Vouzas v Bleake House Pty Ltd

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

S CI 2010 5307

STEVEN VOUZAS & ANOR	Plaintiff
v
BLEAKE HOUSE PTY LTD & ANOR	Defendant

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JUDGE:	MACAULAY J
WHERE HELD:	Melbourne
DATE OF HEARING:	6-8, 12-14 March 2013
DATE OF JUDGMENT:	8 October 2013
CASE MAY BE CITED AS:	Vouzas v Bleake House Pty Ltd
MEDIUM NEUTRAL CITATION:	[2013] VSC 534

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TRADE PRACTICES – Misleading or deceptive conduct – Representations made by vendor and vendor’s selling agent when selling land – Representations about long term lease to AAA tenant – Conduct comprising written and oral representations, and silence about agreement to sell lease – Importance of clear identification of conduct alleged to be misleading and deceptive – Conduct of defendants not misleading or deceptive or likely to mislead or deceive – No loss caused by conduct – s 52 Trade Practices Act 1974 (Cth).

SALE OF LAND – Whether a conditional transfer of lease is required to be disclosed under s 32(2)(b) of the Sale of Land Act 1962 (Vic) – Disclosure not required by Act – Defence under s 32(7) made out in the alternative.

CONTRACT – Counterclaim for damages caused by breach of contract of sale of land – Whether damages to be measured at time of breach or at a later time – Johnson v Perez (1988) 166 CLR 351; Wroth v Tyler [1974] Ch 30.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	G McCormick	Goldsmiths Lawyers
For the First Defendant	M Osborne	O’Donnell Salzano Lawyers
For the Second Defendant	L Nichols	DLA Piper Australia

TABLE OF CONTENTS

Introduction......................................................................................................................................... 1

Statement of issues........................................................................................................................ 3

Claim.......................................................................................................................................... 3
Counterclaim.............................................................................................................................. 4
Third party claims...................................................................................................................... 4

Factual background........................................................................................................................... 4

Was Vouzas/Baia Properties entitled to rescind the contract?................................................. 12

What did s 32(2)(b) require to be disclosed?.......................................................................... 14
False or incomplete information?............................................................................................. 15
Conclusion on application of s 32 of the Sale of Land Act...................................................... 20

Was the conduct of Bleake House and/or Keleman Commercial misleading or deceptive? 22

What was the conduct alleged?................................................................................................ 23
Applicable principles................................................................................................................. 27
What was said to be misleading and deceptive about the representations?..................... 29
What oral representations were made?................................................................................... 31

‘Rumour’ and ‘no truth in it’ representations.......................................................................... 31
Retail Leases Act representations............................................................................................. 41
Summary of oral representations.............................................................................................. 43

Conclusion on what comprised the impugned conduct....................................................... 46
Was the impugned conduct misleading and deceptive?..................................................... 47

Was Kelemen Commercial knowingly concerned in any breach of s 52 by Bleake House? 49

Did any contravention of s 52 cause loss to Vouzas?................................................................ 50

Knowledge of the prospect that Munday would be tenant................................................. 51
Vouzas’ inability to obtain finance to settle............................................................................ 52
Conclusion on causation............................................................................................................ 53

Contributory fault, proportionate liability and third party claims......................................... 54

Bleake House’s counterclaim......................................................................................................... 54

Applicable principles................................................................................................................. 55
The facts........................................................................................................................................ 58
Analysis and conclusion............................................................................................................ 60

Conclusion and orders.................................................................................................................... 61

HIS HONOUR:

Introduction

In the course of selling ‘The Beach’ hotel in Albert Park, Victoria, in the latter half of 2008, the vendor (or the real estate agent of that vendor) represented, in substance, that the freehold was subject to a ‘long term lease’ to a ‘AAA tenant’, namely, the Collingwood Football Club (‘Collingwood’). This case raises questions whether what the purchaser describes as ‘a classic half-truth’ embodied in that representation - and certain associated representations - amounts to misleading and deceptive conduct in breach of s 52 of the Trade Practices Act1974 (Cth) (‘TPA’), or justifies rescission of the contract for the sale of the hotel pursuant to s 32(5) of the Sale of Land Act1962 (Vic).

The first plaintiff (Vouzas) contracted to buy the hotel freehold from the first defendant (Bleake House Pty Ltd) on 14 November 2008; the second defendant (Kelemen Commercial Pty Ltd) was Bleake House’s selling agent; and the second plaintiff (Baia Properties Pty Ltd) was Vouzas’ nominee to take the transfer of title upon completion.

At the time of the representation, in the latter half of 2008, Collingwood was, indeed, the tenant and operator of the business of the hotel. But at all relevant times Collingwood had entered a conditional agreement with a third party to assign the lease. Bleake House was aware of that agreement – in fact, it had (at the least) signified its approval of the proposed assignee.

When time came for Vouzas to settle the sale in May 2009, he claimed that he was entitled to rescind the contract because the vendor’s statement, made pursuant to s 32 of the Sale of Land Act, had falsely represented the land was leased to Collingwood. The falsity was said to lie in the fact that the lease was soon to end and that Bleake House had already consented to the assignment of lease to the third party, each of which being matters that Vouzas says he was not told. Having already paid $500,000 deposit on the $11m sale price, Vouzas demanded the return of his deposit.

Bleake House denied that Vouzas was entitled to rescind. Instead, it claimed that Vouzas’ conduct amounted to a repudiation, accepted it as terminating the contract, and attempted to resell the hotel. For a variety of reasons it was not able to resell the hotel in 2009.

Vouzas and Baia Properties bring this action to recover the $500,000 deposit (together with other costs incurred in the purchase). First, they sue Bleake House for damages consequent upon their allegedly lawful rescission of the contract, relying on the Sale of Land Act provisions. Alternatively, they sue both Bleake House and Kelemen Commercial for damages suffered as a result of being induced to enter the contract by the misleading and deceptive conduct of Bleake House and/or Kelemen Commercial, relying on the TPA provisions. The relevant conduct was the making of written representations concerning the tenancy in an advertisement and the sale documentation, the making of alleged oral representations by Rudy Kelemen, a principal of Kelemen Commercial,[1] and silence about the conditional agreement to assign the lease and the approval of the proposed assignee.
[1]Whether or not any of the oral representations allegedly made by Rudy Kelemen were, on the pleadings, also attributed to Bleake House as principal was a matter of some dispute. For reasons that follow, it was not necessary to resolve that issue: see further [178] below.

As well as denying the plaintiffs’ claim, Bleake House counterclaims for damages against Vouzas for the loss of its bargain under the contract, together with incurred expenses. An issue arises on the counterclaim as to the correct date to measure its loss: is it the date of repudiation or the date of trial?

If Bleake House and Kelemen Commercial are each liable to the plaintiffs for breach of s 52 of the TPA, the parties require a determination of their respective proportionate liability under s 87CB of that Act, alternatively ss 23B and 24 of the Wrongs Act 1958 (Vic). Further, both say that, if they are liable to the plaintiffs, the plaintiffs have by their own contributory fault also caused their own loss and damage.

Finally, each defendant has a cross claim against the other. Kelemen Commercial says that if it is liable to the plaintiffs, at all material times it was acting within the course and scope of its authority with Bleake House who, as principal, must indemnify it pursuant to the terms of the agency agreement between them. Bleake House confines its claim for indemnity from Kelemen Commercial to any liability incurred by Bleake House as a result of the oral representations made by Kelemen Commercial. It says those representations, if made, were made without authority.

Statement of issues

Therefore, the questions for determination can be summarised as follows:

Claim
(1)Was Baia Properties entitled to rescind the contract of sale pursuant to s 32(5) of the Sale of Land Act; and, if so, is it entitled to the return of the deposit and damages for legal costs incurred in the sale?
(2) Was the conduct of Bleake House and/or Keleman Commercial (by the written and oral representations, and by silence about the agreement to sell the lease, etc) misleading or deceptive contrary to s 52 of the TPA?
(3) Was Kelemen Commercial, directly or indirectly, knowingly concerned in any breaches of s 52 of the TPA by Bleake House in relation to the written representations?
(4) Did any contravention of s 52 of the TPA cause the plaintiffs’ loss?
(5) Was there any, and if so what degree of, contributory fault on the part of the plaintiffs in the cause of their loss and damage?
(6) Are the defendants concurrent wrongdoers (within the meaning of s 87CB of the TPA, alternatively ss 23B and 24 of the Wrongs Act) in respect of the plaintiffs’ claim, and if so what is the proportionate liability of each defendant?

Counterclaim
(7)Alternatively to question 1, did Vouzas repudiate the contract of sale, and if so what is the appropriate measure of Bleake House’s damage?

Third party claims
(8)Is Bleake House entitled to an indemnity from, or alternatively required to indemnify, Kelemen Commercial in respect of liability to the plaintiffs for damages and costs?

Factual background

Before turning to address the specific issues, I will set out as much of the non-controversial facts, in chronological order, as is necessary as context for those issues.

On 14 March 2006, Dalerivers Pty Ltd leased the hotel premises from Bleake House. The term of the lease was 15 years, with options for three further terms of five years each, at an annual rental of $806,000 (plus GST) increasing annually by 3%. The first market review was not due until 14 March 2016.

The Dalerivers’ lease was assigned to Collingwood on 22 December 2006. Amongst other things, the terms of the assignment varied the lease so as to provide that Bleake House could require, as a condition of any assignment of lease to a corporate tenant, a bank guarantee for an amount equal to six months rent.

As well as holding the lease over The Beach hotel, Collingwood also owned the freehold for and operated the business at the Diamond Creek Tavern. In about early August 2008 an article appeared on the website maintained by Collingwood announcing:

This week the Collingwood Football Club signed Heads of Agreement to sell both The Beach Hotel in Albert Park and the Diamond Creek Tavern. The settlement of the sale will take between six and twelve months and during that time the Club will continue to operate both venues.

The Heads of Agreement (‘HoA’) concerning The Beach hotel was a document executed between Collingwood, as vendor, and Ricky John Munday (for himself ‘and/or nominee’), as purchaser.[2] The subject matter of the HoA was Collingwood’s interest in the hotel business. By that agreement it is recorded that:

The Vendor has agreed to sell to the Purchaser and the Purchaser has agreed to purchase from the Vendor all the Vendor’s interest in [the subject matter as described above] upon the following terms and conditions.

There followed the terms and conditions. The purchase price was $2m of which $100,000 was to be paid as a deposit, in two instalments, and the balance within 14 days of the satisfaction of a list of conditions. $50,000 part payment of the deposit was payable on signing.

[2]The version of the document tendered in evidence was undated although it bore a facsimile header dated 4 August 2008.

The agreement was subject to the satisfaction, within 12 months of the contract date, of six conditions which, essentially, related to obtaining transfers of liquor and gaming licences (upon specified terms), the freehold owner’s consent to assignment of lease, and consents for the mortgage of the lease. The purchaser of the hotel business (Munday, or his nominee) was obliged to commence applying for the various licences within 2 months.

The HoA was also subject to the simultaneous exchange of the heads of agreement for the sale of the Diamond Creek Tavern. Other provisions made the completion of the two transactions interdependent. Each party was to use best endeavours to obtain satisfaction of the conditions and:

…acknowledge[d] that this Agreement is intended by them to be a valid and enforceable and legally binding Agreement effective from the date hereof notwithstanding that a formal Contract shall be prepared and entered between the parties after the date of this Agreement.

The real estate agency that negotiated the sale of the lease for Collingwood was T. J. Board & Sons. The particular agent concerned was Stephen Cropley. As well as being commercial real estate agents within T.J. Board & Sons, members of the Board family also held interests in the freehold of The Beach hotel through directorships of and shareholding in Bleake House. It is common ground that from an early stage – and certainly before selling the freehold to Vouzas - Bleake House, through its directors, was aware of the HoA between Collingwood and Munday.

In the proposed sale of business transaction, Munday was represented by lawyers, Bazzani Scully Brand (‘BSB’), and Collingwood was represented, initially in 2008, by Deacons Lawyers (‘Deacons’) and later by Logie Smith Lanyon (‘LSL’). At various times the solicitors for Bleake House were Ryan Commercial Lawyers (‘Ryans’) and, at other times, O’Donnell Salzano.

On 19 September 2008, Ryans, for Bleake House, responded to a letter from BSB, for Munday, concerning the requirements for ‘approval’ of the proposed assignee of the lease, Simham Pty Ltd, a company associated with Munday and later nominated as purchaser of the hotel business. Ryans wrote:

I am instructed that given my client’s relationship with Mr Munday that no personal or commercial references will be required in relation to the proposed transfer.
I am further instructed that the form of Transfer of Lease provided is acceptable to my client.

As will be seen below, Vouzas attributes much significance to this letter. He relies on it as constituting, in substance, a ‘consent’ by Bleake House to the assignment of lease from Collingwood to Munday, even before critical representations were made to him by Bleake House concerning the tenancy of the hotel being offered for sale.

Not long afterwards, on 30 September 2008, Bleake House appointed Kelemen Commercial to be its agent to sell the freehold of the hotel by tender, for an asking price of $12m.

On that same day, following a phone call between them, Andrew Egan of Kelemen Commercial emailed to Vouzas draft copies of the vendor’s statement (made pursuant to s 32 of the Sale of Land Act1962) (‘the vendor’s statement’) and the proposed contract of sale (‘the contract’). The vendor’s statement incorporated a copy of the Dalerivers lease and the 2006 assignment of that lease to Collingwood. Soon afterwards, in various meetings with agents at Kelemen Commercial, Vouzas was also given a copy of a prospectus for the sale of the hotel (‘the prospectus’) and a colour sale leaflet (‘the leaflet’). He also saw an advertisement, published by Kelemen Commercial, appearing in The Age newspaper (‘the advertisement’).

Amongst other things, those documents contained the following representations:

The advertisement and the leaflet:
Long Lease to “AAA” Tenant
Income $830,000 p.a. +3% annual increases
The prospectus:
Tenant - The subject Hotel is leased by the Collingwood Football Club Limited for 15+5+5+5 years from 14 March 2006. The rental is subject to annual 3% increases. Rent as of March 2008 $830,180 pa.
The vendor’s statement:
The property is subject to a Lease between the Vendor and Collingwood Football Club Limited dated 14 March 2006. A copy of the Lease and Assignment of Lease is attached.
The contract:
The Land is sold subject to the Lease between the Vendor and Collingwood Football Club Limited dated 14 March 2006. A copy of the Lease and Assignment of Lease documents are attached to this contract. [special condition 7]

During October and early November 2008, meetings occurred between Vouzas and, principally, Rudy Kelemen of Kelemen Commercial concerning the sale of the hotel. Some discussion revolved around Vouzas’ interest in redeveloping the hotel site, combined with the adjoining properties owned by Vouzas’ parents, into a mixed commercial and residential development. In answer to questions put to Kelemen by Vouzas, oral representations were made to Vouzas about the prospect that Collingwood may have sold its lease to a third party. The specific evidence about those representations will be discussed below.

Several things are not in dispute. There is no dispute that Vouzas was not told of the existence (still less, the terms) of the HoA, or of the ‘consent’ given by Bleake House to Munday as proposed assignee of the lease. But neither is there any dispute that, before signing the contract of sale to buy the hotel freehold: (1) Vouzas was aware of the possibility that Collingwood might enter a transaction with Munday and, (2) on one occasion, while Vouzas was present with Rudy Kelemen, a phone call was made to Munday to ascertain his attitude toward the redevelopment of the site should Vouzas become the freehold owner and Munday become the tenant.

On 14 November 2008, Vouzas and Bleake House signed the contract of sale. It incorporated the vendor’s statement, now signed by Bleake House, in the same terms and with the same attachments as the draft previously provided. The purchase price was $11m. A deposit of $500,000 was to be paid by payment of $100,000 on or before the day of signing (which was paid) and the balance of $400,000 by 12 December 2008. Settlement of the contract was to take place on 12 May 2009. The contract permitted Vouzas to nominate a substitute purchaser to take a transfer of title to the land which Vouzas did on 18 December 2008, nominating Baia Properties.

The $400,000 balance of deposit which was to be paid on 12 December 2008 was not paid in full by Vouzas on that date. He negotiated a further extension of time and ultimately paid the balance by two instalments, each of $200,000: one in late December 2008 and the other in January 2009. He borrowed the money to pay those instalments from Mrs Helen Wolfers. Mrs Wolfers’ evidence about Vouzas’ financial position was relied upon by the defendants to suggest an alternative reason why later on he failed to proceed with the transaction. Mrs Wolfers’ evidence will be discussed in greater detail later.

In early December 2008, Ryans, for Bleake House, and BSB, for Munday, corresponded on the topic of the transfer of lease between Collingwood and Simham Pty Ltd (Munday’s company). Specifically, Ryans sought the transfer of lease documentation, for execution by its client, and other consent documentation to be signed by the freehold owner and freehold mortgagee. BSB responded, noting that the freehold was reportedly being sold and, making the assumption the freehold transfer would precede the business transfer, sought details of the new owner’s identity so as to make any necessary amendments to the transfer of lease documentation.

As contemplated by the HoA, on 23 January 2009 Collingwood and Simham (Munday’s nominee) entered a formal contract of sale of business containing the same conditions as those in the HoA. Simham paid a further $50,000 instalment of the deposit.

Meanwhile, James Morton of the National Australia Bank (Richmond) sought and obtained a valuation of the The Beach hotel freehold from Charter Keck Cramer, a well-known firm of valuers. Mr Morton was Vouzas’ banker from whom Vouzas claimed to have received ’in principle‘ agreement to fund the purchase before Vouzas signed the contract to purchase the hotel. Charter Keck Cramer’s report dated 28 January 2009, provided to and read by Vouzas within a month of the date it bore, valued the freehold at $11m. Significantly, in relation to the tenant, Charter Keck Cramer wrote:

It has also been reported in the press that the business of the Beach Hotel has been purchased by interests associated with well-regarded hotelier Rick Munday, whom we understand (although not confirmed) has purchased the business in late 2008 for circa $3 million. Our inquiries on a confidential basis indicate that the reduction in purchase price paid for the business by Rick Munday, of $3 million in comparison to the $7 million (reported but not confirmed) by the Collingwood Football Club was impacted as a result of the reduced trading performance of the hotel, and therefore the burden of the higher rent.
Having regard to the above, we are of the opinion that the current passing rental is significantly above market levels … .[3]

[3]Charter Keck Cramer valuation report dated 28 January 2009 [6.6].

As the date drew near for the completion of the transaction (12 May 2009) correspondence was exchanged between lawyers for the parties. Ryans, for Bleake House, reminded Goldsmiths, for Vouzas, on 24 April 2009 of the pending settlement date. On 28 April Goldsmiths sent Ryans a number of documents including the nomination form and transfer of land. On 8 May 2009 Ryans corresponded with Goldsmiths about the withdrawal of a caveat lodged over the land, lodged by Collingwood’s mortgagee bank. At that time Collingwood remained the tenant. At least some of the conditions to which the sale of business and transfer of lease agreement were subject had not been fulfilled, including the transfer of the liquor licence permit.

On Monday 11 and Tuesday 12 May 2009, there was a string of letters between the solicitors for the parties. On 11 May, Goldsmiths wrote to Ryans claiming that Vouzas ’is still waiting on your client’s selling agent to provide him with information in regard to a purported transfer of the existing lease‘. Goldsmiths claimed that their client, Vouzas ’ha[d] been chasing this information from [Bleake House’s] selling agent but, to date, no information ha[d] been forthcoming‘. Those statements were contentious.

Goldsmiths requested an extension of the settlement date. On the same day, Ryans wrote:

This property is subject to an existing lease to the Collingwood Football Club, who will remain as tenant until such time as the assignment transaction is settled.
In that regard, please note that the proposed assignee, Simham Pty Ltd, has been advised by their [sic] mortgagee that its loan application will not be considered until the full details of the post 2012 gaming supply arrangements are known.

Ryans insisted on the settlement occurring on the scheduled date, arguing that the transfer of the existing lease was a separate transaction and that there was no basis for delaying the freehold sale.

On 12 May, Goldsmiths, for Vouzas, wrote a long letter stating, in substance, that while their client was determined to proceed with the purchase they anticipated there would be delay in settling. Part of the delay was attributed to Vouzas’ financiers needing to know the identity of the proposed new tenant and that tenant’s financial strength. The letter also outlined alleged misrepresentations made to Vouzas at the time of purchase. Chief among them was the representation that the property was subject to a long lease to a ‘AAA’ tenant, namely Collingwood Football Club, whereas, at the time of purchase, there was a proposed transfer of lease to another entity, a fact (it was alleged) that had not been disclosed.

The sale did not settle on 12 May 2009. On 14 May 2009 Ryans served a rescission notice upon Vouzas and Baia Properties. Over the course of the next several weeks solicitors for Bleake House and Vouzas exchanged correspondence seeking to salvage the transaction. On 28 May 2009 Goldsmiths, for Vouzas, purported to rescind the contract and on 1 June 2009 Ryans, for Bleake House, also purported to rescind the contract. Even after that date Ryans provided some financial information concerning Ricky Munday in an endeavour to resurrect the transaction but it was not revived. Both parties eventually accepted that the contract was at an end; each claimed to have been entitled to rescind the contract.

Not long after the termination of the contract for the sale of freehold, the agreement to sell the business (and transfer of lease) between the Collingwood and Ricky Munday (ie Simham) also came to an end. On 4 August 2009, BSB, for Munday, wrote to LSL, for Collingwood, noting that, as the contract had required satisfaction of conditions precedent by 1 August 2009 and a number of those conditions had not been satisfied, the contract was at an end. The particular conditions that were not satisfied included:

(a)Liquor Licensing Victoria had not approved the transfer of the liquor licence to the purchaser on the same terms and conditions as existed as at 1 August 2008; and
(b)the freehold mortgagee had not consented to the assignment of lease to Simham.

Meanwhile, in mid-June 2009, Bleake House had again engaged Kelemen Commercial to attempt to resell the freehold. A new sales campaign was conducted, including the use of advertising. This time the property was marketed as being subject to a ‘long lease’ with no reference being made to ‘AAA tenant’. The campaign was singularly unsuccessful without there being any prospective purchaser demonstrating interest in the property. The owners decided to take it off the market.

By that time, disputes between Bleake House and Collingwood had emerged. Those disputes took a considerable time to resolve, involving a proceeding at the Victorian Civil and Administrative Tribunal. The tribunal’s decision resolving that dispute was made on 16 December 2010. The dispute had centred upon the authenticity of a decision, apparently emanating from Tattersalls, to reduce (by two) the number of gaming machines that were operated under licence at the hotel.

Tattersalls’ decision had the effect, under the lease between Bleake House and Collingwood, that Collingwood was entitled to demand a market review of rental (which otherwise was not due until 2016). VCAT’s decision upheld the authenticity of Tattersalls’ request and, thus, it was confirmed as a trigger for a market review. That review was undertaken by a specialist retail valuer appointed by the small business commissioner. As a result, the rent for the hotel was reduced from $830,000 per annum to $450,000 per annum.

After the resolution of the rental issue, on 1 August 2011 Bleake House consented to an assignment of the lease from Collingwood to another entity unrelated to Munday.

It is against the backdrop of this narrative that I then take up the first issue for determination.

Was Vouzas/Baia Properties entitled to rescind the contract?[4]

[4]In this section, a reference to Vouzas includes a reference to Baia Properties.

Section 32(1) of the Sale of Land Act 1962 requires that a vendor under a contract of sale of land shall give to a purchaser, before the purchaser signs the contract, a statement containing prescribed information. Critically for present purposes, s 32(2)(b) provides that the statement must contain

a description of any easement, covenant or other similar restriction affecting the land (whether registered or unregistered), and particulars of any existing failure to comply with the terms of that easement, covenant or restriction.

If a vendor either supplies false information or fails to supply all the required information, the purchaser may rescind to the contract before accepting title and becoming entitled to possession or receipt of profits.[5]
[5]Sale of Land Act 1962 (Vic) s 32(5).

By its vendor’s statement, Bleake House disclosed to Vouzas the Collingwood lease, attaching a copy of the Dalerivers lease and the assignment to Collingwood of December 2006. That information appeared in the section of the vendor’s statement relating to details of any registered or unregistered easement, covenant or other similar restriction affecting the land, in apparent compliance with s 32(2)(b). Bleake House also stated that to the best of its knowledge there was no existing failure to comply with the terms of any such restriction.

In this case Vouzas alleges that Bleake House breached s 32(2)(b), giving him the right to rescind under s 32(5), claiming that:

(a)First, the information in the vendor’s statement was false because Bleake House failed to disclose:
•that the lease of the property to Collingwood was to end;
•the new lessee was Simham Pty Ltd; and
•Bleake House had consented to the transfer of the lease;

(b)Secondly, Bleake House did not supply all the information it was required to supply, namely that:
•the lease to Collingwood was to end in 6-9 months after 8 August 2008;
•the new lessee was Simham Pty Ltd; and
•Bleake House had consented to transfer the lease to Simham Pty Ltd.

Bleake House denies that the information supplied in the vendor’s statement was either false or incomplete. It says that, at the date of the vendor statement, Collingwood was the lessee, not Simham; the Collingwood lease was not about to end; any consent to transfer the lease was conditional; the transfer never occurred; and in any event Bleake House was not obliged to disclose a consent to transfer a lease.

What did s 32(2)(b) require to be disclosed?

These arguments raise questions as to what information s 32(2)(b) obliged Bleake House to disclose in the circumstances that existed at the date the vendor statement was provided.

First, it is apparent that s 32(2)(b) does not, by its terms, expressly require the disclosure of a lease. Nor does it require, in terms, disclosure of an assignment of lease, an agreement to assign a lease or a consent to the transfer of a lease. So, the statutory construction question is whether any such instrument or agreement falls within the expression appearing in s 32(2)(b) ‘or other similar restriction affecting the land’, that similarity being in respect of an easement or covenant. No other paragraph of the subsection was relied upon by Vouzas nor do I think that any other paragraph was applicable.

It may be accepted that the phrase should not be given a narrow, restrictive construction having regard to the evident reformatory object of the legislation. A similar observation was made by Kirby P (as he then was) in respect of like, but not identical, legislation in New South Wales.[6] Nevertheless, in Krakowski v Eurolynx Properties Ltd,[7] O’Bryan J did not consider that s 32(2)(b) required a vendor to disclose the existence of a lease affecting the land. In more recent times, however, Nettle J (as he then was) doubted that O’Bryan J was correct, although his Honour did not specifically decide the issue.[8]
[6]Timanu Pty Ltd v Clurstock Pty Ltd (1988) 15 NSWLR 338, 339-340.
[7]Krakowski v Eurolynx Properties Ltd (Unreported, Supreme Court of Victoria, O’Bryan J, 27 February 1992).
[8]IGA Distribution Pty Ltd v King & Taylor Pty Ltd [2002] VSC 440 [252].

Whatever the legal position may be, I was informed that it is generally the practice in Victoria for vendors to disclose the existence of a lease in a vendor statement, as indeed occurred in this case and in the IGA case decided by Nettle J.

Is a lease relevantly similar to an easement or covenant? Easements and covenants both impose restrictions on a land owner’s use of the land. Broadly speaking, an easement confers a right, upon another, to use the land owner’s land in a particular way or to prevent that land owner using his or her land in a particular way. Similarly, a covenant imposed on land limits or controls the way that the owner or occupier of it may use the land. In both cases, the right or limitation ‘runs with the land’ in the sense that it binds the successor in title to the land without the need for privity of contract between that successor and the beneficiary of the easement or covenant.

A lease may be regarded as having similar characteristics in the manner in which it ‘affects the land’. That is, over its duration, a lease restricts the lessor’s use of the land by conferring a right of occupancy on the lessee with a corresponding limitation on the lessor’s right of occupancy. Also the leasehold is an interest (and corresponding restriction) that runs with the land irrespective of any privity of contract between the succeeding land owner and the tenant.

For these reasons, it appears to me, with respect, that the doubts expressed by Nettle J in the IGA case are well founded. That is particularly so if it is correct to give s32(2)(b) a wide rather than narrow construction. Nevertheless, for reasons that follow, it is not necessary for me to decide the question whether a lease is a ‘similar restriction’ within the meaning of s 32(2)(b): for present purposes, I am prepared to assume that it is.

Making that assumption, given that the lease to Collingwood was disclosed in the vendor statement, the real issue for decision on this point is whether, as at 14 November 2008 (ie the date of the contract), it was false to say that the property was leased to Collingwood, or whether by disclosing no more than the lease, Bleake House failed to supply information it was obliged to supply.

False or incomplete information?

Revisiting the facts in a little more detail, the lease which Collingwood took by assignment from Dalerivers in December 2006 was a lease that was not due to expire until March 2021. At the date of the contract of sale – and on the date the vendor’s statement was signed – the lease was on foot and there is nothing to suggest that the demise itself was in jeopardy.

Without more, it seemed plainly correct, and not false, to represent that there was a lease to Collingwood and that it was the lessee. But Vouzas argued that the conditional agreement to sign the lease, and the consent given by Bleake House to an assignment to a new lessee, had to be taken into account in assessing the truth or falsity of the vendor’s statement.

Clause 4.0 of the lease, as amended by the deed of assignment between Dalerivers and Collingwood, dealt with the topic of an assignment of the lease term. It provided that the lessor would not assign the 15 year term without first obtaining the written consent of the lessor, which consent would not unreasonably be withheld.

As previously stated, settlement of the HoA was subject to the purchaser satisfying a number of conditions. Those conditions had to be satisfied within twelve months of the agreement date. Only then was the sale of business and the assignment of lease to be settled. If those conditions were not met the sale of business would not proceed nor would the assignment of lease take place. The date by which all the conditions had to be satisfied was 1 August 2009.[9]
[9]See note 2 above. The later formal contract of sale, entered on 23 January 2009 pursuant to the terms of the HoA, put the date by which the conditions precedent had to be satisfied as 1 August 2009.

The evidence indicated that Bleake House regarded the list of conditions as a significant hurdle to the realistic completion of the sale of business. Peter Board, a director of Bleake House and himself an experienced real estate agent, described the conditions as ‘reasonably onerous’, adding that one could not assume the transaction was ‘a done deal’ from the terms of the document.[10] He was not challenged on that belief.
[10]Transcript 205-206.

On that subject, Rudy Kelemen gave evidence, which was not challenged, that Stephen Cropley, a director of Bleake House and also the agent who negotiated the heads of agreement on behalf of Collingwood, told him in Vouzas’ presence that:

it would be hard to jump over all the hurdles that were there and it’s highly unlikely it’s going to happen.[11]

[11]Transcript 336.

And, although he did not specifically describe the conditions as difficult to satisfy, Munday explained that the lengthy period of time allowed to enable Simham to try and fulfil them reflected the amount of work that was involved in the task.[12]
[12]Transcript 384-385.

Later events tended to confirm that it was reasonable to hold a pessimistic view of the chance that the sale conditions would be met. At least two of the six conditions[13] remained unsatisfied by 1 August 2009. And, as we know, the transaction failed.
[13]See [36] above.

Among the conditions that were required to be satisfied, one was that the freehold owner should consent to the assignment of lease to Munday (or nominee). The agreement was also conditional upon the freehold owner, and any mortgagee of the freehold, agreeing that the business purchaser (also the assignee of the lease) could mortgage the lease to its bank to assist with the purchase.

Before Vouzas signed the contract to buy the freehold, some steps had already been taken towards obtaining the freehold owner’s consent to the assignment of the lease from Collingwood to Simham. By its pleading, Bleake House admitted that on 18 August 2008 it gave its consent to the transfer of the lease, fulfilling one of the conditions of the sale.[14]
[14]Defence of the First Defendant to the Further Amended Statement of Claim and Amended Counterclaim against the First Plaintiff and Second Plaintiff [14].

It was not clear from the evidence what justified that admission. But, even accepting the admission, the significance of the consent needs to be considered against a wider context, including the point in time at which it was given and what was expected or likely to occur afterwards.

For his part, in relation to the consent, Vouzas relied upon the letter from Ryans, for Bleake House, of 19 September 2008 which, on its face, approved the ‘form of the transfer of lease’ and declined to require personal references for Munday because he was personally known to the directors of Bleake House. Then, on 17 December 2008, BSB, for Simham, sent to Ryans a transfer of lease for signature by Bleake House. They did so notwithstanding that they understood the freehold of the hotel had been sold and that if the sale of the freehold was settled before the sale of the business, the transfer of lease would need to be amended to refer to the new freehold owner.[15]
[15]See letter from BSB to Ryans dated 3 December 2008.

On 20 March 2009, BSB requested from Ryans, ‘on a without prejudice basis’, a copy of the signed transfer to show the Victorian Commissioner for Gaming Regulation. BSB again observed that if settlement of the freehold sale preceded the settlement of the sale of business then the transfer would need to be amended to refer to the new freehold owner.[16] Presumably, if the transfer was to be amended to replace Bleake House with the name of the new freehold owner, it was contemplated that the new freehold owner would have to sign the document as the owner at the date of transfer. The copy transfer of lease returned to BSB by Ryans, although signed by Bleake House, was stamped ‘Copy’ and the date of transfer was left blank.
[16]Letter BSB to Ryans 20 March 2009.

In summary:

·As at the dates of the contract of sale and the vendor’s statement, Collingwood was the proprietor of the hotel business and the lessee of the premises;
·The HoA, made before those dates and by which the business was to be sold and the lease assigned, was heavily conditional;
·Bleake House reasonably entertained significant doubts that those conditions would be fulfilled – and if they were not fulfilled, the assignment of lease would not proceed;
·Because of the length of time allowed for the fulfilment of the conditions of the business sale, it appears to have been contemplated from an early time that the settlement of the freehold sale may well precede the settlement of the business sale (and the assignment of lease);
·Although Bleake House signed a transfer of lease to Simham, the signed transfer was held by Bleake House’s solicitors and it appears to have been understood that should the freehold sale occur before the business sale the new freehold owner’s name would be substituted for Bleake House on the transfer and, presumably, that new owner would be invited to sign it;
·Whether a new freehold owner would be bound by any ‘consent’ given by Bleake House was not argued before me, and may be doubted, but in any event, like Bleake House, a new freehold owner could not unreasonably withhold consent.

With those matters in mind, I return to the question whether Bleake House supplied false information or incomplete information in the vendor’s statement.

In my opinion, it was not false to say as at 14 November 2008 that the premises were leased to Collingwood. They were leased to Collingwood and were not leased to anybody else. I doubt that any agreement to assign a lease at some point of time in the future would falsify a representation that the premises are, at the time of the statement, leased to the current tenant. But even if it could, because of the uncertain nature of the proposed assignment the conditional agreement to assign the lease to Simham in 8 or 9 months time did not sensibly falsify that fact. Indeed the premises remained leased to Collingwood right through until 2011. It would have been false in November 2008 to represent that the premises were leased to Simham, or anybody other than Collingwood.

It is also my view that Bleake House was not obliged by s 32(2)(b) to supply information to a purchaser of the land regarding the HoA or the so called consent to the transfer of lease to Simham.

Even before considering any conditional agreement to assign a lease, I am not convinced that an assignment of lease would need to be disclosed under s 32(2)(b). Neither seem to me to constitute a restriction affecting land similar in nature to an easement or covenant. So long as the terms of the demise remain the same, a change in the identity of a lessee does not bring about any new or altered restriction in the use of the land. Still less does a conditional agreement to assign the lease amount to a restriction affecting land in any way similar to an easement or covenant. Whoever the lessee under the lease may be, the nature, scope and duration of the restriction remained the same. And, if it matters, there was no evidence to suggest that the proposed change in the identity of the tenant affected or would affect the value of the land.

And if that is so, then the giving of a consent by the freehold owner, in advance of a proposed assignment should the assignment actually takes place, also cannot amount to a restriction affecting the land or, for that matter, a change to an existing restriction.

Whether the failure to disclose the agreement to assign the lease or the consent to that assignment could, in the circumstances, constitute misleading and deceptive conduct is another matter to which I will return in due course. But in my view the failure to disclose the conditional agreement to assign the lease or the ‘consent to transfer’ the lease did not constitute any contravention of s 32(2)(b).

Conclusion on application of s 32 of the Sale of Land Act

It follows that Bleake House neither supplied false information to Vouzas nor failed to supply required information, so as to engage s 32(5) of the Act. Vouzas was not entitled to rescind the contract under that subsection.

If I am wrong on that conclusion, I would nonetheless have held that Vouzas was prevented from rescinding the contract because of s 32(7) of the Act. That subsection provides that a purchaser may not rescind the contract if the court is satisfied that the vendor has acted honestly and reasonably and ought fairly to be excused for the contravention and that the purchaser is substantially in as good a position as if all the relevant provisions of the section had been complied with.

In my view, even if it could be said that a proper construction of s 32(2)(b) obliged Bleake House to disclose the conditional agreement to transfer a lease, or the consent given to such transfer, nevertheless Bleake House had acted honestly in not disclosing those matters. I find that Bleake House genuinely held the view (and this was not challenged) that the assignment of lease was not likely to proceed. It was neither put to witnesses for Bleake House nor alleged in submissions that the failure to disclose the heads of agreement and the ‘consent to transfer’ was done deliberately to conceal the information from Vouzas. Further, it was reasonable for Bleake House not to make reference in the vendor’s statement to the conditional heads of agreement and the ‘consent to transfer’ because, notwithstanding that a different conclusion could be reached, it was not self-evident that the s 32(2)(b) required that information of that kind be disclosed. Having regard to those findings, in my view Bleake House ought fairly to be excused from any contravention of s 32(2)(b).

Finally, in my view Vouzas was substantially in as good a position as if all the relevant provisions had been complied with.[17] That is because, as my findings below reveal, he well knew before the contract of sale was executed that Munday might take an assignment of the lease from Collingwood and, with that knowledge, went ahead and signed the contract. Whether he knew that possibility existed because a conditional agreement had been signed, or on some other basis, makes little practical difference.
[17]See Fifty-Eighth High Wire v Cohen (1996) 2 VR 64, 74-75.

Put differently, for these purposes there is little difference in substance between a state of knowledge that Munday might become the tenant accompanied by a belief that a conditional heads of agreement had been signed, or not accompanied by such a belief. It was the knowledge that Munday might possibly be the tenant that was important. With that knowledge, as the evidence which I will discuss shortly showed, Vouzas could obtain information that would assist him in deciding whether or not to purchase the land. With that knowledge, Vouzas could make his own assessment of the security of rental payments, or make further enquiries if he needed to make them.

Furthermore, I am satisfied on the evidence that (at the relevant time) Ricky Munday was highly regarded as a hotel operator and tenant. A reasonable freehold owner appraised of all the facts would have considered him to be more or less of the same grade or rating as Collingwood. Any concerns as to the financial security of Munday compared to the relative security of dealing with a public company (as Collingwood was) would likely have been allayed because of the six month rental guarantee. And, if (as Vouzas was)[18] the new freehold owner was intent on redeveloping the whole site in two or three years time, the concern for the financial security of the tenant would have been subjugated to other priorities.
[18]See [146] and [199] below.

In conclusion, the claim by Vouzas (and his nominee, Baia Properties) for the return of the deposit based upon an alleged, lawful rescission of the contract of sale of land under the Sale of Land Act fails.

That leads me to the next issue.

Was the conduct of Bleake House and/or Keleman Commercial misleading or deceptive?[19]

[19]I will assume for present purposes that Bleake House is responsible, as principal, for the alleged ‘no sale’ representation. Hence, unless it is necessary to differentiate the defendants, a reference to the conduct of Bleake House includes a reference to the conduct of Keleman Commercial.

At the time the relevant conduct occurred in 2008, s 52(1) of the TPA provided:

A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.

It is not in issue between the parties that the relevant conduct occurred ‘in trade or commerce’.
What was the conduct alleged?

I have already set out above[20] the written representations which Vouzas says comprised part of the misleading and deceptive conduct. Those written representations were labelled, respectively, in Vouzas’ pleadings as ‘The Age representation’, ‘the leaflet representation’, ‘the prospectus representation’, and ‘the vendor statement representation’. Each of the four documents containing those representations were said to be silent as to Collingwood having agreed to transfer the lease and Bleake House having consented to such transfer.
[20]See [23] above.

In addition to the four written statements and the silence, Vouzas also relied upon a number of oral statements as comprising the impugned conduct. Each alleged oral representation was attributed to Rudy Kelemen on behalf of Kelemen Commercial.

First, Vouzas claimed that on three separate occasions before the contract was made, Rudy Kelemen responded to questions from him about ‘rumours’ he said he had heard concerning Collingwood having sold the lease. Rudy Kelemen allegedly told him on each occasion that ‘there was no truth to it’ or ‘it’s only a rumour’, or words to that effect. On the third occasion Rudy Kelemen allegedly added that he had learned that Munday was interested in buying the lease but that no agreement had been reached. These were called the ‘no sale representations’.

Secondly, Vouzas pleaded that on two separate occasions Rudy Kelemen said to him, in effect, that because Collingwood was a public company the premises were not ‘retail premises’ under the Retail Leases Act so that, even if Collingwood ceased to be the tenant, it would remain liable (eg for rent) under the lease. Those representations were labelled the ‘Retail Leases Act representations’.

It might immediately be observed that there is a degree of tension between the alleged representations that:

•There is no truth in it, it’s just a rumour;
•Munday is interested, but there’s no agreement; and
•Even if Collingwood ceases to be the tenant, it will still be liable.

Each implies a different state of certainty about the existence or non-existence of an arrangement for Collingwood to cease to be the tenant. As will be seen, the misleading and deceptive quality of the representations Vouzas asserts turns upon the extent to which they can reasonably be understood as making a claim about the certainty that Collingwood would remain the tenant of the premises. But as will also appear, there was a degree of obscurity in the pleadings, evidence and submissions at trial concerning the misleading and deceptive elements of the representations said to have been made to and relied upon by Vouzas.

Vouzas pleaded that each written representation, viewed separately, was misleading or deceptive or likely to mislead or deceive.[21] But in each case, Vouzas also pleaded that Bleake House’s silence about the HoA and the consent to transfer was integral to the misleading and deceptive quality of the particular representation.[22]
[21]Further Amended Statement of Claim (‘FASOC’) [17A], [18], [18A] and [20].
[22]FASOC [17] and the particulars to each paragraph referred in the previous footnote.

In addition, Vouzas alleged that the three oral no sale representations, collectively, were misleading and deceptive. Finally, in a separate plea, he alleged that the Retail Leases Act representations were also misleading and deceptive.

Nowhere did he allege that the entirety of the conduct, taken as a whole, was misleading and deceptive. Yet, as the principles to which I will refer show, conduct said to be misleading and deceptive must be viewed in the context of the whole conduct of the parties.

The consequence of that principle is that it is not appropriate to analyse, for example, The Age representation in isolation from the prospectus representation, or either of them in isolation from the alleged oral representations. Nor, for that matter, should any of the representations be viewed in isolation from other conduct which provides context to all of them. Indeed, no party suggested that the conduct should be viewed in isolation.

When it came to alleging what it was that induced him to enter the contract, Vouzas said that he relied, without distinction, upon all of the representations other than the Retail Leases Act representations.[23] His reliance upon the alleged Retail Leases Act representations was expressed to be ‘further or alternatively’ to his claim to have relied upon the other representations.[24]
[23]FASOC [21].
[24]FASOC [29A] and [29C].

Other than saying he was induced by the representations, collectively, to purchase the property, Vouzas did not precisely identify in his pleading what aspect of those representations was influential upon his decision. Causation principles require that the plaintiff allege and prove what it was that operated as the inducement.[25] That is necessary because the court needs to perform something of a ‘matching’ exercise to ensure that the aspect of the defendant’s conduct that is said to have caused loss is the same aspect that is said to have been misleading and deceptive.
[25]See, for example, Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, 604 [37].

Putting them together, the written representations made a positive claim that the premises were subject to a long term lease of 15 years to a AAA tenant, namely Collingwood. The alleged no sale representations carried a negative claim, namely that Collingwood had not sold the lease – ie. that proposition was merely a rumour and there was no truth to it.

As the trial progressed, however, there was a shift in emphasis in how Vousas’ claim was put. Rather than focus on the positive assertion that there was a long term lease to Collingwood, and the argument that it was misleading to represent Collingwood as a long term tenant, Vouzas focused instead on having not been informed that there was a signed HoA and a consent to the proposed transfer.

I accept, as counsel for Bleake House observed, that there was no specific pleading, in express terms, that the conduct complained about was a failure to inform Vouzas of the HoA or the consent to transfer. But it is and always was sufficiently clear from the pleadings that Vouzas complained that Bleake House’s silence about those two matters at least formed part of the misleading and deceptive conduct alleged.

But the subtle change does highlight the importance of the identification of the precise conduct complained of: first, to identify what ‘claim’ the plaintiff must prove to be false or capable of inducing error, and secondly, to assess whether there is a causal link between the prohibited conduct and the loss.

Logically, the first step in the enquiry whether conduct is misleading or deceptive where the impugned conduct is the making of a representation or representations, is to look at the words spoken and the documents relied upon to see whether expressly or by implication they convey the meaning as ascribed.[26]
[26]Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (2005) 220 ALR 211, 221 [50] ff.

Where the impugned conduct is or includes oral statements, the court must be properly satisfied as to the content of such conduct. As McLelland CJ observed in Watson v Foxman:[27]

Where the conduct is the speaking of words in the course of a conversation, it is necessary that the words spoken be proved with a degree of precision sufficient to enable the court to be reasonably satisfied that they were in fact misleading in the proved circumstances. In many cases (but not all) the question whether spoken words were misleading may depend upon what, if examined at the time, may have been seen to be relatively subtle nuances flowing from the use of one word, phrase or grammatical construction rather than another, or the presence or absence of some qualifying word or phrase, or condition. Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions or self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.

[27]Watson v Foxman (1995) 49 NSWLR 315, 318-319.

In final (oral) submissions, when responding to questions I put to him, counsel for the plaintiffs, Mr McCormick, emphasised that it was Vousas’ ignorance about the HoA and the consent to transfer that was critical to the case. Ignorance of those two matters, he argued, made the difference between Vouzas believing that it was a mere possibility that Munday might become the tenant of the hotel and an understanding that Munday had a legal entitlement to become the tenant of the hotel.[28] Recasting those beliefs with respect to Collingwood’s lease, it was the difference between the possibility that Collingwood might cease to be the tenant, and a legal obligation upon Collingwood to transfer its tenancy to another.
[28]Transcript 564.

So understood, the case is significantly focused on Bleake House’s silence about the HoA and the consent to transfer. That is not to say that the oral and written representations as pleaded were not important. But the shift in emphasis might be fairly expressed as a change from a primary reliance upon the written and oral representations in the context of the silence (ie about the HoA and the consent to transfer), to a primary reliance upon the silence in the context of the written and oral representations.

It is thus important to look at what the cases say not only on misleading and deceptive conduct generally, but in particular upon the role of silence as the impugned conduct or as a component of the impugned conduct.

Applicable principles

The key applicable principles in relation to assessing whether conduct is misleading or deceptive (or likely to mislead or deceive) are well established and were not in dispute. First, the conduct must induce or be capable of inducing error.[29] Secondly, whether it does induce or is capable of inducing error is to be assessed objectively by the court in light of all relevant surrounding circumstances.[30] Thirdly, to undertake that task objectively requires the court to evaluate what a reasonable person in the position of the representee would have understood the conduct to have meant.[31]
[29]Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191, 198.
[30]Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592, 625 [109].
[31]North East Equity Pty Ltd v Proud Nominees Pty Ltd (2010) 269 ALR 262 [46] – [48].

In Demagogue Pty Ltd v Ramensky,[32] Black CJ explained the court’s approach to assessing silence in this way:

Silence is to be assessed as a circumstance like any other. To say this is certainly not to impose any general duty of disclosure; the question is simply whether, having regard to all the relevant circumstances, there has been conduct that is misleading or deceptive or that is likely to mislead or deceive. To speak of ‘mere silence’ or of a duty of disclosure can divert attention from that primary question. Although ‘mere silence’ is a convenient way of describing some fact situations, there is in truth no such thing as ‘mere silence’ because the significance of silence always falls to be considered in the context in which it occurs. The context may or may not include facts giving rise to a reasonable expectation, in the circumstances of the case, that if particular matters exist they will be disclosed.[33]

[32]Demagogue v Ramensky (1992) 39 FCR 31.

[33]Ibid 32.

In Campbell v Backoffice Investments Pty Ltd,[34] Gummow, Hayne, Heydon and Kiefel JJ approved[35] a statement of McHugh J in Butcherv Lachlan Realty Pty Ltd[36] containing a summary of the principles for determining whether particular conduct infringes s 52 of the TPA. His Honour said in substance:[37]

•Whether the conduct is misleading or deceptive is a question of fact;
•In determining whether a contravention of s 52 has occurred the task is to examine the relevant course of conduct as a whole in the light of the relevant surrounding facts and circumstances;
•It is an objective question that the court must determine for itself;
•The effect of any relevant statements or actions or any silence or inaction occurring in the context of a single course of conduct must be deduced from the whole course of conduct;
•Where the alleged contravention relates primarily to a document, the effect of the document must be examined in the context of the evidence as a whole; and
•The court must have regard to all the conduct of the (maker) in relation to the document including the preparation, distribution, and any statement, action, silence or inaction in connection with the document.
[34]Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304.
[35]Ibid 341-342 [102].
[36]Butcherv Lachlan Realty Pty Ltd (2004) 218 CLR 592.
[37]Ibid 625 [109].

What was said to be misleading and deceptive about the representations?

Did the conduct of Bleake House, viewed as a whole, have a tendency to lead a reasonable person in the position of Vouzas into error? Putting that question in somewhat more specific terms, was the failure of Bleake House to divulge the existence of the HoA and the consent to transfer, in the context of the various written and oral representations, apt to lead a person in the position of Vouzas into error?

Given that my task is to decide whether the conduct of Bleake House might induce an erroneous belief in a reasonable person in the position of Vouzas so as to cause such a person to enter the agreement, a very good question to ask in this case is: error about what? What error (or errors) is it said that a person in the position of Vouzas might fall into as a result of the impugned conduct?

Counsel for Bleake House, Mr Osborne, made the point in final submissions that at no stage in evidence did Vouzas say that, as a result of the various representations (including what he was not told), he believed X to be true, and that but for X he would not have entered the transaction. I will come back to this issue on the question of reliance and causation, but counsel’s observation about the evidence can be linked to the observation about the pleading I made earlier. That is, that nowhere in the pleading does Vouzas set out what the totality of the representations meant, or what particular feature or features of the representations caused him to enter the agreement.

Not uncommonly, the particular meaning of the representation asserted by a plaintiff to have been made by a defendant can be gleaned from what the plaintiff says made the representation false or misleading. Vouzas expanded upon the misleading and deceptive character of each representation by the particulars he gave of his allegation that the representation had that quality. In each case they took the form of a series of propositions. First, the explicit or implicit propositions in the statement; then, the silence on the two matters previously described; and, finally, the conclusion of what (presumably) Vouzas alleged was the false (ie error inducing) representation.

Taking The Age representation as an example, he gave the following ‘particulars’ of its misleading and deceptive quality:[38]
[38]FASOC [17A] (emphasis added).

(a) The Club had agreed to sell the lease over the Beach Hotel;
(b) The Club would no longer be a long term tenant;
(c)The Club’s lease would come to an end in six to nine months after 8 August 2008;
(d)The Age advertisement was silent as to the Club having agreed to the sale of the lease;
(e)The Age advertisement was silent as to [Bleake House] having consented to the transfer of the lease;
(f)The Age advertisement was silent as to there being a new tenant;
(g)The Age advertisement was silent as to the new tenant being Simham;

(h) The Age advertisement was silent as to Simham’s worth;
(i)The Age advertisement by its statement as to a long term lease to ‘AAA’ tenant represented that the Club would continue to be a tenant; and
(j)Further or alternatively, the Age advertisement by that statement represented that the Club was such a tenant.

The particulars given in respect of the oral representations were substantially the same but added that Bleake House had denied the sale of the lease.

By his particulars, as indicated by the parts I have emphasised above, Vouzas alleged that each statement carried the misleading and deceptive representation (either or both) that ‘the Club was a tenant’ and ‘the Club would continue to be a tenant’ at the hotel.

So understood, the alleged erroneous belief must have been the belief that at the date of the representation Collingwood was, and would as a matter of some degree of certainty continue to be, the tenant at the hotel premises.

With those considerations in mind, I turn to some of the factual controversies.

What oral representations were made?

Of course, there is no dispute about the content of the written representations contained in The Age advertisement, the prospectus, the leaflet or the vendor‘s statement. Nor is there any dispute that Vouzas saw and read those statements. But there is some dispute about what Rudy Kelemen said to Vouzas, both as regards the alleged ‘no truth in it’ statement, and also as to the Retail Leases Act representations.

‘Rumour’ and ‘no truth in it’ representations

Vouzas said in evidence that Rudy Kelemen first made a ‘no truth in it’ statement at a meeting in mid-October 2008. The conversation occurred after Vouzas had been to see his bank manager, James Morton, of the NAB. The inference from that sequence of events is that Mr Morton made some mention of having heard that Collingwood had sold its lease.

That such a conversation with Mr Morton might have occurred is hardly surprising. Information about the agreement to sell the business was readily accessible. First, Collingwood itself had announced on its website that it had signed an agreement to sell the lease (along with the lease of another hotel, the Diamond Creek Tavern). Collingwood’s website article contained further details about the sale, for example: that the sale would take between six and twelve months to settle; that Collingwood would continue to operate the venue in the meantime; that the performance of the business of the Bleake House hotel had not been meeting forecasts; that the sale of the venue would be at a loss to Collingwood; and that the sale was part of a wider scheme at Collingwood to reduce its debt.

Furthermore, apart from what was on the Collingwood website it is evident from what was published by Charter Keck Cramer the following January that press articles had appeared about the sale as well. A portion of its valuation report has been set out above.[39] It specifically referred to press articles in these terms:

It has been well documented in the Melbourne Press that the Collingwood Football Club has traded less than satisfactorily at the venue since taking over the lease, and there are further press reports that they have sold the business of the Beach Hotel, in conjunction with another hotel at Diamond Creek, realising a substantial loss on their investment on a relatively short two year period.
..
It has also been reported in the press that the business of the Beach Hotel has been purchased by interests associated with well regarded hotelier Rick Munday, whom we understand (although not confirmed) has purchased the business in late 2008 for circa $3,000,000.[40]

[39]See [30] above.

[40]Charter Keck Cramer valuation report dated 28 January 2009 [6.6].

So the evidence would suggest that anyone interested in making inquiries from either the press or from Collingwood’s own publications at the time would have discovered a degree of detail about Collingwood’s sale of the lease of The Beach hotel. And, having read that information, the reasonable reader would gain an impression that the sale of the hotel business went beyond mere rumour and in fact was the subject of a documented agreement that might take six to twelve months to settle.

According to Vouzas, when he first raised the ‘rumour’ – a term which he admitted was his own language[41] - about the Collingwood sale, Rudy Kelemen said ‘there was no truth to it. It was, in fact, a rumour’.[42]
[41]Transcript 103.
[42]Transcript 71.

Vouzas continued that, at the same meeting, Kelemen had ‘elaborated’ that:

… if it was to sell – because he doesn’t know what can happen in the future but if it was to sell, the Retail Leases Act does not apply and Collingwood Football Club remains on the hook.[43]

[43]Ibid.

Vouzas then described having spoken to his lawyer, Darren Goldsmith before having another meeting with Kelemen. He said that after mentioning to Goldsmith his interest in buying the hotel, Goldsmith seemed to remember having read somewhere that Collingwood had sold its interest in the hotel. Goldsmith then performed an internet search, there and then, and, according to Vouzas, ‘he referred to an article which was earlier in the year of 2008’. That article was not produced in evidence. Vouzas did not say that he read it. He did not say what, if anything, he learned from the article nor did he say what details it provided. The most he was able to say, in cross-examination, was as follows:

Did you and Mr Goldsmith search for an article on the internet? - - -Mr Goldsmith did. …
Did Mr Goldsmith do it in your presence? - - - Yes.
And did you look at the article once he had obtained it? - - - Uh, no, I think the – the first paragraph where it, where it said it sold, I’d already asked and I was told then by, it hadn’t been sold so I pretty much disregarded it. I didn’t disregard it. Sorry. I – I took, I didn’t believe it.
Would it be fair to say this, that what happened was that the two of you found an old article which stated the business had been sold? - - - Yeah, well, that’s what it stated.[44]

[44]Transcript 136.

The article to which he referred may have been the Collingwood website article that was tendered in evidence. Alternatively, it may have been one of the Melbourne press articles to which Charter Keck Cramer referred. Or perhaps it was something else altogether.

Neither Darren Goldsmith nor James Morton were called to give evidence. So I did not have the benefit of evidence from either of them as to what information they had found about the Collingwood sale, and what it was that they passed on to Vouzas. I have only Vouzas’ account of what he was told. I will return to the significance of the absence of their evidence later, but in my view it is quite important in this case to know just what it was that Vouzas knew from Morton and Goldsmith – or from any other source – at the time he was speaking to Kelemen. If the most he had heard at that time was a gossipy, word-of-mouth nature, then the inherent probability that his conversations with Kelemen on several occasions would have concerned mere ‘rumour’ would be greater than if the source of his information was the financial press and he had specific details of agreements, settlement periods, identity of the purchaser and the reasons for sale.

Moreover, if information about the sale was either well known or easily discoverable (eg via an internet search), then the inherent probability that the owner of the property would deny the existence of the sale would be relatively low.

Inherent probabilities alone do not amount to proofs. But they are matters to be weighed along with other factors.

I bear in mind, of course, that at the stage of determining whether a representation is misleading or deceptive I am concerned with what a reasonable person would have understood the relevant representation to mean. But, I am also concerned with a reasonable person in the position of – including, with the knowledge of – the plaintiff, Vouzas.

On the second occasion that Kelemen allegedly made the ‘rumour’ representation, Vouzas says that Kelemen made a phone call to Stephen Cropley in his presence. He claims that he only heard Kelemen’s part of the conversation, at the end of which Kelemen said to him:

The vendor knows nothing about it. There’s no sale. It’s just a rumour, he knows nothing about a sale.

Rudy Kelemen and Cropley both gave evidence about this incident. While their versions differ from Vouzas’ account, they are not entirely the same as one another’s.

Kelemen said he knew Cropley well. He and Cropley regularly walked together in the mornings around the Tan, the well known track surrounding the Royal Botanic Gardens in Melbourne. Cropley, Kelemen said, had told him on one such morning early in the sales campaign (so, I infer, in the first half of October 2008) that Munday was looking at doing some sort of transaction with Collingwood. But, Kelemen recalled, Cropley had said that he thought the transaction ‘had buckleys and none chances of succeeding’.[45] Cropley had mentioned a figure of about $3,000,000 for the sale, less than half what Collingwood had paid for it. Kelemen said there was no mention of an agreement – more that some ‘sort of deal or transaction’ could be done whereby Munday could help turn the business around.
[45]Transcript 330.

Kelemen took it from that conversation that there was no transaction ‘as such’, that it was ‘only talk at the moment’ and that it was ‘highly likely not to succeed’.[46]
[46]Transcript 332.

Cropley had no specific recollection of the conversation with Kelemen. But he did not dispute that he may have told Kelemen on a morning walk that Collingwood and Munday were looking at doing some sort of transaction with the intention of involving Munday in the business.[47] He was asked if he had mentioned a price of around $3,000,000 and whether the conversation had occurred early in the campaign to sell the freehold. He answered that he could not recall the conversation but ‘that would have been right’.
[47]Transcript 198.

Kelemen said in evidence that Vouzas was very keen to pursue the issue of Collingwood’s possible sale of the lease. According to Kelemen, Vouzas rang him and said that he had heard that Collingwood had sold or was wanting to sell the lease, after which Vouzas attended Kelemen’s office to discuss it.

Kelemen’s evidence was that, at the meeting that ensued, he first told Vouzas what he knew as a result of his earlier conversation with Cropley. That is, he told Vouzas that there was a man called Rick Munday who had an excellent reputation as a hotelier who was talking to Collingwood about some sort of transaction.[48] He informed Vouzas that the information came from Stephen Cropley.
[48]Transcript 335.

Consistent with Vouzas’ account, Kelemen said that he then phoned Cropley in Vouzas’ presence. Kelemen believed he spoke on the speaker phone so that Vouzas could hear both sides of the conversation. On his version, he told Cropley that he had Vouzas with him and that Vouzas wanted to know the story about the transaction between Collingwood and Munday. According to Kelemen, Cropley said in answer to that question:

… well, not much. It’s the same thing that’s been talked about for a long time. There is no – there is no transaction and it would be that hard to jump over the hurdles that are there that it’s highly unlikely it’s ever going to happen.[49]

[49]Transcript 336.

Kelemen denied saying to Vouzas that Bleake House knew nothing of the transaction or that the sale was ‘just a rumour’. He did, however, agree in cross-examination that in speaking to Vouzas he conveyed the message that there was ‘no transaction’, it was ‘only talk’ and ‘highly likely not to succeed’.[50]
[50]Transcript 360.

Cropley did not volunteer any recollection of the phone conversation that both Kelemen and Vouzas spoke of. He did, however, recall Kelemen mentioning to him at some point that there was a prospective purchaser interested in developing the site and that he gave Kelemen Munday’s phone number so Kelemen could call Munday directly to ascertain his attitude should the development take place. I will return to that conversation shortly. But in response to a specific question put to him as to whether later in the campaign Kelemen had telephoned him and asked whether there had been a ‘completed sale’ between Collingwood and Munday, Cropley answered ‘he would have done that. Yes’. And when it was further suggested that his response to that question was ‘no, there hadn’t been’, he answered ‘that’s correct’.[51]
[51]Transcript 200.

I will return shortly to my conclusions on what I think probably happened in these discussions. First, I will consider the evidence about the other disputed discussions.

At the meeting at which he said he signed the contract on 14 November 2008, Vouzas claimed he told Kelemen, before signing, that he remained concerned about the ‘rumours’ and that ‘everyone keeps talking about it’.[52] According to Vouzas it was on that occasion that Kelemen mentioned Munday by name and said that he had heard over the last few days there was an interested party that had conversations with Collingwood but that no agreement had been reached. Vouzas then gave this evidence:

… Mr Kelemen rang Mr Munday and again I didn't hear the other side of the conversation, but essentially to ask what Mr Munday's view would be if he were to acquire the business, how would he view the new landlord intending to do a long term development on the site. When Mr Kelemen got off the phone, he said to me that Mr Munday would be, would look at it favourably if it was beneficial to him, or he would look at any proposed development favourably.[53]

[52]Transcript 74.

[53]Transcript 75.

Several things can be noted from the account Vouzas gave. First, despite what he says he had been told prior to this meeting, it is evident that he was not convinced that there was no truth in the ‘rumours’ he said he had heard about Collingwood having sold the lease. Secondly, on his version, ‘everyone kept talking about it’, suggesting that what he had heard had real currency. Thirdly, although Kelemen told him that no agreement had been reached, the matter had evidently progressed from a status of there being ‘no truth in it’ and ‘only rumour’ to there now being an interested party, namely Munday, who had had conversations with Collingwood (presumably about buying the leasehold).

In this case, the real issue is whether it was misleading to implicitly represent that Collingwood would continue to be the tenant. Vouzas asserts that by (implicitly) making that representation, Bleake House engaged in misleading and deceptive conduct.

In my view it is doubtful that Bleake House’s conduct carried that implicit representation. Or if it did, it is so vague a proposition that is it difficult to give it meaningful content. A reasonable buyer in Vouzas’ position would appreciate that there could be no certainty Collingwood would always remain tenant. That buyer would know that Collingwood could ask at any time for consent to assign the lease, and the lessor would bound to agree if a suitable replacement tenant proposed. Whether Bleake House’s conduct was misleading or deceptive turns on the degree to which that conduct was apt to lead buyer into an erroneous belief about some certainty of Collingwood continuing as tenant. But what degree of certainty? And for what duration?

A reasonable buyer would at least have known of the hypothetical, legal possibility of Collingwood assigning the lease in the future and not remaining the tenant. More than that, in the circumstances facing the reasonable buyer in the position of Vouzas, that buyer would know of the real, practical possibility of an assignment occurring because of the internet report of a sale, and the identified possible purchaser in Munday.

Bleake House correctly represented the existing lease position which, of itself, did not and would not have conveyed anything to a reasonable purchaser about the prospect of Collingwood continuing to be the tenant of the premises. Bleake House did not give any assurance that Collingwood would of necessity continue as tenant. No such assurance could be implied from its conduct as a whole. As I have found, neither it nor Kelemen Commercial conveyed that the reported sale was without any substance or truth at all; only that it had not yet happened and was very unlikely to happen.

What had in fact occurred, but was not disclosed, was that a conditional sale agreement had been entered into for the sale of the lease, and an approval given by the lessor to that assignment, should it occur. That conditional sale agreement was, on the evidence, one about which there could be no confidence it would ever be completed: indeed, the evidence disclosed that it was an unlikely prospect. So understood, the fact of the agreement merely converted an ever present legal possibility into a practical, commercial possibility, albeit one with very low prospects of ultimately eventuating. Accordingly, ignorance about it would make no practical difference to the belief a reasonable person in the position of Vouzas would have entertained about the prospect that Collingwood would remain the tenant of the premises.

In conclusion, the express representations, together with silence about the HoA and consent to transfer, was not apt to lead a reasonable person in the position of Vouzas to form any erroneous belief. That is, they were not apt to induce a belief about the likelihood that Collingwood would remain the tenant, for any particular time into the future, that was materially different to the belief that person would have held absent such conduct.

For those reasons I am not persuaded that either Bleake House or Kelemen Commercial engaged in conduct, in breach of s 52 of the TPA, that was misleading and deceptive or likely to mislead or deceive.

Was Kelemen Commercial knowingly concerned in any breach of s 52 by Bleake House?

Since I have not found there to have been any breach of s 52 by Bleake House, in respect of the written representations, it is not necessary that I discuss the issue of Kelemen Commercial’s involvement in any such breach. Were it necessary for me to have had to decide, I would have answered ‘no’ to that question. On the evidence, I am not satisfied that Kelemen knew of the HoA or consent to transfer, or any other information that could potentially have given a misleading or deceptive quality to the making of the written representations.

Did any contravention of s 52 cause loss to Vouzas?

Once again, because I have not found there to have been any contravention of s 52, the question whether the contravention causing loss is entirely hypothetical. To answer the question would involve assuming, contrary to my findings, that the conduct of Bleake House or that of Kelemen Commercial was apt to induce an erroneous belief in the mind of a reasonable person in the position of Vouzas about the prospect of Collingwood continuing as tenant of the premises.

In case the matter goes further, I will address this question making that assumption. However, given the circumstances, I will only do so relatively briefly.

In my view, if anything, it was on this aspect of the case that Vouzas’ claim was at its weakest.

Whereas, when considering whether either defendant’s conduct was misleading or deceptive it was relevant to consider what effect that conduct was apt to have on a reasonable person, at this stage of the analysis the task is to find how the representations were understood by Vouzas and what effect they had, if any, in inducing him to enter the contract.[64]
[64]Krakowski v Eurolynx Properties (1993) 183 CLR 563, 576-577.

The representation need not be the sole inducement for the representee to act: it is sufficient that it plays some part, even if a minor part, in contributing to the entry into the contract.[65] And, negligence on the part of the victim of the contravention is not a bar to recovery for that breach, so long as the victim’s conduct does not destroy the causal connection between the contravention and the loss or damage.[66]
[65]Gould v Vaggelas (1985) 157 CLR 215, 236.
[66]Henville v Walker (2001) 206 CLR 459, 468 (Gleeson CJ), 484 (McHugh J).

To begin with, as noted earlier, Vouzas did not ever state in evidence that but for a particular belief which he says was induced by the various representations, or from not being told about the HoA or consent to transfer, he would not have entered the contract. That alone is close to fatal to his claim on causation. A consideration of the evidence that was given does not improve his position.

Far from being satisfied that Vouzas was induced, even as to a minor part, to enter the contract upon an erroneous belief that Collingwood would necessarily continue as the tenant of the premises, I find that Vouzas well knew of the real prospect that Collingwood could be replaced by Simham as tenant, and was content to enter the contract regardless. Moreover, his claim that he wanted to rescind the contract in May 2009 because he discovered, for the first time, that Collingwood had made an agreement to sell the lease to Munday was purely opportunistic. His real reason for wanting to get out of the contract had much more to do with the availability of finance.

Knowledge of the prospect that Munday would be tenant

I have already canvassed most of the evidence pertinent to what Vouzas knew and believed, before entering the contract, about the prospect that Collingwood might be replaced by Munday or his nominee. I do not accept that, having had the conversation he had with Munday, on speaker phone, that he could seriously have believed that there was no substance in the reports he had heard – and continued to hear – that Collingwood had sold its lease (or at least was in the process of negotiating to sell its lease).

In my view, at the time of entering the contract, Vouzas knew more about the prospective or actual deal between Collingwood and Munday than he revealed to the court. I reach that view because:

·The evidence disclosed that he was a man of considerable commercial development experience. It beggars belief that he would learn some details from the internet about the sale, but not pursue more detail about it independently of the seller;
·Vouzas must have known that his prior knowledge of the Munday deal was critical to his case. As I have already observed, I am entitled to infer from his failure to call Goldsmith or Morton to say what information they possessed, and passed on, that their evidence would not have assisted him;
·Charter Keck Cramer’s report in January 2009 would, in my view, have caused Vouzas some alarm had he truly believed that the reports of the sale were purely ‘rumour’ with no truth to it. His admission in evidence that he made no further enquiry about the sale from the day of the telephone conversation with Munday in Kelemen’s office, in November 2008, until May 2009, was telling. I do not accept his explanation for making no further enquiry, namely that he had already exhausted his avenue of enquiry by asking the agent for Bleake House. He made no effort to speak again to Munday, or to Collingwood. This was despite saying that he remained concerned throughout because of ‘rumours’ he continued to hear. The more plausible explanation was that he was already aware of the prospective sale and was comfortable with it;
·He was comfortable with it because I think it probable, despite Vouzas’ denial, that he was interested in developing the site as soon as reasonably practicable. He envisaged being able to obtain permits to do so within two or three years. His assertion that he was most focused on income from the tenant, and not the development in the first instance, was discredited by an email confirming his intention to get permits within two or three years of taking possession;[67] and
·For that reason I think that Kelemen’s belief[68] that Vouzas was equally relieved to think he might have a tenant (Munday) who would be amenable to surrendering the lease, and not have to pay Collingwood to relinquish the lease under the demolition clause,[69] was probably correct.
[67]Transcript 115.
[68]See [148] above.
[69]Vouzas confirmed in evidence (Transcript 65) his awareness of the demolition clause in the lease (cl 23.1) which permitted the lessor to buy back the lease, at certain periods in the lease term, for $10m if it wished to demolish the building.

Vouzas’ inability to obtain finance to settle

Bleake House and Kelemen Commercial sought to show that Vouzas’ true reason for wishing to avoid the contract in May 2009 was not that he discovered the HoA, but rather that he simply did not have the funds to settle. In my view that explanation is very likely to be correct.

Vouzas admitted that he did not have the money to settle the contract on 12 May 2009, the due settlement date. Nor did he have finance available a month later.[70] But he maintained he had an agreement from the NAB for funding. He did not discover[71] or produce any evidence of a loan agreement, or any loan application, or any document at all from the bank indicating funding was available. He insisted that his banker, Morton, had agreed in principle before the contract was made to lend the money and that he could have obtained it if necessary. Of course, he did not call Morton to give evidence to establish the availability of funds, and gave no explanation for not doing so.[72] Again, I infer that Morton’s evidence would not have assisted him.
[70]Transcript 111.
[71]Transcript 149.
[72]Transcript 116.

Morever, Kelemen Commercial called evidence from Helen Wolfers, a former lender to Vouzas. She explained that until the due settlement date Vouzas had sought to involve her either in funding the project or becoming a partner in the project. No arrangement for funding was ever made. She had lent him the money for the deposit upon a promise that it would be repaid within two weeks. It was not repaid. She gave evidence that his previous good pattern for repaying loans had begun to decline in early 2009.

Conclusion on causation

On the whole of the evidence, I find that the probable reason for Vouzas seeking to avoid settling the contract in May 2009 was not some continuing concern about the prospect of Collingwood not being the tenant, or having learned of the existence of the HoA or consent to transfer. Rather, it was his inability to obtain finance to pay the $10.5m that was due.

For these reasons, even if Vouzas had succeeded in showing that Bleake House or Kelemen Commercial had engaged in the misleading and deceptive conduct he alleged, that conduct did not cause him to enter the contract or to suffer the loss of the deposit. Entry into the contract was not caused by reliance upon the impugned conduct and the loss of the deposit was caused by his failure to have the money to settle the purchase.

Contributory fault, proportionate liability and third party claims

Like the question whether Kelemen was knowingly concerned in any breach by Bleake House of s 52, my findings on the principal allegations of misleading and deceptive conduct make it unnecessary for me to decide issues of contributory fault, proportionate liability as between defendants, or indemnity between defendants. For that reason I say nothing about those claims.

Bleake House’s counterclaim

Having dismissed Vouzas’ claims under the Sale of Land Act and for misleading and deceptive conduct, I now turn to the counterclaim by Bleake House for damages.[73]
[73]No evidence was lead at trial in support of a claim against Baia Properties for removal of a caveat. Subject to any further submission prior to making final orders, I treat that claim as not being pursued.

There was no dispute that if (as I have found) Vouzas was not entitled to rescind the contract, then he repudiated it, and Bleake House is entitled to damages for his breach. The only dispute between the parties, in those circumstances, is the date upon which those damages are to be assessed.[74]
[74]Paragraph 5 of Vouzas’ Further Amended Defence to Counterclaim, relying upon a purported contractual time limitation period, was abandoned at trial.

The usual rule, in respect of breach of contract, is that damages are assessed at the date of the breach.[75]
[75]JW Carter, Carter’s Breach of Contract (2011, Lexis Nexis Butterworths) 627 [13-03].

If damages are assessed at the date of the breach,[76] there was no dispute that the quantum of damages is $500,000,[77] calculated in this fashion:

Contract Price  $11,000,000
Value of Land on 12 May 2009                 $10,000,000
Difference  $ 1,000,000
Retention of Deposit  $     500,000
Net loss  $     500,000

[76]That is the date Bleake House accepted Vousas’ repudiation of the contract: 1 June 2009.

[77]Although the particulars of loss given by Bleake House referred to a claim for consequential losses, it expressly abandoned such a claim at trial. Vouzas made no submission in respect of that abandonment or the consequence of it.

However, Bleake House argues that in the circumstances of this case damages should be assessed at the date of trial. For his part, Vouzas contends that damages should be assessed at the conventional date, namely the date of breach. But if, despite that argument, I am satisfied that the damages are to be assessed at the date of trial, the parties have agreed the appropriate award should be $2,200,000. Without precisely identifying the monetary value of all of the components, that calculation takes into account the following elements:

Contract Price  $11,000,000
Value at Date of Trial  $ 8,000,000
Difference  $ 3,000,000
Less Deposit Paid  $     500,000
  $ 2,500,000
Add holding and ancillary costs,
but deduct rent received to arrive
at net loss:  $ 2,200,000
Applicable principles

The fundamental object of an assessment of damages at common law for breach of contract is to place the injured party, so far as money can do it, in the same situation with respect to damages as if the contract had been performed.[78]
[78]Robinson v Harman (1848) 1 EX 850 at 855; 154 ER 363 at 365 (Parke B). And see, for example, Wenham v Ella (1972) 127 CLR 454, 471 (Gibbs J).

As already mentioned, the conventional date for assessment of those damages is at the date of breach. So, for example, the usual date for the assessment of damages for a purchaser’s breach of a contract for the sale of land is the date the contract was determined for that breach.[79]
[79]Victorian Economic Development Corporation v Clovervale [1992] 1 VR 596, 604 (Tadgell J).

It has been said that, even though the general rule that damages are assessed at the date of breach is more rigidly applied to contract than in tort, nevertheless, in respect of breach of contract, courts have departed from the general rule where it is necessary to do so in the interests of justice.[80]
[80]Johnson v Perez [1988] 166 CLR 351, 356 (Mason CJ).

In Johnson v Perez, Mason CJ gave examples[81] of circumstances in which it may not be appropriate to assess damages at the date of breach, for example:

·For the injured party to a contract of sale of goods where, at the time of breach, there was no market in which to buy replacement goods; or
·For the defendant’s failure to return shares on loan, in circumstances where, at the date of the breach, it was difficult to measure loss because of the wild fluctuation in share value at that time.

[81]Ibid 356-357.

The usual choice of date for the assessment of damages may, perhaps, be explained by reference to the principle that the wronged party is expected to mitigate loss. That is, upon learning of the breach the injured party may seek to minimize loss by reselling the asset or purchasing a replacement asset, as the case may be. But if the victim is unable to mitigate loss at the date it occurs, to achieve fairness to both parties the court may choose the date when it becomes reasonable to do so as the date of assessment of damages.[82]
[82]Ibid 357-358.

After reviewing a number of cases in which alternative dates had been selected by the court for assessment of damages, Mason CJ said in summary:

As the cases to which I have referred reveal, the principles governing the assessment of damages do not permit the application of rigid rules based on categories of actions. Instead, the injured parties’ intentions and the surrounding circumstances must be considered in light of the underlying principles in order to do justice between parties.[83]

[83]Ibid 360.

In Wroth v Tyler,[84] damages were to be assessed for a vendor’s breach of a contract for the sale of land. The purchase price under the contract was £6,000, although, at the date of breach, the value of the land was £7,500. It was accepted that, at the date of breach, the purchasers were unable, by reason of their financial position, to go into the market and purchase a substitute property of the value of £7,500. At the date of trial, an award of £1,500 damages, when added to the £6,000 the purchasers had agreed to pay under the failed contract, was not sufficient money to purchase a property equivalent to the one the subject of the contract. By that date, due to movement in property prices, an additional £5,500, on top of the £6,000 contract price, was required to purchase an equivalent house.
[84][1974] Ch 30.

Megarry J considered that, if applied in the circumstances of that case, the general rule of assessing damages at the date of the breach would appear to defeat, rather than carry out, the general principle that damages should place the innocent party, so far as money can do it, in the same situation as if the contract had been performed.[85] His Honour then observed:

It therefore seems to me that on the facts of this case there are strong reasons for applying the principle rather than the rule. The question is whether it is proper to do so.
…The rule requiring damages to be ascertained as at the date of the breach does not seem to be inflexible, and in any case the rule may be one which, though normally carrying out the principle, does on occasion fail to do so; and on those occasions the rule may have to be modified so as to accord with the principle.[86]

[85]Ibid 57.

[86]Ibid 57.

From the authorities I have mentioned the principles I apply are as follows:

· The guiding principle is that damages are awarded to place the injured party in the same situation, with respect to damages, as if the contract had been performed;

· The usual rule is that the damages are assessed at the date of the breach;

· The rule is not to be applied rigidly, but may be modified if necessary to do justice to the parties, consistently with underlying principles, having regard to the injured party’s intentions and the surrounding circumstances; and

· In addition to the guiding principle as stated, the ‘underlying principles’ include other established principles with respect to damages, including those in relation to the burden of proof, causation and remoteness.

The facts

Bleake House argued that, once it became evident it could not sell the property to Vouzas, it became ‘impracticable’ for it to sell the property thereafter. It made that submission on the following grounds:

· Its agent, Rudy Keleman, advised against proceeding with the resale;

· By July 2009, a liquor licensing issue had arisen in respect of the premises when a Licensing Inspector issued an application at VCAT to amend the liquor licence conditions so as to only allow background music (rather than live music) at the premises;

· After the HoA with Ricky Munday was terminated, Collingwood unsuccessfully attempted to assign the lease from September 2009 onwards;

· On 24 December 2009, Collingwood advised Bleake House that Tattersalls had notified it that its allocation of electronic gaming machines at the premises had been reduced by two machines as a consequence of which Collingwood required a market rent review under clause 20.03 of the lease;

· Bleake House contested Collingwood’s asserted right to a market rent review at VCAT until 16 December 2010, when the tribunal determined the matter in Collingwood’s favour;

· In March 2011, Colliers (the valuers appointed to conduct the market review) determined market rental at $450,000 per annum;

· On 1 August 2011, Collingwood assigned the lease, with the rent so revised, to a new tenant; and

· At trial, Bleake House remained the owner of the freehold of the premises, valued (as at 25 January 2013) at $8,000,000.

The reasons for Bleake House not wishing, or being unable to, resell the property after mid 2009 are multifarious. Some of the causal ingredients in the deferral of any resale lay in the characteristics of the asset itself, rather than any systemic problem with the market for real estate. As such, the case is distinguishable from those in which a date later than the date of breach was selected because there was no market for the goods, or the market was fluctuating wildly, or the purchaser could not afford a replacement due to market revaluation.

In its favour, Bleake House did intend to sell the property and it attempted to do so again immediately after the failed sale to Vouzas. But it did so against Keleman’s advice. Kelemen did not think the time was right because, by then, it had become apparent that Collingwood was not the desirable tenant that it was once thought to have been, plus the liquor licensing problem had arisen. Kelemen’s opinion provides a reasonable explanation, partially or wholly, for the failure of the resale soon after the breach by Vouzas.

The intrusion of the liquor licence issue stemmed, it appears, from Collingwood’s adverse conduct of the hotel business. In that sense, it was a problem which was latent in the identity of the tenant under the lease prior to the sale. Further, the intrusion of the Tattersalls issue in December 2009, and the ensuing dispute over the market rent, probably had its genesis in discontent with the market rent under the lease, and its restrictive review terms. It is unlikely to have been a coincidence that the dispute followed closely upon Collingwood’s failure to assign the lease under the agreement made with Munday.

Bleake House produced no expert evidence to say that it had done all it reasonably could have done to attempt to resell the property prior to trial. Nor did it lead any opinion evidence to establish that early 2013 was the first time it could reasonably have attempted to resell that land so as to make that date the more appropriate time for assessment of damages.

Analysis and conclusion

In my view, the foregoing facts and circumstances are to be evaluated in view of three underlying principles. Individually, or in combination, they support the conclusion that the proper date for the assessment of damage in this case is the date of breach.

First is the principle that the onus is upon Bleake House to demonstrate that a date other than the conventional date for the assessment of loss should be applied.

Second is the principle of mitigation of loss. In my view, it has not been demonstrated by Bleake House that it took all reasonable steps to mitigate its loss in the period between mid 2009 and January 2013 (when the property valuation upon which it relies was made). I accept that the general chronology outlined above suggests that it would have been difficult to sell the property while Bleake House and Collingwood were litigating the market rent in 2010 and until March 2011 when it was finally fixed. But there were periods of time in late 2009 and between March 2011 and January 2013 which may have provided reasonable opportunities to sell. I am not confident I can make a proper assessment of the reasonableness or otherwise of a decision not to attempt to resell the property in those time frames on the evidence before me. Nor is there any evidence of the value of the property within those time frames.

Applying the first and second principles, and not being satisfied that January 2013 was necessarily the first opportunity to have reasonably mitigated its loss, Bleake House has not established a more appropriate date for assessment, or a more appropriate valuation or damages, than the valuation assessed at the date of breach.

Third is the principle of remoteness of damage. The rule in Hadley v Baxendale limits the recovery of loss for breach of contract to those losses flowing in the usual course of things from the breach (first limb) or those that may reasonably be supposed were in the contemplation of both parties, at the time of contract, as the probable consequence of breach (second limb).[87] In my view, a loss suffered by Bleake House measured by the difference between the contract price and the value of the premises in January 2013, arising as it does from the multifarious factors I have mentioned, is not a loss that sits comfortably within either limb of the rule.
[87]Hadley v Baxendale (1854) 156 ER 145, 151 (Alderson B).

Having regard to all of these considerations, I am not persuaded that the justice of the case requires that there should be an assessment of damages after the date of the breach. In other words, I am not persuaded that, in order to do justice between the parties, Vouzas should bear, or Bleake House should be compensated for, the consequence of the slide in value of the property between mid 2009 and January 2013, given the particular causes contributing to the inability of Bleake House to resell the property, and the depreciation in the property’s value.

Damages will be assessed at $500,000.

Conclusion and orders

In summary, I have reached the following critical conclusions:

·Vouzas was not entitled to rescind the contract of sale pursuant to s 32(5) of the Sale of Land Act;
·Neither Bleake House nor Kelemen Commercial contravened s 52 of the TPA so as to entitle Vouzas to damages pursuant to s 82 of that Act;
·By not completing the contract of sale, Vouzas breached the contract and Bleake House is entitled to damages for that breach;
·Damages are assessed at $500,000.

I will hear the parties on the appropriate orders to give effect to these conclusions.

[2013] VSC 534

8 October 2013