliance by McHugh J in Essays on Torts Ed P D Finn at 5; Hill v Van Erp (1997) 188 CLR 159 per Dawson and Toohey JJ. For the purposes of this case, it is sufficient to refer to and rely upon the following passage taken from the judgment of Gibbs CJ in Shaddock & Associates Pty Ltd v The Council of the City of Parramatta (1981) 150 CLR 225 at 231:
"It would appear to accord with general principle that a person should be under no duty to take reasonable care that advice or information which he gives to another is correct, unless he knows, or ought to know, that the other relies on him to take such reasonable care and may act in reliance on the advice or information which he is given, and unless it would be reasonable for that other person so to rely and act."
In San Sebastian Pty Ltd v The Minister (1986) 162 CLR 341, Brennan J (as he then was) said, at 372, that a duty of care arises in the following circumstances:
"Where a representor gives information or advice on a serious or business matter, intending thereby to induce the representee to act on it, the representor is under a duty of care in giving that advice or information if three conditions are satisfied. First (corresponding with the first condition expressed by Barwick CJ), if the representor realizes or ought to realize that the representee will trust in his especial competence to give that information or advice; second (corresponding with the third condition), if it would be reasonable for the representee to accept and rely on that information or advice; and third (applying the underlying principle of the law of negligence), if it is reasonably foreseeable that the representee is likely to suffer loss should the information turn out to be incorrect or the advice turn out to be unsound."
Application of the foregoing principles to the findings of fact leads to a finding that a duty of care arose at the time the representations were made:
· Mr Lieberknecht was a senior officer of the defendant.
· The meeting was arranged for the sole purpose of giving the owner of the Reservoir Road land business information concerning his proposed development of that land and concerning the potential for the development of the Blackwood Drive land.
· Mr Lieberknecht intended the owner of the Reservoir Road land to rely upon the information he supplied and realised that it was likely that he would do so. Indeed, that was the whole purpose of Mr Lieberknecht's visit to Archers'' Manor in early 1986.
· It was clearly reasonably foreseeable that the owner of the Reservoir Road land would be likely to suffer loss if the information that I have found was given, turned out to be incorrect.
The information was not given to the owner of the Reservoir Road land, but to his parents. By the statement of claim it is pleaded that the plaintiff's parents were his agents at the time of this meeting. The evidence with respect to this is scarce, although it is very clear that the plaintiff's father became the plaintiff's agent with respect to the events that occurred after this meeting. However, I am satisfied that agency is immaterial for present purposes. The defendant owed a duty of care to the plaintiff, even though the representations were not made to the plaintiff, but to his parents, because at the time of their making, Mr Lieberknecht knew, or ought reasonably to have known, that the information he was giving would be communicated to the plaintiff. In Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg) (1997) 71 ALJR 448, Brennan CJ said, at 452 - 453:
"The uniform course of authority shows that mere foreseeability of the possibility that a statement made or advice given by A to B might be communicated to a class of which C is a member and that C might enter into some transaction as the result thereof and suffer financial loss in that transaction is not sufficient to impose on A a duty of care owed to C in the making of the statement or the giving of the advice. In some situations, a plaintiff who has suffered pure economic loss by entering into a transaction in reliance on a statement made or advice given by a defendant may be entitled to recover without proving that the plaintiff sought the information and advice. But, in every case, it is necessary for the plaintiff to allege and prove that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff, either individually or as a member of an identified class, that the information or advice would be so communicated for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the kind that the plaintiff does enter into and that it would be very likely that the plaintiff would enter into such a transaction in reliance on the information or advice and thereby risk the incurring of economic loss if the statement should be untrue or the advice should be unsound."
Was the defendant in breach of the duty of care it owed the plaintiff?
Clearly there was a breach of the duty of care. Mr Lieberknecht was a senior planning officer of the defendant. There is no evidence that he made any enquiry prior to speaking to Mr and Mrs Shaw with respect to the defendant's then current plans for the future development of Rocherlea. Had appropriate enquiry been made before the representations were uttered, it would have become apparent that the defendant did not have the intentions attributed to it, nor did any other authority have an intention to construct a link road to Ravenswood.
Did the plaintiff rely upon the representations in embarking upon a chain of events that led to the signing of the contract and the building of the shopping centre?
The plaintiff returned to Tasmania shortly after the meeting between Mr Lieberknecht, Mr Edwards and his parents. The representations were conveyed to him. Together with his parents, the plaintiff inspected the Blackwood Drive land. He noted that the land was a little larger in area than the Reservoir Road land.
At that time, the chemist who had been interested in purchasing a shop to be built by the plaintiff on the Reservoir Road land, had withdrawn his interest. In result, the doctor's enthusiasm for the project had waned, as it was to have been a joint venture between him and the chemist. The plaintiff said, and I accept his evidence, that immediately prior to the representations being made, he still proposed to develop the shopping complex on the Reservoir Road land, notwithstanding that the chemist and the doctor had withdrawn their joint support for the project, provided he could secure firm purchasers or long-term tenants for the premises when built. The plaintiff said that about a week after inspecting the Blackwood Drive land, and after considering the representations that had been made, he decided to approach the defendant with a proposal that it purchase the Reservoir Road land at valuation and compensate him for moneys expended on his venture there, and that he purchase the Blackwood Drive land at valuation. As agent for the plaintiff, Mr Shaw wrote this letter (formal parts omitted) to the defendant, dated 24 February 1986:
"An approach has been made by your Planning Officer requesting that the above-mentioned lots 3926/7 be transferred to The Housing Commission in exchange for the above-mentioned substitution lots. This offer is acceptable in principal, [sic] however I wish to make the following points known to you:-
-Architects drawings have already been prepared for the proposed buildings to be erected on the sites required by you,
-Conveyancing costs and stamp duty will become payable should the proposal proceed and,
-My existing property is the subject of a mortgage to the National Australia Bank as security for my Overdraft. Substitution of security fees will be payable to the Bank should the proposal succeed.
Under these circumstances, you advice [sic] as to what extent the Department would be prepared to re-imburse [sic] for these costs is requested."
The plaintiff said that he would not have entertained that proposal but for the representations that I have found were made. Although the plaintiff said that he would not have entertained the proposal if any one of those representations had not been made, including that relating to compulsory acquisition, he did add that "the major draw card to me was the doubling of the size of the estate in the next three to five years".
I accept the plaintiff's evidence about this. It is a matter of common sense. The plaintiff would have been foolish not to take the opportunity to relocate his proposed shopping complex from the extreme edge of the Rocherlea estate to the middle of what was going to become a very large housing subdivision. I also accept the plaintiff's evidence with respect to the reverse proposition namely, that he would not have bought the Blackwood Drive land had the representations not been made. He said, and I accept, that had the representations not been made, he would have developed the Reservoir Road land had he been able to find purchasers or long-term tenants, and failing that, he would have sold it.
The defendant accepted "in principle" the plaintiff's proposal by letter dated 24 June 1986. There was a considerable delay between acceptance of the proposal and its implementation. This was due to the need to obtain a separate title and a change of zoning for the Blackwood Drive land. Eventually this was done and valuations obtained. As mentioned at the beginning of these reasons for judgment, the plaintiff and the defendant signed the contract for the plaintiff's purchase of the Blackwood Drive land on 16 April 1987. The purchase price was $40,000. The defendant paid the plaintiff $35,000 for the Reservoir Road land plus $2,500 compensation for moneys expended on its development and "thrown away". The defendant said, and I accept, that in the 12 months or so between the acceptance of the proposal and the signing of the contract, he visited the subdivision on a regular basis and noted that some building activity was going on. He described the rate of development as follows:
"I was under the impression that the rate they were going at, it was not going to be completed within the three to five years, but on the other hand, I was still satisfied that things were happening, they were, you know, making some progress."
The plaintiff said, and I accept, that just before the signing of the contract to purchase the Blackwood Drive land, the defendant extended Waratah Road a short distance to meet up with other roads servicing building allotments close to the Blackwood Drive land. He said that he made no enquiry about the defendant's plans for Rocherlea before he signed the contract to buy the Blackwood Drive land, but relied upon what the defendant's officers had told his parents about a year earlier. The following is taken from the plaintiff's evidence-in-chief:
"… were there any factors or any information drawn to your attention in that period which caused you to change the views you had formed after looking at the site? … No. I was still satisfied that things were still happening there and it may have appeared a little slow but I was still satisfied.
What was your state of mind about, what in particular, you had been told about the development of the estate? … There was no ¾ I didn't have any cause to question what I had been told because of what was continuing to happen there as far as the development."
I accept that evidence of the plaintiff and find that he executed the contract dated 16 April 1987 to purchase the Blackwood Drive land from the defendant in reliance upon the misrepresentations that I have found were made by the defendant and further, I find that had those misrepresentations not been made, he would not have executed the contract.
Did the plaintiff suffer financial loss?
I find that in consequence of entering into the contract the plaintiff has suffered loss that he would not have suffered had he not entered into the contract. In this context, causation has to be determined in a common-sense practical way. See Fitzgerald v Penn (1954) 91 CLR 268; March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506; Chappel v Hart (1998) 195 CLR 232 at 268 - 269.
As mentioned earlier, the contract obligated the plaintiff to construct a shopping centre on the land. Clause 6 provided:
"The Purchaser hereby covenants with the Director that he will commence the construction of a shopping centre on the said land within one year from the date hereof but the Director may if in his absolute discretion he sees fit extend the time for commencement of such construction beyond the said period of one year."
Construction of houses at Rocherlea did not proceed as represented by the defendant's officers. There was very little building after the contact was signed on 16 April 1987. The plaintiff said that at the time he signed the contract, some 360 houses and units had been constructed at Rocherlea and that in the period between then and shortly before trial, approximately only another 40 houses or units were constructed. No doubt this was due either to the shift in emphasis to infill development and spot purchasing or to reduced demand for public housing, or both.
In about mid 1988, the plaintiff became aware that the defendant did not intend to expand the Rocherlea subdivision by constructing another 300 or so houses. He discovered this when he was approached by a person who was interested in developing a service station in conjunction with the shopping centre. This person made enquiry of the defendant and reported to the plaintiff that it was not intended to increase by many the number of houses at Rocherlea. Thereupon the plaintiff formed the view that a shopping centre at Blackwood Drive would not be a financially viable proposition.
On 21 June 1988, the plaintiff's father, as agent for the plaintiff, wrote the letter to the defendant to which I have already referred, complaining about the misrepresentations. In the letter, Mr Shaw pointed out that as the subdivision was not going to double in size, there was no interest in the proposed shopping centre. The letter sought a release from all contractual obligations and the payment of compensation. The defendant's response was to place a caveat on the land. There was no justification for this course as the defendant had no caveatable interest in the land. In about August 1988 the plaintiff engaged real estate agents to sell the land, but they were unsuccessful. The plaintiff sought an extension of time within which to build the shopping centre, and by letter dated 27 September 1988, the defendant agreed to extend the time provided by the contract, cl 6, for two years.
The defendant engaged an architect to draw up plans. He decided that he should build a smaller centre than originally envisaged. The plans were for a take-away food shop, a small supermarket and another shop. The plaintiff began to build in about October 1988. As stage one of the development he built the take-away food shop only. The plaintiff had to borrow money to finance the building project. He borrowed from his solicitor. The take-away shop was completed about the end of 1989 and a tenant was found to lease it. In order to comply with his contractual obligation the plaintiff borrowed more money and proceeded to build stage two, the supermarket and the other shop. Construction was complete about the end of 1989 or early 1990. By that stage the plaintiff had exhausted all commercial avenues open to him to raise money for capital works. Rental income was insufficient to meet his financial obligations and he contemplated bankruptcy. The lessee of the take-away food store took a lease of the supermarket and moved the take-away food business into the supermarket. The plaintiff released the tenant from her obligations under the lease to enable this to occur. He said, and it was not challenged, that this was the only practical solution at the time. There was very little interest in renting the other two shops. Although one was leased for most of the time until sale, the rental was low. The other remained vacant for most of the time until it was sold. The plaintiff's parents came to his assistance firstly, by lending him sums of money from time to time when needed to meet creditors and secondly, by starting up a hairdressing business in one of the shops in the hope that it might attract a suitable tenant if it was a going concern. The loan from the plaintiff's parents was made upon the basis that it would be repaid if and when the plaintiff could manage it and although the plaintiff told his parents that he would repay it in full with interest, I find that the loan was repayable on demand, but there was no binding obligation on the plaintiff to pay interest on the outstanding amount. Accordingly, any claim for interest on this sum fails.
In order to sell the three shops, it was necessary for the plaintiff to divide the single title into three stratum titles. The supermarket was sold for $120,000 in May 1991, but the other two shops were not sold until February 1993 for a total sum of $60,000. The plaintiff claims that had the representations not been made, he would have not entered into the contract which imposed an obligation to build the shopping centre. As I have already said, I accept that claim.
What is the measure of the plaintiff's loss, including interest and taking into account the plaintiff's obligation to mitigate his loss?
The plaintiff claims loss on two alternative bases:
· the difference between the capital cost of the development of the shopping centre and its market value on completion plus interest on money borrowed until repaid and thereafter interest calculated in accordance with the principles established in Hungerfords v Walker (1989) 171 CLR 125; ("diminution in value" loss)
· the difference between the capital and consequential costs of the development of the shopping centre and the revenue and capital receipts therefrom plus interest calculated in accordance with the principles established in Hungerfords v Walker (supra); ("reinstatement" loss).
The plaintiff called Mr Jones, a qualified valuer, to give evidence. It was Mr Jones' opinion that at the time of completion of construction of the shopping centre its market value was $150,000. Although the plaintiff later sold it for a total of $180,000, Mr Jones said that the increase of $30,000 was due to the fact that between the date the building works were complete and the date of actual sale, the land was divided into three stratum titles. Mr Jones' opinion was supported by reasoned written argument. Mr Jones adhered to his opinion and reasoning during his cross-examination. The defendant called no expert opinion evidence of the value of the shopping centre. I accept Mr Jones' opinion and find that upon completion, the centre had a market value of $150,000.
Before trial, the plaintiff went through his financial records and prepared a large spreadsheet which detailed, under different headings, all his expenses and his income relating to the disposition of the Reservoir Road land, the acquisition of the Blackwood Drive land and the construction of the shopping centre. The spreadsheet was exhibit P54. It shows that a total capital sum of $228,971.42 was expended upon the development of the shopping centre. Mr Jones' evidence was that if that sum is correct, then the difference between the capital outlay and the capital value of the end result was $78,971 (rounded off). The logic is impeccable but, by the end of the trial, it appeared that there may be some errors in P54 which needed correction. Examination of many source documents became necessary. Further, an alteration to the figures on P54 meant that there had to be a recalculation of all the particulars of interest claimed. In order to save trial time doing this, counsel agreed that I should make the necessary primary findings with respect to the measure of damages and they should then be able to reach agreement or, failing agreement, address me further.
Mr McElwaine, counsel for the plaintiff, contended that the plaintiff was entitled to elect between the recovery of his loss measured upon a diminution in value basis and such recovery measured upon a reinstatement basis. His submission was that the assessment should be on the latter basis.
There is a fundamental difference between the assessment of damages for tort and assessment of damages for breach of contract. In Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1, Mason J (as he then was), Wilson and Dawson JJ enunciated this fundamental difference when they said, at 11 - 12:
"In contract, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the contract been performed ¾ he is entitled to damages for loss of bargain (expectation loss) and damage suffered, including expenditure incurred, in reliance on the contract (reliance loss). In tort, on the other hand, damages are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed (similar to reliance loss)."
Gates was concerned to find the appropriate method of assessing damages for a breach of the Trade Practices Act 1974 (Cth), s52(1), and held that the measure of damages in tort is appropriate, in most, if not all, cases under the Trade Practices Act, PtV. Of course, with respect to the issue of assessment of damages for breaches of the provisions of the Trade Practices Act, the High Court has since held in Marks v GIO Australia Holdings Limited (1998) 196 CLR 494, that the statutory provisions in the Act are not limited by analogy to the assessment of damages for either breach of contract or tort or in equity. However, the proposition that damages for negligence are awarded with the object of placing the plaintiff in the position in which he would have been had the tort not been committed remains unaffected by the decision in Marks. This proposition has been described as "the broad and fundamental principle as to damages" in negligence: see Megaw LJ in Dodd Properties Ltd v Canterbury City Council [1980] 1 WLR 433 at 451 although, with respect to some cases, as Kirby ACJ said in his dissenting judgment in Kyogle Shire Council v Francis (1988) 13 NSWLR 396 at 404, "like many statements of broad and fundamental principle, it tends to beg the question which is offered to answer".
However, this case does not give rise to the sort of questions and difficulties that arose in Kenny & Good Pty Ltd v MGICA(1992) Ltd (1999) 163 ALR 611. In this case it was not suggested that the plaintiff spent more money than he should have done in the building of the shopping centre, nor was it suggested that his borrowings for this purpose were imprudent. In the view of the finding that I have made that the plaintiff would not have entered into the contract to purchase Blackwood Drive, which contract included the obligation to build the shopping centre, the plaintiff is:
"entitled to be put, so far as money can do, in the same position as if [he] had not made the purchase. If the purchase had not been made the [plaintiff] would have kept the money paid to the vendor and would not have made the other payments in question;" per Gibbs CJ in Shaddock & Associates Pty Ltd v The Council of the City of Parramatta (supra) at 237.
In the same case, Mason J, (with whose reasons for judgment on the issue of the measure of damages, Stephen and Aickin JJ agreed) said at 255:
"The respondent is right in saying that the items were expenses to which the appellants would have been subject had the land been free from the road-widening proposal. However, this does not prevent the expenses from constituting recoverable damage. The judge found that, but for the negligent mis-statement, the appellants would not have bought the land, the land being useless for the purpose for which it was acquired. Consequently, the appellants' loss includes, not merely the diminution in value of the land, but also the expenses of acquisition and retention for a reasonable time, expenses which would not have been incurred had the respondent not been negligent. It was not suggested that the items in question fell outside the boundary of foreseeability. The measure of recoverable damages for negligent mis-statement is the amount of money necessary to restore the plaintiff to the position he was in before the statement, subject to the loss being foreseeable. The test is somewhat different from that applied in deceit (Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158, at p167 ) and breach of warranty (at p255)."
Assuming for the moment that P54 is accurate, it shows that the plaintiff expended a total of $375,466.82 in consequence of entering into the contract to purchase Blackwood Drive and after taking into account rents received and the proceeds of sale, he was out of pocket $117,595.52 at the time of the last sale.
On the issue of mitigation, Mr Turner, rather strangely it might be thought, submitted that the plaintiff ought to have mitigated his loss by rescinding the contract for the purchase of the Blackwood Drive land as soon as he became aware that he had entered into it as a result of a misrepresentation, and that had he done so, his loss would have been minimal. I say rather strangely, because the defendant's attitude had always been that the plaintiff was not entitled to rescind, and that the defendant intended to enforce the terms of the contract. This attitude was manifested (inter alia) by the placing of the caveat on the land and the refusal to remove it until the shopping centre had been built. There is no substance in the submission. Mr Turner also submitted on the issue of mitigation, that the plaintiff had elected to perform the contract and not rescind it, that this election caused the plaintiff to suffer almost all his losses and in consequence, the plaintiff cannot recover anything other than insignificant damages against the defendant. This submission confuses an action for damages for breach of contract with an action for damages for negligent mis-statement. The doctrines of so-called waiver and election have no application to the measure of damages for tortious conduct. I venture to refer to a decision of mine, Cohen v Wilson Dowd [1999] TASSC 123, in which these doctrines and their applicability were examined. I conclude that there is nothing that the plaintiff could have reasonably done but did not do, to mitigate the loss sustained by the defendant's tortious conduct.
With respect to interest, in the written calculations submitted by Mr McElwaine, there is a claim for interest on $117,595.52 "Accrued to date of sale (22/3/1993)". I will need to hear counsel further about this claim, for as I understand P54, the sum of $117,595.52 is the sum that the plaintiff was out of pocket by reason of entering into the contract for the purchase of the Blackwood Drive land as at that date.
Finally, there is a claim for interest at bank overdraft rates from time to time, capitalised monthly, from the date of the crystallisation of the loss until judgment. Of course, as Mr McElwaine submitted, the claim is not really a claim for interest, but another head of damage being:
"compensation for a wrongfully caused loss of the use of money and which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money or which was in fact paid upon borrowings which otherwise would have been unnecessary or retired"; per Brennan J (as he then was) and Deane J in Hungerfords v Walker (supra) at 152.
The plaintiff's evidence in this respect was throughout the whole period from 1993 to the date of trial, he borrowed various sums of money from banks in order to carry on his business. The evidence was to the effect that at no time since the completion of the shopping complex has the plaintiff been free of debt. He said that had he received the loss that he made upon the sale of the shopping complex at about that time, he would have used the money in his business, thereby rendering unnecessary the loans that he made. I accept that evidence. Mr Turner submitted that the plaintiff had failed to mitigate his loss by reason of dilatoriness in the prosecution of this litigation. A sheet of paper containing eight agreed facts was tendered in evidence. This shows that the statement of claim was delivered on 12 December 1990 and that the defence was delivered on 28 February 1991. The defendant delivered its list of documents on 26 April 1991 and thereafter until February 1998, the statement of agreed facts shows that there was no communication between the solicitors for either party, except for a notice of intention to proceed, delivered in July 1996.
In Watts v Rake (1960) 108 CLR 158, Dixon CJ said at 159:
"The law of course places upon a plaintiff who sues in tort for unliquidated damages the burden of satisfying the tribunal of fact of the damages he has suffered both special and general and of the quantification in money that should be adopted in the sum awarded. That is the legal burden of proof which rests upon him throughout. Only in one respect is the burden of proof upon the defendant and this is when he sets up matter in mitigation of damages. If it appears satisfactorily that damage in a particular form or to a particular degree has been suffered by the plaintiff as a result of the wrong but the defendant maintains that the plaintiff might have avoided or mitigated that consequence by adopting some course which it was reasonable for him to take, it seems clear enough that the law places upon the defendant the burden of proof upon the question whether by the course suggested the damage could have so been mitigated and upon the reasonableness of pursuing that course."
In James v Woodhall Duckham Construction Co Ltd [1969] 1 WLR 903, it having been established that the plaintiff knew that his psychiatric illness would continue until the litigation had concluded, it was held that the plaintiff was under a duty to mitigate his loss by prosecuting his claim with reasonable diligence. See also Donjerkovic v Adelaide Steamship Industries Pty Ltd (1980) 24 SASR 347 at 364 et seq. However, in this case there is no evidence of any facts other than those that I have set out. There is no evidence of why this litigation did not get to trial more quickly than it did. Indeed, it might have been the impecuniosity of the plaintiff, caused by the defendant's tort, that disabled him from bringing the case on for hearing at an earlier point of time. It seems to me that the following passage from the judgment of Bray CJ in Ruma v Christoff (1974) 9 SASR 289 at 293 is apposite, although I should point out that the passage has been the subject of criticism (obiter dicta) by Zelling J in Donjerkovic at 365:
"I have referred to this topic in Chapman v Heritage (1973) 6 SASR 464 and in Honey v Keyhoe (1973) 6 SASR 466. The effect of undue delay on the part of a plaintiff in prosecuting his action was discussed by Mitchell J in Tramoundanis v Weihart (1973) 4 SASR 530 and by the Court of Appeal in England in James v Woodhall Duckham Construction Co Ltd [1969] 1 WLR 903. I adhere to what I said in the first two cases and I respectfully agree with what was said in the other two cases. But there are some qualifications which I desire to mention, though I have mentioned some of them before. In the first place I adhere to the view that the mere fact of delay by itself proves nothing. It may have been the fault of the plaintiff: it may have been the fault of the defendant: it may have been no one's fault. It is for the defendant to prove matters in mitigation of damages and if he wants to argue that the plaintiff's damages should be reduced for delay, it is for him to show the plaintiff's responsibility for the delay. Next, in making allowance for delay it must always be borne in mind that the defendant has had the use of the money during the period of the delay, …".
In this case, I might add that had the defendant wanted to bring the litigation to finality earlier than has been the case, it could have applied for directions at any time after the defence had been delivered. It apparently chose not to do that and has had the use of the money that has been found due to the defendant over the whole of the period since the loss was sustained.
Accordingly I find that the plaintiff is entitled to recover interest on the money that he spent in consequence of the misrepresentations, less any amounts recouped by way of rents and sale, calculated at the same rate as the plaintiff's bankers charged him from time to time on his overdraft, capitalised monthly. There will be judgment for the plaintiff against the defendant, but I will postpone its entry until I have heard further from counsel as was agreed.
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