Simpson and Cater v Piagno

[1992] QCA 262

IN THE COURT OF APPEAL	[1992] QCA 262
SUPREME COURT OF QUEENSLAND	No. 110 of 1991
BETWEEN:

DONALD BRUCE OSBORNE SIMPSON

(First Plaintiff) First Respondent

AND:

ALAN GEORGE CATER

(Second Plaintiff) Second Respondent

AND:

MICHAEL JOHN PIAGNO

(Defendant) Appellant

REASONS FOR JUDGMENT OF THE COURT

Delivered the 26th day of June 1992

The appellant, Michael John Piagno, is a real estate agent. In that capacity he was the agent for the respondents in the sale of land owned by them severally pursuant to a

contract of sale in the standard form adopted by the Real Estate Institute of Queensland Limited and the Queensland Law Society Incorporated. The contract was dated 23 November 1988, the purchaser thereunder was Lockbourne Pty Ltd, and the sale price was $930,000. Item O provided for a deposit of $93,000 and cl. 1 provided:

"DEPOSIT. The Vendor's Agent shall be the Stakeholder unless another person is named in Item G. The deposit shall be paid by the Purchaser to the Stakeholder forthwith upon the execution hereof by the Purchaser. If the deposit or any part of it is paid by cheque which is not duly honoured on presentation the Purchaser shall immediately thereupon be in substantial breach of this contract and the Vendor may terminate this contract and forfeit the deposit. Whether or not the Vendor terminates this contract the Vendor shall be entitled to recover as a liquidated debt from the Purchaser so much of the deposit as has not been paid by the Purchaser. If the Vendor has not terminated this contract at the time of recovery of that amount then he shall pay the amount recovered to the Stakeholder under this contract. The deposit shall be retained by the Stakeholder until completion when it shall be accounted for to the Vendor. Any moneys payable to the Vendor by the Purchaser or the Stakeholder shall be paid to the Vendor or as the Vendor or the Vendor's Solicitor shall in writing direct."

No other person was named in Item G. In fact the appellant was named therein.

The respondents executed the contract on 23 November, the date which it bears. At that time it already bore the common seal of the purchaser. Immediately after they signed it, the appellant, in answer to a question, assured them that the deposit money was in the bank. That assurance was repeated on a number of occasions afterwards. In fact, as the trial judge found, that statement was never true and the appellant knew it was untrue.

All of this is common ground. There was no contest on appeal to the trial judge's conclusion that the appellant's statement that he had received the deposit was a fraudulent misrepresentation. His Honour then proceeded to assess damages in deceit and it is his Honour's conclusion in this respect that results in this appeal.

The contract did not settle on the due date because of default on the part of the purchaser. The respondents, on 10 May 1989, rescinded the contract and again it is common ground that, had the deposit been paid, they would have been entitled to forfeit it pursuant to the terms of the contract. His Honour assessed as damages for deceit the sum of $93,000, the amount of the deposit.

Counsel for the respondents concedes that it is difficult to justify his Honour's conclusion in this respect. We agree.

The sum of $93,000 could not, except by accident, represent the amount necessary to place the respondents in the position in which they would have been had the fraudulent misrepresentation not been made. Had it not been made, they may have elected not to proceed with the contract or to take the risk on its being paid later. There is no direct evidence one way or the other on this though it may have been possible to infer the former from their apparent concern, in conversations with the appellant, as to whether the deposit had been paid.

In any event even if the respondents established that, had they not been told that the deposit had been paid, they would have terminated the contract immediately, their only losses could have been the loss of a chance of resale or losses incurred in other investments which they would not have made if the representation had not been made.

The respondents did prove that, in reliance on receipt of the deposit as well as on the expectation of receipt of the balance of the purchase price, they caused Yalcan Pty Ltd to enter into three transactions of purchase. Yalcan was a company the shareholders of which were the respondents and their wives in equal shares. It entered into the transactions as trustee of a trust the terms of which were never proved.

The first of these transactions was for purchase of a property at Furnaux Street, Cooktown from a Mr Simpson, which property Yalcan still owned at the date of trial, notwithstanding efforts to sell. The whole of the purchase price, $80,000, together with a further $5,000 to cover some unidentified expenses, was borrowed from the National Australia Bank.

The second was a farm which Yalcan purchased for $91,500 from people named Verdon. Again, the whole of the purchase price was advanced by the Bank. Yalcan sold the land for $105,000. That sale was said to have yielded a profit but whether that included interest paid on the money borrowed is not clear.

The third of these transactions was a purchase of some land at Cooktown which was made subject to completion of the sale of the subject land. The deposit was borrowed from the Bank but repaid upon the transaction not proceeding. There was presumably some interest for which Yalcan incurred liability in the period between the advance of the deposit and its repayment, but this was not particularised.

All of the moneys advanced to Yalcan were guaranteed by the respondents and their wives as directors. They also guaranteed other amounts advanced by the Bank to Yalcan. By the time of trial, the Bank had made demand on those guarantees.

No attempt was made by the respondents at the trial to prove what their liability, if any, was to the Bank arising out of these three transactions. Given the Bank's security over the land the subject of the action and the land at Furnaux

Street, it may be unlikely that they will ever be obliged to pay any money to the Bank.

More importantly, although their pleadings contain a general allegation of loss consisting of "interest on money outlaid" and "alternatively extra interest paid on National Australia Bank loan" such interest was never particularised and the respondents' counsel informed the Court that her solicitor had advised the appellant's solicitor that the only interest claimed was on the sum of $93,000.

Consequently, not only is it unclear whether the respondents suffered any loss by causing Yalcan to enter into these transactions of purchase, but in any event they abandoned any claim for any such loss. Nor did they make any claim that they had lost the chance of resale by relying upon the representation. They therefore failed to prove any damage flowing from the deceit.

There are two other possible bases for a conclusion that the respondents were entitled to judgment for $93,000. Neither formed the basis of his Honour's decision and, though both were pleaded, neither appears to have been argued below and neither was argued in this Court before the Court itself drew attention to them.

It was pleaded in paragraph 6 of the respondents' plaint that it was an express term of the appellant's engagement by them that he would take a deposit of ten per cent of the sale price in respect of any contract of sale relating to the land. This allegation was denied. Had it been proved that there was a contractual promise by the appellant to get in the sum of $93,000 a breach of that term might have entitled the respondents to damages in that sum. No such term was, however, proved. It was common ground before this Court that there was a document in writing which recorded the appellant's retainer as agent. That is not surprising when one has regard to s. 70 of the Auctioneers & Agents Act 1971-1988. However, the document was never tendered and consequently it is impossible now to say what were the terms of that contract, express or implied.

The respondents' primary claim was for $93,000 being a deposit held by the appellant on the respondents' behalf. They also pleaded that the appellant was estopped from denying that he received the deposit. This allegation was denied. However, the appellant clearly represented to that effect and the respondents swore that, in reliance on that representation, they entered into other contractual commitments, the guarantees referred to above. It is arguable that the consequence of that is that the appellant was liable to the respondents as if that representation were true, and consequently was liable to them for the sum of $93,000 whether or not the respondents suffered any loss in consequence of that representation or a loss substantially less than that sum.

We should say at once that it would be a curious result if, by relying on estoppel, plaintiffs such as the respondents could recover a sum disproportionate to their loss by altering their position in reliance on a fraudulent misrepresentation. Nor do we think that that is the law.

On the contrary, the better view is that there must be a proportionality between the remedy and the detriment which is its purpose to avoid: The Commonwealth v. Verwayen (1990) 170 C.L.R. 394 at 413 per Mason C.J., 441-3 per Deane J., 487 per Gaudron J.

In the present case the respondents could have pleaded and proved their detriment, if any; the loss which they suffered in altering their position in reliance on the misrepresentation. However, they declined to do so. This denies them their claim of estoppel and consequently their right to recovery of a money claim.

In summary, the respondents, having proved fraudulent misrepresentation and that they relied on that misrepresentation by entering into contracts of guarantee of liabilities incurred by Yalcan, failed to prove any loss flowing therefrom or, put another way, failed to prove what, if anything, was required to avoid detriment to them. The action therefore must fail and the appeal must succeed.

We would therefore allow the appeal and set aside the judgment and order for costs made below. Instead, there should be judgment for the appellant. However, because of the appellant's undoubted fraud we would make no order for costs either here or below.

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	No. 110 of 1991
Before the Court of Appeal
Mr Justice Davies Mr Justice Pincus Mr Justice Derrington
BETWEEN:

DONALD BRUCE OSBORNE SIMPSON

(First Plaintiff) First Respondent

AND:

ALAN GEORGE CATER

(Second Plaintiff) Second Respondent

AND:

MICHAEL JOHN PIAGNO

(Defendant) Appellant

REASONS FOR JUDGMENT OF THE COURT

Delivered the 26th day of June 1992

MINUTE OF ORDER:	Appeal allowed. Judgment and order for costs made below set aside. Judgment entered for the appellant. No order as to costs here or below.
CATCHWORDS:	DAMAGES - MEASURE OF - Respondents awarded damages for deceit in sum equivalent to deposit following fraudulent misrepres- entation by appellant that deposit had been paid by vendor - whether that amount could represent sum necessary to place respondents in the position they would have been in absent fraud
Counsel:	Griffith Q.C. for the Appellant P. Wolfe for the Respondents
Solicitors:	McInnes Wilson & Jensen t/a for Lindsay & Co. for the Appellant Barry Johnson for the Respondents

Date/s of Hearing: 28 May 1992

IN THE COURT OF APPEAL

SUPREME COURT OF QUEENSLAND	No. 110 of 1991
BETWEEN:

DONALD BRUCE OSBORNE SIMPSON

(First Plaintiff) First Respondent

AND:

ALAN GEORGE CATER

(Second Plaintiff) Second Respondent

AND:

MICHAEL JOHN PIAGNO

(Defendant) Appellant

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DAVIES JA
PINCUS JA
DERRINGTON J
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Reasons for Judgment of the Court delivered the

26th day of June 1992

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"APPEAL ALLOWED.
JUDGMENT AND ORDER FOR COSTS MADE BELOW SET ASIDE.
JUDGMENT ENTERED FOR THE APPELLANT.
NO ORDER AS TO COSTS HERE OR BELOW."