Tenji v Henneberry & Associates Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Tenji v Henneberry & Associates Pty Ltd (ACN 009 168 629) [2000]
FCA 550

TRADE PRACTICES – misleading or deceptive conduct – contravention of s 52 of Trade Practices Act – sale of land – service station premises – misrepresentations as to value, rent and fuel sales – non-disclosure amounting to misleading or deceptive conduct – presence of easements – adequacy of fuel tanks – notice of purported rescission – no undertaking to account to vendors – small difference between value of land and purchase price – claim for avoidance of contract ab initio – s 87(2)(a) Trade Practices Act – criteria for grant of relief – relevance of equitable analogues – whether relief limited to declarations relating to contracts void by operation of some other rule of law – appeal allowed – cross-appeals dismissed – order for avoidance of contract – conditions attaching to declaration.

Trade Practices Act 1974 (Cth) s 52, s 87
Trade Practices Act Amendment Act 1977 (No 81 of 1977)
Trade Practices Revision Act 1986 (No 17 of 1987)
Trade Practices Legislation Amendment Act 1992 (No 222 of 1992)
Trade Practices Amendment (Fair Trading) Act 1998 (No 36 of 1998)

Trade Practices Commission v Milreis (1977) 29 FLR 144 distinguished
Sent v Jet Corporation of Australia Pty Ltd (1986) 160 CLR 540 cited
Fenech v Sterling (1984) 4 FCR 372 discussed
Kizbeau Pty Ltd v W G & B Pty Ltd (1995) 184 CLR 281 applied
Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 applied
Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 distinguished
Mister Figgins Pty Ltd v Centrepoint Freeholds Pty Ltd (1981) 36 ALR 23 discussed
Collier v Electrum Acceptance Pty Ltd (1986) 69 ALR 355 discussed
Henjo Investments Pty Ltd v Collins Marrickville Pty Ltd (1988) 39 FCR 546 applied
Munchies Management Pty Ltd v Belperio (1988) 84 ALR 700 referred to
ASX Operations v Pont Data Australia Pty Ltd (No 2) (1991) 27 FCR 492 applied
Alati v Kruger (1955) 94 CLR 216 distinguished
Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liq) (1965) 113 CLR 265distinguished
Maguire v Makaronis (1997) 188 CLR 449 applied
Brickenden v London Loan and Savings Co [1934] 3 DLR 465 applied
Gould v Vaggelas (1985) 157 CLR 215 applied
Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563 followed

Harland, The Statutory Prohibition of Misleading or Deceptive Conduct in Australia and its Impact on the Law of Contract (1995) 111 LQR 100
Skapinker, ‘Other Remedies ’under the Trade Practices Act – The Rise and Rise of Section 87 (1995) 21 Mon Univ Law Rev 188
Meagher, Gummow and Lehane, Equity Doctrines and Remedies (3rd Edition Butterworths 1992)

FRANK TENJI and MATTHEW TENJI v HENNEBERRY & ASSOCIATES PTY LTD (ACN 009 168 629), PALERMO NOMINEES PTY LTD (ACN 008 871 618) and GAETANO PALERMO
PALERMO NOMINEES PTY LTD (ACN 008 871 618) and GAETANO PALERMO v FRANK TENJI and MATTHEW TENJI, HENNEBERRY & ASSOCIATES…

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Details
Case
[2000] FCA 550
Decision Date

CaseChat Overview and Summary

The appeal before the court involved Mr and Mrs Tenji (the appellants) against Henneberry & Associates and others (the respondents). The appellants sought damages and claimed that the respondents engaged in misleading or deceptive conduct during the sale of a service station business, in breach of s 52 of the Trade Practices Act 1974 (Cth). The primary judge found in favour of the appellants and awarded them damages. The appellants challenged the refusal of the trial judge to declare the contract of sale void and to limit the damages to $10,000. The respondents cross-appealed the decision. The primary legal issue before the court was whether the trial judge correctly determined the nature and extent of the appellants' entitlement to damages for the respondents' misleading or deceptive conduct. The court also needed to decide if the contract of sale should be declared void from the outset. In resolving these issues, the court considered the precedent set by Marks v GIO Australia Holdings Ltd and the relevant provisions of s 87 of the Act. The court found that the representations made by the respondents during the sale negotiations constituted misleading or deceptive conduct. However, the court also concluded that the trial judge's assessment of the appellants' damages was incorrect. The court held that the contract of sale should be declared void ab initio. The court ordered that the contract between the appellants and the second respondent is void from the outset, subject to the parties agreeing on the terms of retransfer of the land, financial accounts, and compensation. The court also ordered the respondents to pay the appellants' costs of the appeal and cross-appeals, and required the respondents to file submissions on the costs of the cross-appeals. This decision reflects the court's interpretation of the relevant statutory provisions and the precedents in relation to damages for misleading or deceptive conduct.

Orders

Orders of the court

1. The appeal is allowed.

2. The cross-appeals are dismissed.

3. It is hereby declared that subject to the performance of terms to be ordered the contract dated 12 November 1996 between the Appellants and the Second Respondent is void ab initio.

4. The parties endeavour to agree within twenty one days the terms upon which the declaration set out in 3 above shall be made including orders providing for retransfer of the land, an account by the Appellants to the Second Respondent for any net financial benefit which has accrued to them by reason of their possession of the land and compensation by the Respondents to the Appellants for their reasonable expenses relating to the purchase including stamp duty, settlement agency fees and title registration fees and such other orders as are necessary to give effect to this judgment.

5. In default of agreement, the Appellants and the Respondents file minutes of proposed terms within twenty one days accompanied by their written submissions in support thereof.

6. The Respondents to pay the Appellants’ costs of the appeal and of the cross-appeals.

7. The Respondents to file written submissions within twenty one days as to the costs of the cross-appeals inter se.

Note:

Background

Background to the litigation

This is an appeal, by the applicants at first instance, from a judgment of a Judge of this Court awarding them damages against the respondents in the sum of $13,005. The learned primary judge found that the respondents had engaged in misleading or deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) (“the Act”) in relation to the sale to the appellants of a service station business and that the appellants were entitled to damages pursuant to s 87 of the Act. The appellants claim that the trial judge was in error in refusing to declare the contract of sale to be void and in limiting the amount of the loss or damage suffered by the appellants to $10,000 (plus overpayment of stamp duty and interest). Each of the respondents cross-appeal. The respective cross-respondents are referred to in the above heading. I shall refer below in more detail to those cross-appeals.Factual Background and the Proceedings at First Instance The following factual background is taken largely from the reasons of the trial judge. The appellants are Mr Tenji (Snr) and Mr Tenji (Jnr). The first respondent (“Henneberry & Associates”) carried on business as a real estate and settlement agent. The second respondent, Palermo Nominees Pty Ltd (“Palermo Nominees”) carried on business as, inter alia, a service station proprietor and had done so for a number of years. The third respondent (“Mr Palermo”) was a director of Palermo Nominees. At some time before October 1996 Mr Tenji (Snr) and Mrs Tenji, in cooperation with neighbouring landowners, engaged the services of Henneberry & Associates to assist them in relation to the rezoning of certain land. In the course of those activities Mr Tenji (Snr) and Mrs Tenji had frequent contact with Mr Henneberry and with Mr Murphy, a business broker employed by Henneberry & Associates. In October 1996, Mrs Tenji discussed with Henneberry & Associates whether it had a property on its books that would be suitable for purchase as an investment. On 6 November 1996 Palermo Nominees instructed Henneberry & Associates to offer for sale, at a price of $375,000, land and buildings on part of which a service station business was conducted at Hamilton Hill, a suburb south of Perth (“the property”). Palermo Nominees had been the registered proprietor of the property since 1981 and had operated the service station between 1982 and 1984. This was not the first time Palermo Nominees had offered the property for sale. On 8 November 1996 Mr Robinson, a salesman employed by Henneberry & Associates, informed Mrs Tenji that the property was for sale. Mrs Tenji said that Mr Robinson told her that it would be an excellent investment. Mr Robinson gave evidence that, at the time when he spoke to Mrs Tenji, he held the opinion that the property would provide a good return on investment. On 8 November 1996 Mr Tenji (Snr) and Mrs Tenji drove out to look at the property. They did not go on to the property or speak to the operator of the service station. The service station was at that time leased to and operated by Niandra Holdings Pty Ltd (“Niandra”). Mr and Mrs Tenji said they did not notice high voltage power lines suspended between towers which traversed part of the property.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Since writing the immediately preceding paragraph I have had the benefit of reading French J’s draft reasons for judgment and in particular his Honour’s review of the decisions relating to s 87. I agree, respectfully, with his Honour’s assessment that Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 and the series of decisions of Full Courts of this Court to which his Honour refers, provide more authoritative guidance on the operation of s 87 than what was said in Trade Practices Commission v Milreis (1977) 29 FLR 144 and, by way of obiter dictum, in Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15. I think that Parliament’s intention was quite clearly to confer on the Court wide discretionary powers, including the power to declare contracts void ab initio, in circumstances where the common law would not provide a basis for the grant of such relief.The Decision at First InstanceThe Representations The trial judge found that the representations set out below had been made in the course of the negotiations prior to sale. His Honour then considered whether, in the context of the entire conduct of Henneberry & Associates and Palermo Nominees, the making of those representations constituted misleading or deceptive conduct upon which Messrs Tenji had relied in deciding to purchase the property. The findings of fact made by his Honour in relation to the statements made at the meeting on 11 November 1996 between Mr Tenji (Snr), Mrs Tenji and Mr Murphy of Henneberry & Associates were as follows:1. “The property has just come on the market” The property had been offered for sale by Palermo Nominees in October 1994 for a price of $495,000. Palermo Nominees had given selling agents (not Henneberry & Associates) an exclusive authority to sell the property for a period of 120 days. The exclusive authority was reinstated for a period of 60 days in May 1995. The lessee gave evidence that over two or three years prior to the sale to Messrs Tenji an agent had brought prospective purchasers to the property. Henneberry & Associates was aware that Palermo Nominees wanted to sell the property and, accordingly, Mr Robinson approached Palermo Nominees to obtain the “listing”. The evidence was that the “listing” was sought to be able to offer the property to Mr Tenji (Snr) and Mrs Tenji as a suitable asset to purchase as an investment. His Honour found that it did not follow that failure to disclose that information invalidated a statement that the property was being offered for the first time to the market as it stood in November 1996. His Honour said that there were sufficient circumstances to permit the conclusion that a statement that the property had “just come on the market” although, as his Honour put it, “on the margin of accuracy” was not rendered inaccurate by refraining to say that the property had been offered for sale between October 1994 and July 1995. The trial judge found that this was not conduct that was misleading or deceptive.2.“The property is worth more than $370,000 and represents a good opportunity to obtain a property that could be resold for $500,000 in the short term.”

Ratio Decidendi

Legal Principle Established

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