Vrancic, Ivan v Elton Close Pty Ltd

[1983] FCA 138

Re: IVAN VRANCIC and GRETA EMMA VRANCIC
And: ELTON CLOSE PTY. LIMITED; LINEHANS ESTATE AGENCY (NEWCASTLE) PTY. LIMITED
and ELTON CLOSE PTY. LTD. (Cross claimant) and LINEHANS ESTATE AGENCY (Cross
respondent)
No. G140 of 1982
Trade Practices

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES REGISTRY
GENERAL DIVISION
Fitzgerald J.

CATCHWORDS

TRADE PRACTICES - alleged statement by a salesperson employed by second respondent - depth of fill on land - sales-staff directed to inform purchasers that there might be fill on the land and that purchasers to make their own enquiries - credibility of witnesses - application dismissed.

TRADE PRACTICES - cross-claim by first respondent against second respondent for an indemnity or contribution in respect of any monies the first respondent is ordered to pay to applicants - alternatively an order under s.87 Trade Practices Act.

Trade Practices Act 1974 (Cwlth), ss. 52, 82 and 87

HEARING

SYDNEY

#DATE 4:7:1983

ORDER

1. The applicants' claim against the respondents and the first respondent's claim against the second respondent are dismissed.

2. The applicants must pay the taxed costs of these proceedings.

JUDGE1

The Claim

The applicants in these proceedings claim against the respondents for damages under s.82 of the Trade Practices Act 1974 ("the Act"). The applicants' claim is founded upon an alleged statement by one Marjorie Walker, a salesperson employed by the second respondent, which it is alleged constituted a contravention of s.52 of the Act. The statement is alleged to have been made in March 1981. The applicants assert that, in consequence of what was then said, they entered into a contract dated 27 May 1981 under which they agreed to purchase from the first respondent for $29,975 a block of land sufficiently described as Lot 69 D.P.261260. The land formed part of the Elton Close subdivision which was developed by the first respondent in Adamstown Heights, Newcastle. The second respondent was the real estate agent engaged by the first respondent to negotiate sales of the land.

The case as ultimately presented by the applicants may be summarised as follows:
(a) In March 1981, the applicants were interested in purchasing Lot 69 and erecting thereon a two-storey brick dwelling, and the female applicant on behalf of herself and the male applicant made enquiries of Marjorie Walker;

(b) in reply to the said enquiries, Marjorie Walker represented to the female applicant that the allotment contained fill up to but not more than a depth of 1 metre;

(c) the depth of filling on the allotment was between 8 metres and 11 metres;

(d) the respondents knew that the allotment contained fill to a depth substantially in excess of 1 metre;

(e) the representation was made in order to induce the applicants to purchase the allotment from the first respondent;
and

(f) the applicants purchased the allotment in reliance upon the representation.

The respondents dispute the applicants' claim. Further, the first respondent cross-claims against the second respondent for an indemnity or contribution in respect of any monies which the first respondent is ordered to pay to the applicants. Shortly stated, the basis of the cross-claim is that any statement by Mrs Walker in the form alleged constituted a breach of the terms of the contract between the respondents which required the second respondent's servants and agents involved in selling allotments in Elton Close to inform would-be purchasers -

(a) that there was fill on the allotments; and

(b) that they should make their own investigations in relation to the fill.
Alternatively, the first respondent submitted that, if it was ordered to pay damages to the applicants, it was a person who has suffered or is likely to suffer damage by conduct of the second respondent in contravention of s.52 and that accordingly an order in its favour against the second respondent could and should be made under s.87 of the Act.

The allotment purchased by the applicants formed part of a large area, formerly known as the Waratah Colliery, which had been acquired by the first respondent late in 1980 for subdivisional development. Coal mining operations on the land had ceased some time prior to its acquisition by the first respondent, and grass and some trees had grown on the land. However, there was a coal heap on the land and a quarry area, and, even where there was vegetation, patches of black coal were visible. It was a matter of local common knowledge that the land had been mined.

Prior to completing its purchase, the first respondent, at the suggestion of the second respondent, employed a firm of consulting engineers to investigate the natural surface underlying a number of blocks in the proposed subdivision including the section containing the allotment purchased by the applicants. Only limited investigations were carried out. One pit was excavated by backhoe on each of the blocks. Each pit "was terminated at either natural surface, full extent of the backhoe, or a refusal". The engineers delivered a report dated 17 November 1980 in which they stated:

"The general profile of the site consisted of: * Recent Fill, generally a clayey sandy gravel, pale brown, although some coal waste has been used about the site underlain by, * Old Fill, predominantly gravelly clays and clayey gravels, dark grey to black, varying from moist to wet, underlain by, either * Naturally occurring Gravelly Sandy Clay slopewash, or extremely to highly weathered sandstone and siltstone. A topsoil profile existed in most of the pits. It should be noted that no testing has been carried out in either the fill or the natural materials and that the natural surface/bill inter-face would not be the founding level for the footings of any structures placed on the site."

They attached to their report a table showing, inter alia, the depth of fill in the respective pits. According to the table attached to the report, the depth of fill at the selected point on Lot 69 was 2.8 metres.

The principal of the first respondent, Mr Turnbull, a Newcastle solicitor, instructed Mr Keegan, a director of the second respondent, that its sales-staff were to inform purchasers that there might be fill on the land and that they should make their own enquiries in relation to fill. Those instructions were duly given. The sales staff were also told that a report had been obtained from the consulting engineer, Coffey and Partners Pty Ltd, but that it was not comprehensive. A copy of the report was provided to each of the sales staff, including Mrs Walker, but they were warned not to rely upon it as a complete and accurate picture in respect of the fill on the land, and not to show it to prospective purchasers or to use it in relation to their sales activities although they could tell purchasers that the report had been obtained. The sales staff were also informed that the Mine Subsidence Board has given an overall approval for the erection of elevated one-storey residences with double garage storage underneath but, if any larger house was to be erected, the Board would have to consider the individual block.

At the time at which the Elton Close subdivision was developed, the applicants lived nearby in Merinda Close. When their house at Merinda Close was built, about 1 metre of fill had been encountered. From their experience at Merinda Close, and their knowledge of the Elton Close land and its history, they were aware that it might contain some fill despite the presence of grass and trees. By late February or early March 1981, they had exchanged contracts for the sale of their Merinda Close home and Mrs Vrancic, who had previously worked in the second respondent's Property Management Development, approached Mrs Walker to inquire about a possible purchase in the western section of the Elton Close subdivision, which included Lot 69.

The applicants' case is founded entirely on a brief conversation between Mrs Vrancic and Mrs Walker which was their sole contact in respect of the sale. Mrs Vrancic swore in an affidavit that she asked Mrs Walker how much fill had been placed on the land and that Mrs Walker "replied in words to the following effect, 'The land contains up to one metre of fill' . . . ". Mrs Walker also swore an affidavit. She said that she was aware that the Elton Close subdivision contained fill which varied from block to block and that the fill on Lot 69 was or might be in excess of one metre. She denied the statement attributed to her by Mrs Vrancic. According to Mrs Walker:

"In accordance with instructions received from the said George Keegan, I said to the female applicant, words to the following effect: 'There is fill on the land but you should make your own inquiries before exchanging contracts as to the extent of the filling and as to the type of home that can be erected on a site'."

Mrs Vrancic in turn denied that any such conversation took place.

Mr and Mrs Vrancic gave evidence that Mrs Vrancic told Mr Vrancic what she had been told by Mrs Walker and that they decided to buy Lot 69. From their experience at Elton Close and what they had then been told, they believed that fill up to a depth of one metre was not a problem in the construction of a house and did not add to the expense, at least not significantly. A contract was prepared and a copy provided to the applicants for signature and exchange in due course for the counterpart signed by the first respondent. However, contracts were not exchanged, because the sale of the applicants' Merinda Close property did not proceed. The applicants' copy of the contract was returned to the second respondent.

By May 1981, the applicants had obtained a further contract for the sale of their Merinda Close home. Lot 69 was still available. They contacted the second respondent and, in mid-May, a contract was provided. The contract was signed, dated 27 May 1981, and exchanged. Settlement took place in early July 1981. Mr and Mrs Vrancic each gave evidence that they relied upon what Mrs Vrancic had earlier been told by Mrs Walker.

I do not accept what they say on that matter and I do not accept that Mrs Walker told Mrs Vrancic that the depth of fill on the land was not more than one metre or that Mrs Vrancic told her husband that Mrs Walker had made that statement. Mrs Walker's memory was not particularly good but I think that she was honest. I have not overlooked that another purchaser gave evidence that, between 24 and 26 May 1981, Mrs Walker informed him that there was a "few feet of fill" on Block 72. Even if that was said, and it was incorrect, and the evidence was admissible, I prefer the evidence of Mrs Walker to that of the applicants.

Clause 12 of the contract between the applicants and the first respondent was in the following terms:

"12. (a) The Purchaser is aware that in the development of this subdivision it may have been necessary to place fill on some of the lots of the subdivision and the Purchaser shall take no objection or make any requisition if it should be found that any part of the subject land contains fill.

(b) The Purchaser is aware that in the event of any part of the land being filled land the foundations of any buildings to be erected over such filled land must be taken down to the natural earth and must comply with the requirements of the Mine Subsidence Board."

I do not for a moment accept Mrs Vrancic's evidence that she did not read the clause or otherwise become aware of it or, had she done so, that she would not have understood it. There is some confusion concerning whether she consulted a solicitor on the first occasion in March. However, there is no doubt but that she did so in May before the contract was signed and exchanged. Her evidence that she said that she knew what the contract contained but did not, and that the solicitor accordingly did not read the contract to her, or explain it, I find totally implausible. It is also unlikely that, after she had gone to a solicitor for the apparent purpose of advice on the contract, he would not read it, or read it but not comment, especially in relation to the special conditions of which clause 12 is one. The solicitor in question sat in court throughout the proceedings but was not called.

According to one affidavit by Mrs Vrancic, the purchase was completed on 7 July 1981. Elsewhere she swore that she found out on the same day that extra footings were needed on Lot 69. She said -

"On or about 7th July, 1981 I attended upon Mr Hart of H. & G. Planning Service at Cardiff and asked for a quotation for a footings design for the erection of a dwelling on the land. He said, 'You'll need footings and a half out there' and showed me a copy of a report from Coffey and Partners Pty. Limited, Consulting Engineers dated 17th November, 1980 . . . .".

Having observed Mrs Vrancic in the witness box, I take leave to doubt whether she would have docilely accepted such news either shortly before or after settlement if it contradicted what she had been told about the fill. Mr Linehan, the principal of the first respondent, gave evidence that, at about the time of settlement, which the respondents put a little later at 13 July, Mrs Vrancic, who was a former employee and known to him, spoke to him and said:

"I am allowing $10,000.00 for the cost of footings on the Elton Close site because of the fill."

Mrs Vrancic denied making such a statement, but it, and other matters, seem to me consistent with a state of knowledge concerning the fill quite different from that asserted by the applicants.

It is easier to accept the applicant's contention that some time elapsed before they discovered the full depth of the fill and the additional expense which it would cause them in the construction of their house. However, neither their initial misapprehension, nor the additional cost, was, in my opinion, caused by any conduct of either respondent. The applicants failed to appreciate how large a problem could be caused by fill and made assumptions as to what the position was likely to be. However, no statement was made by Mrs Walker as the applicants allege, and they cannot now look to the respondents to bail them out of their unfortunate predicament. It is regrettable that land with such hidden defects or possible defects may be made available for sale to ordinary people who can ill afford to lose money in consequence of an incautious purchase. However, that remains the position, although the New South Wales legislature has taken steps to minimize the risk. It is impossible to protect people entirely against their own imprudence. The Act, including sub-s. 52(1), further extends the law in favour of consumers but sub-s. 52(1) has no operation where, as here, there was no conduct which misled or deceived or was likely to mislead or deceive.

In the light of my conclusion that the applicants' claim fails, no question arises of the second respondent indemnifying the first respondent and it is unnecessary to say much concerning the question of damages. The applicants' put their claim on alternate bases, namely that the land was worth less than they agreed to pay for it and that the erection of their home cost more by reason of the presence of the greater depth of fill. Both the valuer and the engineer called for the applicants were cross-examined to some effect and their respective approaches subjected to criticism, part at least of which possessed merit. The second respondent called an engineer who disagreed with the applicants' engineers on some matters.

I do not think that it is necessary in this case to investigate any of the rival contentions in fine detail. I consider that, in the circumstances, an assessment in the increased costs of construction provides a better approach than a determination of what, if any, difference existed in the value of the land. I am generally inclined to accept that, if there had only been one metre of fill, the work could have been performed as suggested by the applicants' engineer and that, his costing of the differences in the two situations was broadly acceptable. In my opinion, the cost of their home to the applicants would have been about $8000 less had their land contained 1 metre of fill, not 8 to 11 metres.

However, the applicants' claim against the respondents and the first respondent's claim against the second respondent are dismissed and the applicants must pay the taxed costs of these proceedings.