Vettese & Anor v Kemp & Ors No. Scgrg-99-793
[2000] SASC 154
•8 June 2000
VETTESE & ANOR v KEMP & ORS
[2000] SASC 154
Full Court: Duggan, Debelle and Bleby JJ
DUGGAN J.
Introduction
The first respondents, Mr and Mrs Kemp, purchased a house at Wynn Vale from the appellants, Mr and Mrs Vettese. Their agent for the sale of the property was the third respondent, Fenwick Ennis Pty Ltd (Fenwick Ennis), and it acted through its servant who is the fourth respondent, Mr Vincent. Mr Vettese is a licensed builder and he assisted in the construction of the premises. The allotment on which the house was constructed is on a pronounced slope downwards towards the street frontage and an extensive excavation had to be carried out in order to level it. This resulted in high embankments at the rear and on one side of the house.
The Kemps purchased the property in January 1995. In October 1996 a large section of rock fell from the embankment at the rear of the premises. This caused a wall consisting of railway sleepers adjacent to the embankment to buckle outwards towards the house. The Kemps were then advised by an expert engineer that a proper retaining wall should have been constructed to keep the embankments in place. They discovered that planning and building approval had been given by the local council to Mr Vettese for the construction of a retaining wall, but the wall had not been built to the specifications in the application provided to the council for approval. They also discovered that council approval had not been obtained to build a verandah with an overhead pergola which had been constructed at the rear of the house. The roof of the pergola was constructed with clear plastic sheeting and the plaintiffs discovered that the roof leaked when it rained.
Mr and Mrs Kemp instituted proceedings against the various defendants in the District Court. Their complaints were in relation to what they claimed was an inadequate retaining wall and the alleged faulty construction of the pergola.
The learned trial judge found the Vetteses were liable to the Kemps in negligence for failing to construct an appropriate retaining wall. He also upheld a claim by the Kemps for breach of contract by Mr and Mrs Vettese. Furthermore, his Honour found that Mr Vincent made representations to Mr and Mrs Kemp for which the Vetteses were vicariously liable. The judge found that the representations were actionable under the Misrepresentation Act 1972 as against the Vetteses. However, he found that Mr Vincent was not liable under the Act as he was entitled to the benefit of the defence provided for in s 7(2)(a) by reason of the fact that he had reasonable grounds to believe, and did believe, that the representations were true. A claim for contribution issued by the Vetteses against Vincent was dismissed. His Honour assessed damages in the sum of $57,822.
The appellants have appealed against the whole of the judgment, including the award of damages.
Before dealing with the grounds of appeal, it is necessary to refer in more detail to the events relating to the construction of the house.
The construction of the house
The vacant allotment was purchased by the Vetteses in about 1990. They set about preparing for the construction of the house a short time later. In addition to obtaining house plans, they sought advice from Structural Systems Pty Ltd (Structural Systems) on the engineering works required in the course of construction. Structural Systems provided a report dated 17 July 1990.
The site excavation was one of the matters dealt with in the report. At first it was anticipated that the height of the embankment at the rear of the property after the excavation would be 1.8 metres. However, this was later increased to 2.8 metres. As I have said, when the excavation was carried out it resulted in embankments at the rear and to one side. The embankment at the side decreased in height until it reached a minimal level at the street frontage.
The advice in the Structural Systems report included the following:
“It is imperative that the owner or builder provide sufficient supervision of the cut and fill operation in order to ensure that the following requirements for satisfactory completion of the cut and fill drainage scheme proposal are adhered to ...
Cut or fill on the boundary should not exceed 300 mm (unless a suitable retaining wall is specified).
Cut on the boundary should not undermine any structure that exists on an adjacent property.
Generally cut or fill within the property (i.e. not on boundary) should not exceed 750 mm unless a suitable retaining wall is specified ...
Note that although Adelaide and environs is not noted as a problem area for soil slippage, attention should be given to this possibility on steeply sloping sites. It is recommended that on steep sites an engineer should assess the risk of slip failure prior to commencement of footing design. This would, of course, necessitate a visit to the site and if a problem is envisaged, a slope stability analysis may be necessary.”
The report contained a drawing described as “Retaining Wall Details”. It was accompanied by specifications for various types of retaining wall construction at various locations along the boundary. The learned trial judge summarised this aspect of the report:
“Broadly speaking, the type of wall proposed for each location varied according to the height of the embankment to be retained. A similar method of construction was prescribed for each wall, however, involving the fixing of galvanised beams (described variously as ‘U’ or ‘I’ beams) in concrete-filled piers at specified intervals, the placement of wooden sleepers between the grooves in adjacent sets of beams and the placement of an agricultural drain and granular back-fill on the boundary site of each structure. The variations in each type of wall design related to height, footing strength and the relative sizes of beams and sleepers.
The largest embankment was, of course, at the rear of the property. The retaining wall there was at first proposed to be 1800 mm in height and, later, that became 2800 mm. That wall was proposed to extend along the rear boundary and then some distance into each of the side boundaries, before reducing in height and size on account of the natural fall of the adjoining land.”
The Structural Systems report, including the details relating to the retaining walls, formed part of the application for council approval. Soon after receiving approval from the council, work was commenced on the site. Mr Vettese said in evidence that he did not have general building skills, but he subcontracted the construction. He supervised the building and assisted in some of the tasks.
When the excavation was completed, Mr Vettese decided not to construct retaining walls in accordance with the plans and specifications which had been approved by the council. He concluded that it was unnecessary to do so as the walls were, in his view, “self retained”. He said he did not consider that the council had required the walls to be constructed. According to his evidence, it was his view that the construction of the walls was optional. He used the analogy of obtaining approval for a swimming pool to be constructed where the owner decides subsequently not to install the pool.
Although the Vetteses did not build retaining walls in accordance with the plans and specifications approved by the council, Mr Vettese did construct a series of walls adjacent to or on the side and near the property boundaries. The trial judge described these structures in his judgment:
“(1).. a small retaining wall along a substantial part of the south-western boundary. That wall was between 1000 and 1500 mm high and continued to a point some six metres or so short of the western corner where the sharp rise in height to the north-western embankment began. Mr Vettese said this wall was adequate to support the higher level of his south-western neighbour’s land. Whilst the general dimensions of this wall were not roundly criticised by the plaintiffs’ engineering expert, there was criticism over certain aspects of its construction and I will come to that later. This wall also encroached on the neighbour’s land, but the plaintiffs ultimately did not pursue their encroachment claim;
(2)a retaining wall which effectively cut across the western corner of the property, from about the point where the south-western retaining wall began its rise towards the western corner (some 6.5 metres short of that corner) to a point adjacent to the rear embankment and about half-way across the property. It effectively supported a garden bed established in that corner. The rear embankment then rose, unsupported, from that bed;
(3)... later, in or after 1993, he continued that same wall in a north-westerly direction from that point it met the embankment along to the northern property corner, but using a slightly different construction, deploying sleepers instead of pine logs. From that northern corner, it turned at a right-angle and continued a short distance into the north-eastern boundary. Mr Vettese said that this third stretch of walling was never intended to be a retaining wall: it was only 800 mm high and did not touch the rock face of the embankment adjacent to it. The embankment sloped away from its foot.”
The third wall is the one bordering the embankment which was involved in the rock fall. The walls of two bedrooms in the house are about one metre from this wall.
The appointment of agents to sell the house
The Vetteses decided to put the house up for sale towards the end of 1994 and Mr Vincent was approached through Mr Vettese’s father to see whether he would act as agent. Mr Vincent inspected the house and spoke to Mr and Mrs Vettese. Mr Vettese told him that he was a builder and Mr Vincent then pointed out to him that under the terms of the Standard Real Estate Institute of South Australia Contract Mr Vettese would be required to give a warranty in relation to the “necessary consents and approvals”. Mr Vettese said he had received the necessary approvals.
The Sales Agency Agreement was signed by the Vetteses on 20 October 1994. In it they warranted that the information given to the agent was and would be true and correct in all respects. Mr Vincent said that when explaining this document to them he reiterated his intimation that in the contract note there would be a clause containing a warranty that necessary consents and approvals had been obtained from the council. Mr Vettese said he could not recall any conversation with Mr Vincent about approvals and consents prior to the signing of the Sales Agency Agreement. However the trial judge thought that the witness prevaricated on this issue and he accepted the evidence of Mr Vincent.
Inspection of the property and the alleged misrepresentation
Mrs Kemp went to inspect the property on about 22 January 1995. She said she spoke to Mr Vincent during the inspection. She said in evidence:
“A.... He asked me what I thought of the house, and I told him that I loved it, and that it suited what we were looking for, because my mother was going to be coming and living with us, and the fact that it had two en suites would suit so my mother could have one and Keith and I would be able to have the other, and that would leave the bathroom free for the girls. I did mention that I was a bit concerned at the back of the house, because of the height of the retaining walls, and the height of the embankment, and he assured me that the house, garage, retaining walls, all had been built to council approval and specifications, and that made me feel a lot better.
Q When you say that he assured you, what words did he use?
A...... I can’t remember them exactly, but it was that he was, I think it was, he was positive that they had been built to council approval, and specifications.
QAnd when you say that they had been built according to council (sic)?
A...... That was the house, the garage and the retaining walls at the back.
QWho was it that actually specifically referred to all three structures; the house, retaining wall and the garage?
A...... The land agent.
QWhat was it that you asked him about the retaining walls after having seen them?
A...... I was concerned about the height of the embankment to the walls because of the embankment being made out of the rock and clay, and because of its close vicinity to the back of the house where our two youngest children, that’s where their bedrooms were going to be.
QHad you seen any properties with retaining walls before, had you had any experience with them?
A Yes, we had a retaining wall at our previous property.”
Mr Vincent’s version of the conversation was as follows:
“A.... There was general discussion and Mrs Kemp was indicating that she was impressed with the storage in the home, the bedrooms had very extensive highly detailed and tailored storage with drawers and shelving etc. Which is not common in a lot of homes. She had three lovely little girls and I could see that was a requirement for her. There was discussion about how she held meetings at home and she needed a large area and the family room gave her a capacity to do that and she also asked me if there were council approvals on the property.
QWhat was your response to that question?
A...... My response to her question as I recall it and I believe I can recall it quite clearly, was that, are there council approvals on the property. It was just in the course of general discussion. I would say that the discussion in relationship to approvals probably lasted something in the order or about 20 or 30 seconds in total. In response to the question, I said that there are council consents on the property. I indicated I did have a document from council which referred to the consents which I could make available but that she should make her own inquiries.
QIn relation to the document that you were referring to, where had you obtained that document from?
A...... That document was part of the normal council s90 search which was ordered through Corsers’ solicitors.”
Mr Vincent was adamant that he did not say that any structure was erected in accordance with council approval. He said no agent in his position could make such a comment; all he could say was that there were council approvals on the property.
The trial judge accepted Mrs Kemp’s evidence that she was concerned about the retaining wall and that she expressed her concern in the manner deposed to by her. However, he preferred Mr Vincent’s evidence as to the reply which she was given. He found that in answer to her expressed concern, Mr Vincent advised her that there were planning consents and building approvals for the property.
The trial judge did not accept that Mr Vincent had given an undertaking of this nature in as many words. However, he reached the conclusion that a reasonable inference could be drawn from the context of the conversation that Mr Vincent was implying that council approval had been given for the structure to which Mrs Kemp had drawn attention and that it purported to comply generally with that approval. The learned trial judge expressed his finding on this aspect in the following passage:
“He (Mr Vincent) has responded to a concern expressed by Mrs Kemp about a particular structure (i.e. the rear embankment retaining wall) by saying there are planning consents and building approvals for the entire property. I find that such a response has necessarily implied that the rear embankment retaining wall is a structure for which planning consents and building approvals have been obtained and, further, which purports to generally comply with those consents and approvals. Such a response has been a misrepresentation and misleading or deceptive conduct on two grounds:
(i) because, as I have mentioned, no such approval or consent ever existed for that particular structure in that particular location;
(ii) even if that conclusion is wrong, that particular structure manifestly never purported to comply with any approval or consent.”
His Honour found that Mr Vincent’s assurance was acted upon by Mrs Kemp. However he said that in his view the representations were made innocently. He went on to find that Mr Vincent had reasonable grounds to believe, and did believe, that the representation he made was true, thus entitling him and the third respondent (Fenwick Ennis) to the benefit of the defence provided for in s 7(2)(a) of the Misrepresentation Act.
Mr Clayton QC, for the appellants, criticised this finding. He said neither witness deposed to the conversation which, according to his Honour’s findings, took place and that the findings amounted to a reconstruction.
In my view his Honour was entitled to approach the matter in the way in which he did. He considered that both these witnesses were attempting to provide a truthful account. He accepted Mrs Kemp’s statement that she expressed her concern about the retaining wall. On the other hand he was not prepared to find that Mr Vincent had said the construction was in accordance with the approval. It was open to his Honour to accept parts of the evidence of the witnesses and reject other parts of their evidence. Apart from his Honour’s favourable view of Mrs Kemp’s general credibility, it was not difficult to accept that she expressed concern about the retaining wall. The height of the embankment at the rear of the house was considerable. It was only a metre away from the bedrooms which were to be occupied by her children. She was aware of the nature of retaining walls from previous experience. On the other hand, Mr Vincent gave reasons as to why he would not have given an express undertaking that any structures had been erected in conformity with council approval.
In my view there is no reason to criticise the findings of the trial judge in relation to the making of the representation during this conversation. He said that, it must have been plain to Mr Vincent that Mrs Kemp was worried about the ability of the retaining wall to perform its function. According to the trial judge’s findings, Mr Vincent replied to this expression of concern by saying that there were planning consents and building approvals for the entire property. He would not have responded in this manner unless he was attempting to answer her concerns. The clear inference to be drawn from his reply was that the council had approved the retaining wall which they were discussing. This representation was relevant because, if the council had approved it, there was independent confirmation of its appropriateness to perform the task of a retaining wall. Mrs Kemp relied upon what she had been told. She said in evidence that Mr Vincent’s statement made her feel a lot better. She also said that what she was told influenced her to buy the property. Mr Vincent did not intend to make the representation to the extent that it was understood. However it was implied in what he said and would have been understood as such by an independent observer. It was an innocent misrepresentation.
Documentation concerning council approval
This was not an end to representations about council approvals. Mr Vincent said in evidence that he told Mrs Kemp at the time of the conversation referred to above that he had a document from the council which referred to the consents and he would make it available to her although she should make her own enquiries. He said in evidence that the document was part of the section 90 searches he had caused to be carried out. He said he decided to make that document available to her when the contract for the purchase of the house was signed in the event that she and her husband decided to purchase it. He said this was contrary to the usual tactical position he adopted. Generally speaking he did not provide information required by the relevant regulations until an offer had been accepted by the vendor. In any event this was not a document which was required to be disclosed by the Land Agents, Brokers and Valuers Regulations. Mr Vincent provided it in accordance with his undertaking to do so. As things turned out, Mr Kemp signed the contract and so Mr Vincent showed the document to him. The document, which is Annexure B to the contract, is in the form of the Sixth Schedule to the South Australian Planning Act Development Control Regulations 1982. It is addressed to Mr Vettese and states that approval has been given in relation to a proposed development described as:
“Erecting a dwelling/garage and retaining wall”.
It states that consent is granted subject to the condition that:
“The development be undertaken in accordance with the plans and information detailed in Application No. 070/12024/90 except where varied by any conditions herein listed which must be fully complied with to the satisfaction of the Council (regardless of any change of occupier or owner of the premises).”
Mr Kemp said that if it had not been for this material being presented to him he would have commissioned a professional report before completing the contract.
Was there a misrepresentation?
The discussion and other events in relation to this issue of consent and approval by the council demonstrate to my mind that it was an important consideration in the history of the negotiations for the sale of the house and not just something mentioned in passing. In my view Mr Vincent made a representation to Mrs Kemp which created the false impression that approval had been given for the retaining wall which they were discussing. She relied upon the representation in deciding to go ahead with the purchase. The representation to Mr Kemp through the documents presented by him was not as pointed, but I think it confirms the relevance and importance of the representation made to Mrs Kemp.
I cannot accept the argument put forward by Mr Clayton that the statement of Mr Vincent could not amount to a misrepresentation because the wall which was actually constructed did not serve the purpose of a retaining wall so that there was no need to secure council approval for it. This argument overlooks the context of the conversation and the nature of the misrepresentation as found by the trial judge. The discussion between Mrs Kemp and Mr Vincent was in relation to what had been erected. Mrs Kemp referred to it as a retaining wall, no doubt because she thought that this was its function. The comment by Mr Vincent was made in relation to the same structure. The gravamen of the misrepresentation was that council approval had been given for that particular structure. This had the effect of putting Mrs Kemp’s mind at ease. If the structure as erected was nothing like that which council had approved, then the fact that council approval was not needed for what was put there does nothing to detract from the misrepresentation. Indeed it could be looked upon as part of the proof of the falsity of the representation.
I would also reject the argument that it was open to the Vetteses to treat the building of the retaining walls specified in their plans as an option which they need not pursue. It is necessary to have regard to some of the history of the application to the council to make this clear. Mr Vettese submitted an application for building approval to the Tea Tree Gully Council. The application was dated 24 July 1990. Annexed to it was the Structural Systems report in relation to the retaining walls including the drawings which had been prepared by that company.
Then on 31 July 1990 the council wrote to Mr Vettese in the following terms:
“After checking the application it has been noted that Council approval pursuant to the Development Control Regulations is required in addition to your Building Application for the building to be sited as submitted. A fee of $35.00 is required to be lodged with Council prior to processing of the application.”
It would appear that planning consent was given on 27 August 1990. The proposal was referred to in the council file as “Erecting a Dwelling/Garage & Retaining Wall”.
The council sought engineering advice on the proposed structure of the retaining walls from B.C. Tonkin and Associates, Consulting Engineers. A representative from that firm discussed the matter with Mr Vettese. Structural Systems also submitted additional details to B.C. Tonkin. B.C. Tonkin reported back to the council on 31 August 1990. The report recommended approval of the retaining wall design subject to two conditions.
On 17 September 1990 Mr Vettese wrote to the council advising that the two conditions for the design and construction of the retaining wall would be met. Finally, on 19 September 1990, building approval was given. It stated that:
“Approval is granted in accordance with the documents submitted for the construction of dwelling.”
and then referred to the address of the premises. The approval also stated:
“No portion of the retaining wall shall encroach the adjacent allotment.”
I agree with the submission of Ms Layton QC, for the third and fourth respondents, that the approval for the construction of the house could not be separated from the requirements in relation to the excavation of the site and the construction of the retaining wall. This is not a case in which some severable aspect of a proposal such as a swimming pool can be proceeded with at the option of the owner. The excavation and the construction of the retaining wall were directly related to the construction of the house and had implications for neighbouring property owners.
The next argument on the misrepresentation issue was concerned with the legislative and regulatory basis of the consents and approvals for the construction. The trial judge stated that the requirement for building approval in relation to the excavation and retaining walls was to be found in the Building Act 1970 and the regulations made thereunder. He said that there was no doubt that, at the relevant time, the excavation and the construction of the retaining wall required building approval from the council. One of the grounds of appeal complains that his Honour erred in having regard to these regulations as they were not tendered and no evidence was called on the issue of compliance or non-compliance with them.
On the hearing of the appeal Mr Clayton pointed out that the Building Act 1970 was repealed on 28 May 1993 and he stated that some parts of the structures with which we are concerned were built after the repeal of the Act. He attached some significance to the fact that the regulations in force at the time of council approval had ceased to exist by the time some parts of the retaining wall had been constructed.
However, it is my view, that these arguments focusing on sanctions are irrelevant to the nature of the misrepresentation made in the present case. As I have pointed out, it was part of the implied representation found by the trial judge that the walls which had been built were constructed in accordance with council approval which had been given some time previously. It was the fact that at some stage the council had approved the wall which influenced Mrs Kemp. Her primary concern was with safety, not with the question as to whether there was a requirement to abide by the terms of any particular approval at the time the wall was constructed.
The Misrepresentation Act 1972
In my view the learned trial judge was correct in finding that the facts disclosed a misrepresentation by Mr Vincent and that the misrepresentation was actionable subject to any defence which might arise by virtue of the Misrepresentation Act s 7(2).
It is convenient at this point to refer to the relevant parts of s 7. The section states:
“(1) Where a contracting party is induced to enter into a contract by a misrepresentation made -
(a) by another party to the contract; or
(b) by a person acting for, or on behalf of, another party to the contract; or
(c) by a person who receives any direct or indirect consideration or material advantage as a result of the formation of the contract,
and any person (whether or not he or she is the person by whom the misrepresentation was made) would, if the misrepresentation had been made fraudulently, be liable for damages in tort to the contracting party subjected to the misrepresentation in respect of loss suffered by him or her as a result of the formation of the contract, that person is, subject to subsection (2), so liable to that contracting party, in all respects as if the misrepresentation had been made fraudulently and were actionable in tort.
(2) It is a defence to an action under subsection (1) -
(a) that the person by whom the representation was made had reasonable grounds to believe, and did believe, that the representation was true; or
(b) that the defendant was not the person by whom the representation was made and did not know, and could not reasonably be expected to have known, that the representation had been made, or that it was untrue.”
The effect of the section is to permit recovery in respect of an innocent misrepresentation in contractual situations. The cause of action is modelled on the common law action of deceit. (The Laws of Australia Vol 35.2 par 54). The provisions cover misrepresentations made by a party to a contract as well as misrepresentations by an agent. A defence appropriate to each of these categories is provided for in ss 7(2)(a) and (2)(b) respectively.
The learned trial judge concluded that Mr Vincent had made out the defence under s 7(2)(a). It was suggested by the appellants’ counsel that there was an inconsistency in finding that Mr Vincent had made out the defence, but the Vetteses were held liable for the misrepresentation. In my view there is nothing inconsistent either on the facts or in the application of the facts to the statutory provisions which renders those findings inconsistent.
Vicarious liability of the owners
The next question is whether the Vetteses were vicariously liable for the statement of their agent. The nature of the role of an estate agent such as that performed by Mr Vincent on behalf of the Vetteses was explained in the joint judgment of Dixon, Fullagar and Kitto JJ in Petersen v Moloney (1951) 84 CLR 91 at 94:
“In connection with sales and purchases of property the word ‘agent’ is apt to be used in a misleading way. The legal conception of agency is expressed in the maxim ‘Qui facit per alium facit per se’, and an ‘agent’ is a person who is able, by virtue of authority conferred upon him, to create or affect legal rights and duties as between another person, who is called his principal, and third parties. When a person is employed to find a buyer of property, he is commonly said to be employed as an agent, and the term ‘estate agent’ is a common description of a class of persons whose business is to find buyers for owners who wish to sell property. But the mere employment of such a person under the designation of agent does not, apart from the general rule that the employer will be responsible for misrepresentations made by him, necessarily create any authority to do anything which will affect the legal position of his employer.”
It has been said that it is within the scope of the agent’s authority to describe the property and state to third parties circumstances which might affect its value. (Mullens v Miller (1882) 22 Ch D 194 at 199). These are matters within the usual authority of the agent. (See also Boscaini Investments Pty Ltd v Petrides & Anor (1982) 103 LSJS 250, a case involving a representation concerning the nature of the construction of a factory floor by a firm of auctioneers. The representation was held to be actionable under the Misrepresentation Act).
However, in the present case the matter went further. The issue of consents and approvals was raised between Mr Vincent and Mr Vettese before the conversation with Mrs Kemp. There had been a failed attempt to auction the property on 3 September 1990. Before that date Mr Vincent discussed with Mr Vettese the information contained in the section 90 statement which included Annexure B, the document referring to the planning consent. I have pointed out that consent was subject to the requirement that the development be undertaken in accordance with the plans and specifications submitted to the council. I have also referred to the conversation between Mr Vincent and Mr and Mrs Vettese when Mr Vincent first inspected the house. On this occasion Mr Vettese said he was a builder. Mr Vincent explained that a warranty would have to be given in relation to the necessary consents and approvals. Mr Vettese then said that the approvals had been obtained. Mr Vettese must have been aware that this information could well be passed on to potential purchasers and it is clear that Mr Vincent had implied authority to do so.
Although intention is not relevant to innocent misrepresentation, it is of some significance to observe that Mr Vettese could not have been under any misapprehension about the nature and significance of the information about approvals and consents. He well knew that he had not built a retaining wall in accordance with council approval. As a builder he was aware of the importance for such a precaution where appropriate. He had erected a structure which, particularly at the rear of the premises was capable of giving the impression of being a retaining wall. This is how Mrs Kemp viewed it. It was not an ornamental structure. In advising his agent that all consents and approvals had been granted, Mr Vettese was either aware or he should have been aware that misleading information of the type that was, in fact, passed on to Mrs Kemp could be passed on to potential purchasers.
However that may be, it is my view that the making of representations concerning consents and approvals in relation to the property was within the scope of the authority given to Fenwick Ennis and Mr Vincent. It is, of course, unnecessary to prove authority to make misrepresentations in order for the principal to be held liable (Australasian Brokerage Ltd v ANZ (1943) 52 CLR 430 at 450, 451).
It follows, in my view, that the learned trial judge was correct in deciding that the Vetteses were vicariously liable for the misrepresentations made by Mr Vincent.
Negligence in construction
The learned trial judge also found the Vetteses liable for damages for breach of duty of care in not constructing proper retaining walls. He referred in his judgment to Bryan v Maloney (1995) 182 CLR 609, a case in which a professional builder was held liable to a subsequent purchaser for damage caused by the fact that the house was built with inadequate footings. The subsequent owner suffered economic loss in the form of diminution in the value of the house when the inadequacies of the footings first became manifest. The house was erected to be used as a permanent dwelling house and, in the circumstances, it was held that a relevant relationship of proximity existed between the builder and the subsequent owner.
The application of this general principle to the present case was not challenged on appeal. However it was argued that there was no evidence of defective construction in the relevant sense. Mr Clayton said that on the evidence there was no need for a retaining wall. He said the excavation revealed a solid rock face and he pointed out that the rock fall was an isolated incident which occurred after many years.
The only expert evidence on this issue came from a consulting engineer, Mr John, who was called by the Kemps. He gave evidence about the soil conditions on the embankments along the perimeter of the allotment:
“A.... The soil was quite variable over the site and the predominant type exposed was a salty clay top soil overlying a highly weathered shale. The shale was crumbling in areas and it was interspersed with clay layers and clay pockets. The bedded angle of the shale - and by that I mean the angle to which the layers of shale actually sat in the ground - was downwards away from the cut face, which indicates that if any of these shale sections were to slip, they would want to slip away from the cut face, ie, collapse, rather than slide into the cut face, and the shale was fractured in numerous occasions.
QCan you go on with your observations of the embankments?
A...... My assessment of that was the soil, as excavated and unretained for a substantial height, is an inadequate factor of safety against soil slip, which means it could fail by slipping away from the cut face. The presence of the sewer easement on the adjacent property to - I have got it as north, but it would be the north-west.
QAnd that is the rear of the property?
A...... The rear of the property, indicates that some cannibal plant and equipment could be used close to the top of the excavation and the weight and vibrations caused by such equipment could result in the collapse of a significant portion of the face of the embankment.
QIs that the only danger of collapse, that is the physical vibration, or might it occur by natural conditions as well?
A...... No, it can certainly occur by natural conditions.”
Mr John then referred to the walls which had been constructed:
“A.... ... it appeared to me that the walls that I saw on site would not be structurally adequate. I subsequently checked those by calculation in our office and analysed those, and reached the conclusion that they were not generally structurally adequate. Apart from the sections of the walls on the south-western boundary, where the post spacing was as originally specified, all the other walls were considered to be structurally unsound.
XN
Q...... And the reasons for that?
AThe walls have an inadequate structural adequacy to resist the imposed forces by soil movement, which is the sole purpose of the retaining wall.
Q...... In coming to that conclusion, did you again have regard to your assessment of the risk posed by the soil on the embankments?
AYes.”
The witness gave the following evidence in cross-examination:
“Q.... Just coming back to the comment that you made before the last question when you said that these walls will I think fix up a problem or remedy the problem, what is the problem?
AThe problem is that the existing - and, in particular, into the rear right-hand corner of the property - the problem is that the existing embankment has an inadequate safety factor against collapse and has the potential to collapse.
Q...... That has always been the case from the day that the land was excavated?
AYes.”
Mr John gave evidence as to the type of construction which would be necessary in order to address this problem. He said the retaining walls could not be built in exactly the way recommended by Structural Systems because it would no longer be possible to work with some of the heavy equipment since the building of the house.
I do not accept the appellants’ suggestion that Mr John’s design goes beyond what is required by the circumstances. I could find nothing in the evidence to justify that conclusion. I think the trial judge was correct in accepting Mr John’s recommendations as appropriate and to take that evidence into account in assessing damages in the event of liability being established. I am also of the view that the Vetteses owed a duty of care to the Kemps and that it was breached by the failure to construct a proper retaining wall. Mr Vettese must have known of the importance of the retaining wall issue generally. He had received advice from his own expert and discussed the matter with the council expert. He claimed that after the excavation he thought the wall was self retaining, but he received no advice on this and did not discuss the matter with the council. It is clear that he took a chance and, if the evidence of Mr John is accepted, the problem remains. There are inadequate safety precautions in place to meet the sort of occurrence which took place after the Kemps purchased the property.
The learned trial judge has correctly identified the damage suffered by the Kemps as a result of this failure to exercise due care in relation to the retaining wall. I think the finding of negligence against the Vetteses should be upheld.
The claim of breach of warranty
The learned trial judge dealt briefly with the Kemps’ claim that there had been a breach of the warranty by the vendor in Clause 5.6.2 of the contract which states:
“The Vendor warrants, except as set out in the schedule; . . .
5.6.2 That to the Vendor’s knowledge, no building work has been carried out on the Land without all necessary consents and approvals having been obtained.”
The trial judge found that a breach of this warranty had been proved. I have pointed out that the gravamen of the misrepresentation was that approval had been given to a particular structure on the land when that was not the case. The claim in negligence was based on the failure to build an adequate retaining wall. In order to establish a breach of the warranty set out above, it would have to be proved that council approval was needed for the particular structure which Mr Vettese erected and that he did not obtain approval for it. However it is clear that he needed no approval for the inadequate walls which he did construct. The trial judge has treated the warranty as if it provided that all building work on the land had only been carried out in accordance with all necessary consents and approvals obtained. It did not so provide. In my view the case for breach of warranty was not made out.
The pergola
Mr Vettese constructed a verandah at the rear of the house. It was not in the original building plans and has never been approved by council. It was built about two years after the completion of the house. A pergola was constructed above it. At first the structure was covered with a shade cloth; later clear plastic sheets were placed over it. The Kemps evidence was that the roof leaked from the time they purchased the property.
The learned trial judge did not make a finding of liability based on negligence in relation to the verandah, but he did find that there was an actionable misrepresentation following upon reliance by the Kemps on the assertion in the schedule to the contract document that council approvals had been obtained. He said the Kemps were entitled to damages under s 7 of the Misrepresentation Act and he assessed those damages by reference to the cost of rectifying the defects in the verandah. The amount awarded under this head was $7,050.
The representation in relation to the verandah, in contradistinction to the representation concerning the retaining wall, did not go beyond the assertion of council approval. No connection could be established between that representation and any damage which might have been suffered by the alleged faulty construction of the pergola. Even if there had been a defect in construction, that was not linked in any way to the failure to obtain consent. In my view any award of damages to the Kemps must be reduced by the amount allowed for rectifying defects in the verandah.
I should add that negligence in building the pergola was alleged in the Statement of Claim but no finding was made in relation to this allegation, nor was there any appeal or cross-appeal on the issue.
The claim for contribution or indemnity
Finally, there is an appeal against the dismissal by the trial judge of the claim made by the Vetteses against Fenwick Ennis and Mr Vincent for contribution or indemnity. The Vetteses filed a contribution notice in the following terms:
“TAKE NOTICE that in this action the First and Second Defendants claim relief against you as follows:
1...... Indemnity, or alternatively contribution, for any judgment that the plaintiffs may obtain against the first and/or second defendants on the grounds that your negligence and breach of contract caused, or alternatively, contributed to the injuries, loss and damage alleged by the plaintiffs.
PARTICULARS
1.1... In paragraph 12B of the Statement of Claim the plaintiffs allege that the fourth defendant Colin Vincent made certain statements concerning the property, the subject of the sale by the first and second defendants to the plaintiffs.
1.2 If the defendant Colin Vincent made the statements referred to in paragraph 12B of the Statement of Claim then he did so without the authority either express or implied of the first and second defendants.
1.3... If any such statements were made by the defendant Colin Vincent as are referred to in paragraph 12B of the Statement of Claim then such statements were made negligently and without due care as to their correctness.
2...... By virtue of the matters referred to in paragraph 1 hereabove the first and second defendants as the principals of the third and fourth defendants may be found liable to the plaintiffs.
3.In the premises the first and second defendants seek contribution from the third and fourth defendants in respect of any damages that may flow from the matters referred to in paragraph 12B of the Statement of Claim.”
The trial judge dealt with this claim in the following passage from his judgment:
“By their contribution claim, the first and second defendants sought indemnity from the third and fourth defendants in negligence and breach of contract, on the footing that any statements made by the fourth defendant to the second plaintiff of the kind relied upon by the plaintiffs in paragraph 12 of the Statement of Claim were made without authority or negligently. I have already made findings as to the instructions provided by the first and second defendants to Vincent and as to the effect of his representations to the plaintiffs. I have further found that, in the circumstances, Vincent was expressly authorised to convey those representations to the plaintiffs and, further, was acting within the scope of his usual authority in doing so. For these reasons, I find that he did not breach his authority, nor was he acting negligently in saying what I have found he did.
The contribution claim of the first and second defendants, therefore, fails and must be dismissed.”
It was not suggested that a right to contribution arose under the Wrongs Act by reason of liability as joint tortfeasors. It appears that the claim was said to arise by reason of the agents’ duty to indemnify the appellants in relation to the claim made by the Kemps. The issue is dealt with briefly in the written and oral submissions of the appellants on the hearing of the appeal. The written submission state:
“As the appellants’ agent Fenwick Ennis and Mr Vincent had a duty to protect their clients from claims such as the present. They had a duty to ensure that they did not make implied albeit innocent representations which might lead to a claim such as the present. If the judgment is to stand they have failed in their duty to protect their client.
If the vendor is liable for a remark made inadvertently by the agent then the agent and not the principal should bear the consequences of that inadvertence.”
In his oral submissions Mr Clayton also based his argument on a duty which he said was owed by the agents to the appellants. He submitted that by making the representation to Mrs Kemp, Mr Vincent failed to protect his client and that the appellants were entitled, therefore, to be indemnified.
A land agent is under a contractual duty to his or her principal to exercise reasonable care and skill in the performance of the usual duties required of such an agent. (Georgieff v Athans (1981) 26 SASR 412). It would be a breach of that duty for an agent, without the authority of the principal, to misrepresent a matter which went to the value of the property. (Howell v Bennett & Fisher Ltd & Janz [1996] SASR 181 at 193, 194).
In order to determine whether there was a breach of duty owed to the Vetteses in the present case, it is necessary to have regard once again to the nature of the misrepresentation and to compare it with the information which was given to Mr Vincent by Mr Vettese. The agent cannot be held liable to the principal for passing on to a potential purchaser false or misleading information provided by the principal to the agent in circumstances where the agent has no reason to suspect the information as being false or misleading.
As I have pointed out, the learned trial judge found that there was an implied misrepresentation by Mr Vincent that council had approved the retaining wall and that the structure “purports to generally comply with those consents and approvals”. This was enough to set Mrs Kemp’s mind at rest. In cross-examination Mr Vincent was adamant that he would not have said that a structure was built in accordance with building and planning approval. He said that not even a builder would be able to say that this was the case. He went on to illustrate this point by referring to specifications relating to the thickness of gyprock and glazing and the size of rods which might be buried in concrete. He said no agent could express a view as to conformity with approvals in relation to such matters.
I think that in attempting to emphasise his case, he was taking the matter beyond the nature of the misrepresentation which was made and which was relied upon by Mrs Kemp. The trial judge’s finding was of a misrepresentation in more general terms. His Honour found a statement had been made which implied the fact of approval for the structure and purported compliance in general terms with the approval. This much is evident from the wording of his finding. The fact of the matter is that there had not been the slightest attempt to comply with the terms of council approval.
What then did Mr Vettese tell Mr Vincent about these matters? The learned trial judge accepted Mr Vincent’s evidence that he advised Mr Vettese that there would be a clause in the contract note which required a warranty by the owner that necessary consents and approvals had been obtained for the construction of the dwelling. Mr Vettese said he had obtained the necessary approvals. After being given this understanding Mr Vincent said in evidence he had no reason to think that there was anything on the site which did not have the necessary consents and approvals.
In fact this was not the case. I leave aside the issue of the pergola, but as far as the wall is concerned the trial judge rejected Mr Vetteses explanations. His Honour said:
“I found his explanation, that the rear wall was never intended by them to be a retaining wall and that it did not require consent, anyway, as it was built on a different location, to be a specious attempt at rationalising his actions. Its heavy construction totally belied the claim it was to be a mere barrier for the children. I find it was constructed by Mr Vettese with some retaining purpose in mind but in the full knowledge that it did not come anywhere near meeting Council requirements (of which he was then aware) for retaining an embankment of the kind it abutted.
I also found his assertion that construction of the retaining wall was merely an option to offend common sense. Whether or not it had the force of a legal obligation, to any reasonable observer and particularly, I find, to Mr Vettese, who had a restricted licence and some measure of building expertise, it clearly was of considerable, if not critical, importance in protecting the safety of the house and the general surroundings. As emerged from the expert evidence, the construction of a proper wall, after the house was built, presented as a very difficult exercise and I consider it likely he simply chose to pay lip service to the approval requirements in constructing what he did.”
His Honour continued:
“Overall, I formed the impression (as indeed he said) that Mr Vettese had little memory of the relevant dealings with Vincent, but that he sought to use this to advance his case by painting a scenario in which he was oblivious to any representations made by Vincent, who, he may have sought to imply, represented certain matters without the Vetteses’ instructions.
He sought to avoid answering some uncomfortable questions and plainly recanted parts of his evidence. He seemed more intent on arguing his position (that the construction of the approved retaining wall was merely an option and that the north-western wall he actually built was never intended or represented to be a retainer) than in attempting to give an account of events in which he was intimately involved. Generally, he did not impress me as reliable.”
In the light of these findings which are not challenged, it must follow that Mr Vettese misled his agent. He gave Mr Vincent to understand that council approval had been given where required when, in fact, he had decided not to comply with the terms of the council approval in relation to the retaining wall. In my view his Honour was correct in rejecting the suggestion that the construction of the retaining wall was optional.
The gravamen of Mr Vettese’s statement to Mr Vincent was that everything which needed it was given council approval and that there was general compliance with that approval. Mr Vettese’s assurances could hardly be construed as meaning “we obtained all the necessary approvals, but we did not comply with all of them”. Furthermore, I am of the view that Mr Vincent’s implied representations took the matter no further than what he was told by Mr Vettese. He said council approval had been obtained and his statement implied that there was apparent compliance with that consent. If this analysis of the facts is correct, then there was no breach of any duty to exercise care in making statements about the property. I would not interfere with the trial judge’s findings in relation to the relief claimed in the contribution notice.
Costs
There is a final matter which relates to costs. The learned trial judge made a Bullock order. He ordered that the plaintiffs pay the costs of the third respondent (Fenwick Ennis) and the fourth respondent (Vincent). He then directed that the plaintiffs recover those costs from the appellants. The appellants have appealed against this order.
In my view there was no error in the exercise of the trial judge’s discretion to make such an order. I respectfully agree with the summary of the relevant principle provided by von Doussa J. in Fennell v S & E Services Holdings Pty Ltd (1988) 47 SASR 6. After referring to the views expressed in the individual judgments in Gould v Vaggelas (1984) 157 CLR 215 his Honour said (p19):
“In my opinion the principle to be discerned from Gould v Vaggelas is that a Bullock order may be made where the costs in question have been reasonably and properly incurred by the plaintiff as between him and the unsuccessful defendant; as between them those costs will be so incurred where the conduct of the unsuccessful defendant in relation to the plaintiff’s claim shows that the joinder of the successful defendant was reasonable and proper to ensure recovery.”
In the present case the plaintiffs were not to know what passed between the appellants and their agents prior to the making of the relevant representations. It was reasonable that they should join the agents as defendants. The appellants pleaded in paragraph 12B of the amended defence that, if Vincent made the representations alleged it was without the authority of the appellants. This was the case presented by the appellants at trial. As I have pointed out, the trial judge found that Mr Vettese prevaricated on this issue and he accepted the evidence of Vincent that he had a conversation with Mr Vettese relating to consents and approvals from the council.
In light of the conduct of the appellants in relation to the plaintiffs’ claim, I am of the view that the joinder of the appellants’ agents was reasonable and proper to ensure recovery.
I would uphold this aspect of the trial judge’s order as to costs.
Conclusion
I would dismiss the appeal by the appellants against the findings that they were liable to the first and second respondents for misrepresentation and breach of duty of care in tort.
I would allow the appeal against damages to the extent of ordering that the amount awarded by the trial judge be reduced by $7,050 (the cost of constructing the verandah roof) to the sum of $47,772.
I would dismiss the appeal against the dismissal of the claim for contribution.
DEBELLE J. The facts are recited in the reasons of Duggan J which I have had the advantage of reading. It is unnecessary to repeat them.
With two exceptions I agree with all of His Honour’s conclusions and the substance of the reasons for those conclusions. The first exception is His Honour’s conclusion that the appellants are not entitled to an indemnity for the misrepresentation made by Mr Vincent. In consequence, the second is that I do not agree with the dismissal of the appeal relating to the Bullock order.
The trial judge found that Mrs Kemp was concerned about the retaining wall and that she had expressed her concern about it to Vincent. He found that Vincent had informed Mrs Kemp that there were planning consents and building approvals for the entire property in terms which implied that planning consents and building approvals had been obtained for the retaining wall and that the wall generally complied with them. I agree with Duggan J that this finding should be upheld.
I turn to the question whether the appellants are entitled to an indemnity. The appellants did not make any representations to the Kemps. Vincent was the only person who made representations to them. Vincent knew that planning and building approvals existed but he did not know whether construction had been carried on in accordance with the approvals. Thus, when Vincent made a representation to Mrs Kemp that planning consent and building approvals had been obtained for the retaining wall and that the wall complied with those consents and approvals, he had assumed those facts and, in the result, misrepresented the true position. It was not an innocent misrepresentation but one made when no reasonable grounds for making it existed. It was in fact made recklessly not caring whether or not it was true. There was no reason why Vincent could not have asked the appellants whether the retaining wall had been built in accordance with the consents and approvals. Had he done so, the true position might have been disclosed.
A land agent has a contractual duty to his principal to use reasonable skill and care in the performance of his duties: Georgieff v Athans (1981) 26 SASR 412. That contractual duty requires the agent not to represent any fact which is untrue and not to make any negligent statement: Howell v Bennett & Fisher Ltd and Janz [1996] SASR 181 at 193 - 194. The Sales Agency Agreement made between the appellants and Vincent required the agent to act in the best interests of the vendor at all times: see clause 7.1. This is a shorthand expression of the duty to exercise all reasonable skill and care. Statements made by Vincent to Mrs Kemp concerning the retaining wall were negligently, if not recklessly, made in that Vincent did not know the true facts.
Mr Vettese had not said anything to Vincent to the effect that the retaining wall had been constructed in accordance with consents and approvals issued by the Tea Tree Gully Council. The fact that Vettese had told Vincent that the necessary consents and approvals had been obtained did not convey to Vincent that the retaining wall had been built in accordance with planning and building approvals issued by the Council. Although Vincent said in his evidence that he had no reason to think there was anything on the site which did not have the necessary consents and approvals, that evidence goes no further than proving he did not know the true position. That is confirmed by other parts of Vincent’s evidence. He said that he did not ask the Vetteses whether they had completed the construction in accordance with the Council’s consent and approvals. More significantly, the thrust of Vincent’s evidence was that he had no means of knowing whether they had complied. His case was that he would never make a representation that a dwelling had been constructed in accordance with all planning and buildings consents and approvals. That evidence was not accepted. But it is apparent from that evidence that in no respect did he believe that all necessary consents and approvals had been obtained. This only serves to underline the negligence of Vincent in making a representation which assured the Kemps the retaining wall had been constructed in accordance with all consents and approvals.
It follows from the above that I also disagree with the trial judge’s conclusion that Mr Vincent’s conduct came within s 7(2) of the Misrepresentation Act 1971. The appellants have appealed against that findings, although the Kemps have not.
For these reasons, the appellants are entitled to a contribution from Vincent.
I also agree with Duggan J that the trial judge erred in finding that there had been a breach of warranty by the vendor in clause 5.62 of the contract. The case for a breach of warranty was not established. That only serves to underline the conclusion that the appellants are entitled to an indemnity.
For these reasons, I would allow the appeal for the purpose of ordering Mr Vincent and his employer, Fenwick Ennis Pty Ltd, liable to indemnify the appellants in respect of the misrepresentation made by Mr Vincent. It follows that I would have set aside the Bullock order as to costs.
94.............. BLEBY J.......................... I agree with the orders proposed by Duggan J and with the reasons that he gives.
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