Young v Coupe

[2004] NSWSC 999

CITATION:	Young v Coupe [2004] NSWSC 999
HEARING DATE(S):	09/06/04, 10/06/04, 11/06/04, 15/06/04, 16/06/04, 17/06/04, 18/06/04, 28/06/04
JUDGMENT DATE:	29 October 2004
JUDGMENT OF:	White J
DECISION:	1. Refuse leave to amend the Second Further Amended Statement of Claim; 2. Dismiss the balance of the plaintiffs' claims for relief against the defendants; 3. On the third defendant's first cross-claim: (i.) declare that the contract dated 19 June 2001 between the cross-claimant and the cross-defendants for the purchase of the property known as 21-69 Regent Street Redfern was terminated by the cross-claimant on 8 October 2001 and the cross-claimant was discharged from further performance thereof; (ii.) declare that the cross-claimant is entitled to retain the deposit of $385,000; (iii.) direct that judgment be entered for the cross-claimant against the cross-defendants in the sum of $385,000 together with interest at the rates prescribed from time to time pursuant to s 94 of the Supreme Court Act 1970 from 5 October 2001 to the date of this judgment. 4. Order that the plaintiffs pay the defendants' costs of the proceedings including the cross-claimant's costs of the first cross-claim; 5. The exhibits may be returned after 28 days.
CATCHWORDS:	Vendor and Purchaser - Existence of a contract - Whether a valid exchange occurred - Authority of agent to change contract so as to have identical counterparts - Intention of parties - Post-contractual conduct indicating existence of contract. - +Misleading and deceptive conduct - Whether purchaser entitled to rescind for misrepresentation - Whether representations made - Whether reliance upon alleged misrepresentation - Claim for repayment of deposit - Vendors claim for liquidated damages.Agent and Principal - Whether agent made false and misleading representations to induce principal to enter into contract - Whether agent owed duty to assess reasonableness of price paid - Whether agent negligent.No question of principle.
LEGISLATION CITED:	Conveyancing Act 1919 (NSW) Trade Practices Act 1974 (Cth) Fair Trading Act 1987 (NSW) Corporations Act 2001 (Cth) Supreme Court Act 1970 (NSW)
CASES CITED:	Sindel v Georgiou (1984) 154 CLR 661 Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 Barrier Wharfs v W Scott Fell & Co Ltd (1908) 5 CLR 647 B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 Gould v Vaggelas (1985) 157 CLR 215
PARTIES :	Kevin Young & Anor v Paul Coupe & 4 Ors
FILE NUMBER(S):	SC 2947/02
COUNSEL:	Plaintiffs: Mr I M Khan, Mr P Menadue 1st & 2nd Defendants: Mr G Ellis 3rd to 5th Defendants: Mr S Epstein SC, Mr C Dimitriadis
SOLICITORS:	Plaintiff: David Geddes Solicitor 1st & 2nd Defendants: Colin Biggers & Paisley 3rd to 5th Defendants: Baron & Associates Solicitors

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

WHITE J

Friday, 29 October 2004

2947/02 KEVIN YOUNG & Anor v PAUL COUPE & 4 Ors

JUDGMENT

The Issues

1 HIS HONOUR: The plaintiffs, Mr and Mrs Young, are property developers. They reside in Queensland. The third defendant, Chadreel Pty Ltd, (“Chadreel”) by its first cross-claim alleges that it entered into a contract dated 19 June 2001 with Mr & Mrs Young whereby they agreed to buy a property at 21-69 Regent Street Redfern for the price of $7.7 million. Chadreel alleges that Mr & Mrs Young failed to complete the contract after time had become essential and that it duly terminated the contract and forfeited a deposit which had been paid of $385,000 representing 5% of the purchase price. Pursuant to a special condition of the contract it claims that it is entitled to be paid an additional amount of $385,000 as liquidated damages.

2 The plaintiffs sought a declaration that no valid and enforceable contract was entered into and that Chadreel is liable to return to them the sum of $385,000 paid as a deposit to Chadreel. They made an alternative claim that they were induced to enter into the contract by fraudulent misrepresentations made by Chadreel and its directors, Mr Litver and Mr Braune, who are the fourth and fifth defendants, as to the value of the property. They claim a declaration that if there was a valid and enforceable contract, it was rescinded by them on 5 October 2001. In the alternative, they claim damages against Chadreel, Mr Litver and Mr Braune in the tort of deceit. If there was a valid and enforceable contract they also claim relief from the forfeiture of the deposit pursuant to s 55(2A) of the Conveyancing Act 1919 and a declaration or order pursuant to s 87(1A) of the Trade Practices Act 1974 for the price of the contract to be varied to reflect the true market value of the property as at the date of the contract.

3 The first and second defendants are Mr Paul Coupe and Paul Coupe Associates Pty Ltd. The plaintiffs allege that Mr Coupe was instructed by them to locate and assess a suitable property for development in Sydney. They allege that on Saturday 16 June and Sunday 17 June 2001 Mr Coupe made representations as to the value of the property which were false to his knowledge, and which induced them to purchase the property.

Course of Proceedings

4 On 21 May 2004 I granted leave to the third defendant to file a second cross-claim against Messrs Denes Ebner solicitors, who acted for it on the sale. The second cross-claim was brought in case the plaintiffs succeeded on their claim that there was no binding contract. In that event, Chadreel alleged that Messrs Denes Ebner breached their contract of retainer for failing to ensure that a valid exchange of contracts took place so as to bring into existence an enforceable agreement between Chadreel as vendor and Mr & Mrs Young as purchasers.

5 In their defence to Chadreel’s cross-claim, Mr & Mrs Young had admitted the existence of the contract and the terms of the contract which Chadreel alleged. They averred that the deposit had been paid pursuant to a certain clause of that contract and averred that they had themselves duly terminated it. This pleading was inconsistent with their allegation in the amended statement of claim whereby they denied any such contract had come into existence. On 31 May 2004 I granted leave to the plaintiffs to withdraw the admissions in the defence to cross-claim.

6 Because of the late joinder of Messrs Denes Ebner as cross-defendants, I accepted a submission made on their behalf that they were not in a position to master all of the issues in the proceedings even if the issues on the second cross-claim were tried after the issues on the originating process. I directed that the question of the plaintiffs’ entitlement to the relief claimed in paragraphs (a) and (b) of the prayers for relief against the third defendant be tried separately and before the trial of the remaining issues on the originating process. Paragraphs (a) and (b) sought declarations that no valid and enforceable contract was entered into between the parties and that, as a consequence, Chadreel was liable to return the deposit. If that question were determined adversely to the plaintiffs, the second cross-claim against Messrs Denes Ebner would fall away. Conversely, if it were decided in the plaintiffs’ favour, the remaining claims of the plaintiffs against the defendants for damages for misrepresentation which induced entry into the contract would fall away.

7 Accordingly the hearing proceeded in two stages. In the first stage I heard the plaintiffs’ claim that no binding contract came into existence. On 15 June 2004 I dismissed the plaintiffs claims in paragraphs (a) and (b) of their claims for relief against the third defendant. I also dismissed the second cross-claim. After dismissing applications made by the plaintiffs for an adjournment and that I disqualify myself from further hearing, I then heard the remaining issues between the plaintiffs and the defendants.

8 Before dealing with those remaining issues I will give my reasons for dismissing the plaintiffs’ claim that no valid and enforceable agreement was entered into.

Plaintiffs’ Claim That There Was No Contract

The Investors Club

9 Mr & Mrs Young are the founders of an organisation described as the Investors Club. The precise structure of the organisation is not entirely clear. It was established in Queensland. The Redfern transaction was the first transaction with which Mr & Mrs Young were involved in Sydney. In essence the proposal was that Mr & Mrs Young would acquire a property which was suitable for development into home units and those home units would then be sold to members of the Investors Club. A company called ProPacific Projects Pty Ltd would be engaged by Mr & Mrs Young to look after the construction management of the project. At different times Mr Young, Mr Coupe and a Mr John Allen, the National Operations Manager of the Investors Club, signed documents on behalf of ProPacific Projects. Its directors were Mr Coupe, a Mr Wayne Abbott and a Mr Nick Lockhart. Mr Abbott was a builder who had done building work on other developments for the Investors Club. Mr Lockhart was the National Marketing Manager of the Club. Mr Coupe is an architect by training and had provided architectural services to the plaintiffs or to the Investors Club in relation to a development at Currumbin in Queensland. Mr Murray Cass is a solicitor practising on the Gold Coast. He acted as solicitor for the Investors Club and for Mr & Mrs Young on the purchase of the property.

Negotiations for Purchase

10 In about May or early June 2001 Mr Coupe was approached by either Mr Young or by Mr Lockhart with a view to his locating sites in Sydney which could be developed and sold to members of the Club. Mr Coupe contacted a Mr Paul Menere, who acted as a real estate agent, to enquire about possible sites for the Investors Club. Mr Menere told Mr Coupe that he had two sites, one at St Leonards, and one at Regent Street, Redfern. Mr Young authorised Mr Coupe to make an offer of $7,900,000 to purchase the property at St Leonards. However, due to what Mr Coupe called the failure of Mr Young’s head office to act sufficiently promptly in providing funds to secure the property, that site was sold to another developer.

11 In early June 2001 Mr Menere provided Mr Coupe with a copy of an Information Memorandum prepared by CB Richard Ellis in relation to the Regent Street Redfern site. On 14 June 2001 Mr Coupe and Mr Lockhart attended a meeting with Mr Menere, Mr Litver and Mr Braune and one other person. Either Mr Lockhart or Mr Coupe mentioned a figure of $6,500,000 or $7,000,000 for the property. Mr Litver was unwilling to sell the property for that price. Mr Braune deposed that Mr Litver said that they wanted $9,000,000 for the site. Mr Litver said that he told Mr Coupe and Mr Lockhart that to sell the property before fully testing the market they would like to see at least $8,000,000.

12 Mr Young and Mr Coupe were anxious to move fast so that they did not miss out on the site. The vendors were pressing for an early exchange. On Friday 15 June 2001 Mr Coupe proposed a price of $7,500,000. Around the weekend of 16 and 17 June 2001 a price of $7,700,000 was agreed on by Mr Braune and Mr Litver provided there was an early exchange of an unconditional contract.

13 At this time Mr & Mrs Young, who ordinarily reside at the Gold Coast in Queensland, were interstate. Mr Young gave evidence that on Sunday 17 June 2001 Mr Coupe told him that the vendors were ready to sign an unconditional contract that day for $7,700,000 with a 5% deposit. At Mr Coupe’s request Mr & Mrs Young sent a fax to Mr Coupe on Sunday 17 June 2001. It was on the letterhead of The Investors Club Ltd and addressed to “To Whom it May Concern”. It stated:

“ This is to authorise Paul Coupe to sign documents on our behalf for the purchase of property at 21-69 Regent Street Redfern 2016. ”

Both Mr & Mrs Young signed the authority.

14 Mr Young says that that night he participated in a telephone conference. He was in Melbourne. He says that the telephone conference was with Mr Coupe, Mr Murray Cass, Mr Braune, Mr Litver and a solicitor from Messrs Denes Ebner who acted for the vendor. According to Mr Young, on that evening Mr Braune asked him if he knew why they were having the telephone conference. Mr Young said that he understood it was because the vendor wanted to be satisfied that that night they were finalising an unconditional contract. Mr Young says that during this telephone conference various misrepresentations were made by Mr Braune. According to Mr Young, the conversation concluded by his saying “Okay I am relying on you guys that it will value up and we will be delivering a good buy for our members.” When the conversation finished he, Mr Young, said “Well thank you very much” and “the deal’s done”. He recalled someone on the other side saying “Thank you gentlemen, we are exchanging”. He said that he did not understand what the term “exchanging” meant. However I do not accept that evidence. Mr Young had had over 30 years experience in the residential property market in Australia and according to his promotional literature for the Investors Club, he had undertaken the legal conveyancing activities for over 600 property transactions.

15 I am satisfied that no such conversation occurred on 17 June 2001. A telephone conference which led to the signing and exchanging of contracts took place on Tuesday 19 June to which I will refer below.

16 Mr Young gave oral evidence that Mr Coupe told him that he would sign a contract on the Sunday night and that he had used his own cheque to seal the deal. He says that Mr Coupe told him on the Sunday night and again on the Monday that he had signed the contract. It was his belief that Mr Coupe had already signed the contract for $7,700,000 with a deposit of $385,000 on Sunday 17 June. Mr Young said that he was told by Mr Coupe that Mr Cass had approved the contract.

17 Mr Cass gave evidence of a conversation having taken place on Sunday 17 June in which he said various representations were made by Mr Coupe, Mr Litver and Mr Braune which the plaintiffs allege were misrepresentations. He did not depose, however, to that conversation resulting in an exchange of contracts. It is clear from the later correspondence between Mr Cass and Mr Denes of Denes Ebner that any conversation in which Mr Young participated which concluded in the way to which he deposed was a conversation on Tuesday 19 June, not on Sunday 17 June.

18 On 17 June Mr Coupe wrote a letter to Mr Braune setting out a proposed special condition to the contract to provide for the substitution of a cash deposit with a deposit bond. Mr Coupe referred to an anticipated exchange as soon as possible.

19 On Monday 18 June Mr Braune sent Mr Denes, a solicitor and partner of the firm Denes Ebner, a sales advice note for the property setting out the purchase price of $7,700,000, that there would be a 5% deposit payable upon exchange of contracts by way of cash, deposit bond or bank guarantee, and that settlement was to be ninety days from date of exchange of contracts.

20 On Monday 18 June Mr Denes sent a draft contract including attachments to Mr Coupe by courier. Mr Coupe faxed this material to Mr Cass on the same day.

21 On Tuesday 19 June 2001 a deposit of $385,000 was made on behalf of Mr & Mrs Young to Denes Ebner’s trust account. The deposit was paid by Mr Abbott.

22 At 9.54 am on 19 June 2001 Mr Cass sent a fax to Mr Denes in which he advised that he had received Mr Denes’s facsimile correspondence of 18 June 2001. He sought confirmation that the client’s deposit had been received. At 1.32 pm on that day he sent a further fax to Mr Denes requesting deletions and amendments to the special conditions to the contract. Two of the special conditions should be noticed at this stage. Clauses 43 and 44 provided as follows:

“43. LESS THAN 10% DEPOSIT
Notwithstanding anything contained or implied in this contract or any other discussions between the parties and/or their representatives or any documents or correspondence, in the event that this Contract requires the payment of a deposit which is less than ten per cent (10%) of the purchase price, the Purchaser shall pay the Vendor an amount equal to the difference between the deposit paid and an amount equal to ten per cent (10%) of the purchase price immediately on default by the Purchaser of his obligations under this Contract. The Purchaser agrees that such difference may be claimed by the Vendor against the Purchaser as liquidated damages in any proceedings between the parties. The Vendor grants the Purchaser the rights and entitlements contained in this clause in consideration of the Vendor accepting an amount in payment of the deposit which is less that ten per cent (10%) of the purchase price.

Notwithstanding the provisions of clause 2 hereof the deposit shall be paid as follows:

(a) The sum of $385,000.00 shall be paid to the agent;

(b) The balance of $385,000.00 shall be payable to the Vendor upon demand in writing by the Vendor provided however that no such demand shall be made by the Vendor unless and until the Purchaser defaults under the Contract where the default is such that it would permit the Vendor to terminate the Contract.
In the event of the Contract being terminated in circumstances where the deposit is forfeited to the Vendor the Vendor shall be entitled to recover from the Purchaser any outstanding deposit as liquidated damages.”

23 One of the amendments to the special conditions which Mr Cass sought was to clause 44(b). He proposed that it be amended to read:

“ The sum referred to at Paragraph (a) of this Clause shall be payable to the Vendor upon demand in writing by the Vendor provided however that no such demand shall be made by the Vendor unless and until the purchaser defaults under the Contract where the default is such that it will permit the Vendor to terminate the contract. ”

24 Mr Denes gave evidence that, after receiving Mr Cass’s fax, he had a lengthy telephone conversation with him on speakerphone in the presence of Mr Litver, Mr Braune and Mr Coupe. Mr Denes and Mr Cass went through each of the deletions and amendments which Mr Cass had proposed. As the proposals were either accepted or rejected by the vendor Mr Denes made a tick or a cross against the item on his copy of the facsimile. The proposed amendment to clause 44 of the special conditions was rejected.

25 Mr Cass’s facsimile of 19 June 2001 also proposed a method for the parties to become bound by the contract. He proposed the following:

“ 1. The Contract be sent by facsimile transmission to our clients, who will execute same and return to your office.
2. Your client will execute the facsimile copy of the contract, on our client’s undertaking to execute the original contracts (in duplicate) upon their arrival at this office.
3. You will provide the original and the facsimile copy of the Contract to this office.
4. Our clients to return to Queensland to execute the contracts on Monday 25 June 2001.
5. The parties to the Contract acknowledge and agree that the contract in facsimile form, in combination with the deposit received pursuant to the said contract, shall stand as good and proper contractual relationship, pending completion of the original documentation. ”

26 According to Mr Braune, after amendments to the contract were discussed with Mr Cass, Mr Denes said that he would not do anything until they had heard from Mr Young.

27 On the afternoon of 19 June Mr Coupe faxed the first page of the contract to Mr & Mrs Young who were staying in Adelaide. The page provided for a price of $7,700,000 and a deposit of $770,000, being 10% of the price. Mr Young struck out the amount of $770,000 as the amount of the deposit and substituted $385,000 and corrected the figure of 10% to 5%. He also corrected the spelling of Mrs Young’s middle name. Mr & Mrs Young initialled the changes, signed the front page as purchaser and faxed the page back to Mr Coupe at 4.20 pm central standard time.

28 At 7.04 pm eastern standard time Mr Denes received a facsimile from Mr Cass. The facsimile stated:

“As discussed, please find enclosed Section 66W documentation executed in accord with our client’s instructions.
I refer a telephone conference today and our teleconference discussion with Kevin Young as purchser (sic) at about 6.45pm.
The writer explained to the purchasers, and in the writers opinion the purchasers understood the nature and effect pursuant to (d) of the Certificate.”

Attached to the facsimile was the certificate given by Mr Cass pursuant to s 66W of the Conveyancing Act . It stated that Mr Cass had explained to Mr & Mrs Young the effect of the contract for the purchase of the property, the nature of the certificate and that the effect of giving the certificate to the vendor was that there was no cooling-off period in relation to the contract.

29 Mr Coupe further amended the front page of the contract which had been faxed back by Mr & Mrs Young to again specify the deposit as being $770,000, being 10% of the purchase price. He did so to ensure that both counterparts to the contract were identical. Mr Litver and Mr Braune signed the vendor’s counterpart of the proposed contract for Chadreel.

30 Notwithstanding Mr Young’s denial, it is clear from Mr Cass’s fax of 19 June referred to at paragraph 28 that there was a “teleconference discussion” in which Mr Young participated at about 6.45 pm on Tuesday 19 June. Denes Ebner’s telephone records show a call placed to Mr Cass’s office from 6.08 pm to 6.45 pm on that day. Mr Young says that because the telephone record does not show that the call was placed to Adelaide the record corroborates his evidence that he did not have any such discussion on 19 June. However there was no evidence to establish that a “teleconference discussion” between three cities would be recorded by referring to both cities to which the call was placed.

31 I find that in a telephone conference on 19 June to which Mr Young was a party Mr Young was told that the amendments had been sorted out and he said that he was happy to exchange contracts. Mr Braune‘s evidence was that words to the following effect were said:

“At this point, or it may have been earlier during the meeting, Mr Denes telephoned Mr Young, whose voice could also be heard by every one on the speaker phone. Mr Cass was on the call at the time. Words to the following effect were said:
Cass: Kevin, from a contract point of view, as far as we are concerned we have sorted out all the amendments. What do you want to do?
Young: I am happy to exchange contracts. Go ahead
Denes: OK, contracts are exchanged. Congratulations everybody.”

Mr Coupe agreed with this (T102), but Mr Cass denied it. I prefer the evidence of Mr Braune and Mr Coupe. Mr Cass’s conduct after 19 June to which I refer below demonstrates that he was aware contracts had been exchanged. Mr Denes did not recall Mr Young having been a participant in the telephone conference on 19 June. Mr Denes was a careful witness, whose evidence I generally accept. On this point however I think it more likely than not that Mr Young participated in the teleconference. It is Mr Young’s own evidence that in a conference call which he said took place on Sunday 17 June, but which could not have taken place at that time, he was told that contracts were being exchanged. Mr Cass’ fax to Mr Denes of 19 June refers to Mr Young having participated in a teleconference on that evening. That suggests the call was between more people than just Mr Cass and Mr Young. I am satisfied that Mr Young authorised the exchange of contracts.

32 The counterparts to the contract were checked to ensure that they were identical and the two counterparts were formally exchanged. The counterpart signed by Mr Braune and Mr Litver for the vendor was not retained by Mr Denes after the meeting. It is clear that Mr Coupe took it away with him although he said he had no recollection of having done so. At the hearing the original counterpart copy of the contract signed for the vendor was tendered by Messrs Denes Ebner. It had been discovered by the plaintiffs and was produced from Mr Cass’s files.

Plaintiffs’ Case That There Was No Valid Exchange

33 With the alteration made by Mr Coupe to the amount of the deposit on the front page to correspond with the copy of the contract signed by the vendor, the counterparts were identical. The only basis upon which the plaintiffs pleaded that no binding agreement came into existence was that:

“ 42. The plaintiff never entered into valid and enforceable contract for sale (sic) with the third defendant as no valid exchange ever took place. ” (paragraph 42 of the second further amended statement of claim).

34 The case the plaintiffs put forward through Mr Young and Mr Cass was that no contracts were exchanged. Mr Cass exhibited to his first affidavit a mish-mash of documents which he said were approximately 120 pages of bits and pieces of an unexecuted contract for the sale of land which he received on 18 June 2001. The second page of his exhibit was a facsimiled copy of the front page of the contract signed for the vendor. In his affidavit of 6 May 2004 he deposed that he told Mr Denes on 19 June 2004 that he wanted Mr Denes to forward the original contracts to him for his client’s execution when he returned to the Gold Coast. Whether or not Mr Cass said those words, it would not preclude a contract having been brought into existence by exchange on 19 June.

35 Mr Cass also deposed that he would never have said that there was an exchange of contracts or acquiesced to an exchange of contracts without first having obtained an executed full counterpart from his client. He said that he did not do so. However, the evidence is overwhelming that contracts were exchanged, not by Mr Cass, but by Mr Coupe on behalf of Mr & Mrs Young, during the course of a meeting during which Mr Cass was in contact by telephone.

36 Mr Young said that he believed that contracts had been exchanged on Sunday 17 June by Mr Coupe on his behalf for an amount of $7,700,000 with a deposit of $385,000. He said that when he received the front page of the contract from Mr Coupe on 19 June he thought the vendor was making a “new offer” with a $770,000 deposit which had not previously been agreed to or discussed. He says that he rejected that offer by sending back the front page showing a deposit of $385,000. Thereafter he was waiting for the vendors to come back to him. According to him, he understood that from the time he received the front page of the contract showing a deposit of $770,000 there was no contract in existence. He rejected the offer involving a deposit of $770,000 and received no response to his counter-offer of a deposit of $385,000. Hence he said he believed that thereafter there was never an agreement on foot.

37 I do not accept this evidence. Mr Young did not explain how he understood that the contract which he believed was in existence after Sunday was discharged. His evidence is inconsistent with the evidence of Mr Denes, Mr Litver, Mr Braune and Mr Coupe which I do accept, and the objective evidence as to when a contract of sale was prepared and its terms discussed between Mr Denes and Mr Cass and then exchanged on the evening of Tuesday 19 June. Mr Young’s evidence is also inconsistent with Mr Cass’s facsimile to Mr Denes of 19 June in which Mr Cass enclosed a certificate under s 66W and referred to “our teleconference discussion with Mr Kevin Young as purchaser at about 6.45pm”.

38 It was submitted for the plaintiffs that there was no valid exchange because the front pages of the contract were not identical. The only page signed by Mr & Mrs Young provided for a 5% deposit whereas the front page signed for the vendor had a 10% deposit. It was submitted for the plaintiffs that Mr Coupe had neither the authority to amend the front page so that it again provided for a 10% deposit, nor to exchange contracts for Mr & Mrs Young.

39 Given my finding that the conversation where Mr Young was told that the parties were exchanging took place on Tuesday 19 June, I am satisfied that he did give authority to Mr Coupe to exchange contracts on 19 June.

40 I do not think it is open to the plaintiffs to allege that Mr Coupe lacked authority to sign the front page or to exchange contracts on their behalf. No such case was specifically pleaded. Their case was that contracts were not exchanged at all. But it is clear that they were. In any event I am satisfied that Mr Coupe did have authority to sign and exchange contracts on behalf of the plaintiffs. On 17 June he was expressly given authority to sign contracts on behalf of the plaintiffs. The plaintiffs made no objection to his exchanging contracts on their behalf on the 17th June and I do not accept that the authority which they admittedly gave to Mr Coupe to exchange contracts on their behalf on the 17th June was withdrawn. There was no evidence that it was. As will appear, from the 19th June the plaintiffs conducted themselves in a way which was only consistent with Mr Coupe having made a contract on their behalf on the 19th June.

41 On the basis that Mr Coupe had no authority to amend the amount of the deposit on the front page, the plaintiffs submitted that there was a difference in the amount of the deposit between the two signed contracts which was fatal to the existence of a binding agreement. I have already said that I think Mr Coupe had authority to sign the page, but even if he did not I do not accept that submission. Chadreel accepted that only a 5% deposit was payable on exchange. That is what Mr & Mrs Young insisted on in the amendment they made to the front page of the contract. Only a 5% deposit was paid. Even if the contracts which had been exchanged had not been in identical terms, nonetheless, the exchange of contracts would have brought a binding contract into existence where the lack of correspondence between the two counterparts was capable of being remedied by rectification. In Sindel v Georgiou (1984) 154 CLR 661 the High Court said (at 667):

“An unqualified acceptance of a proposition that delivery of two parts in identical terms is crucial to an effective exchange would exclude the parties’ intention as a governing, or even as a relevant factor. The question whether the delivery of parts in identical terms is essential must ultimately depend on the parties’ intention.
….
And if the parties, through negotiations between their solicitors, have agreed on the terms of their bargain and settle on an exchange of parts in order to seal that bargain, it would usually accord with their intention to treat the exchange as creating a binding contract, notwithstanding the lack of correspondence in the parts, so long as that lack of correspondence is capable of being remedied by rectification. It will be otherwise when it appears that the parties intend to be bound only by an exchange of parts in identical terms or when the prior negotiations do not completely settle the terms of the bargain and the parties look to the parts as exchanged to fix these terms.”

42 The discrepancy between the counterparts could be addressed, if that were necessary, by ordering rectification. There is no circumstance to take the case out of the usual.

43 In fact the question does not arise because I am satisfied as to Mr Coupe’s authority to make the amendment, which, in so far as it had any consequence, was for the benefit of the plaintiffs.

44 Clause 44 of the special conditions assumes that the deposit is 10%. It provides for half of the deposit to be paid on exchange and the other half only to be payable if the purchaser defaults under the contract in circumstances which would permit the vendor to terminate the contract. In that event, the remaining half of the deposit is said to be recoverable as liquidated damages.

45 Clause 43 applies if the deposit is stated to be 5%. In that event, the purchasers are required to pay an additional 5% of the purchase price immediately on any default of their obligations under the contract. Such amount is recoverable as liquidated damages.

46 Thus if the deposit on the front page is stated to be 5%, by clause 43 an additional 5% of the purchase price is immediately payable on “default” by the purchasers of their obligations under the contract and is payable as liquidated damages. If the deposit is stated on the front page to be 10%, by clause 44, the balance of 5% is payable as liquidated damages on demand if the purchaser defaults under the contract and the default is such that it would permit the vendor to terminate the contract. It is more advantageous for the purchasers to have the deposit stated to be 10% rather than 5% so that in the event of default the remaining 5% is payable as liquidated damages under clause 44 rather than clause 43. There are two reasons for that. First, monies may be payable under clause 43, but not clause 44, in the event of default by the purchasers of their obligations under the contract falling short of a default which would permit the vendor to terminate the contract. A second and more important point of difference is that if the deposit is 5% and not 10%, the Court does not have jurisdiction under s 55(2A) of the Conveyancing Act 1919 to order repayment to the purchaser of the additional 5% which is payable as liquidated damages.

47 The plaintiffs did not see the special conditions, and they may not have realised the effect of clauses 43 and 44. They left things to Mr Cass and Mr Coupe. Mr Cass certified that he had explained the effect of the contract to the plaintiffs. If Mr Cass and Mr Coupe did not explain the special conditions to Mr & Mrs Young, and I am not persuaded they did not, that should not affect the vendor. The plaintiffs appointed Mr Coupe and Mr Cass to negotiate and vet the terms of the contract. They authorised Mr Coupe to exchange it. They are bound by their agents’ conduct.

48 The plaintiffs submitted that:

“ If the Court finds that there are in fact any documents which could be called “counterparts” another discrepancy between them is the alteration for the time for completion from 14 days to 28 days (see clause 27.3). However, because the Third Defendants have never produced the purchasers “counterpart” purportedly signed in the offices of Mr Denes, it is impossible to know if that was also exchanged with the other “counterpart” if it exists. ”

49 That submission was not developed. I infer that it refers to the request made by Mr Cass in his facsimile of 19 June 2001 that clause 27.3 of the special conditions, which dealt with the service of notices to complete, be amended to substitute 28 days for the period of 14 days for the giving of a notice to complete. The copy of the pages of the draft contract which Mr Cass exhibited to his affidavit (Exhibit A) showed such an alteration to clause 27.3. However it appears from Mr Denes’s notation on his copy of the facsimile of 19 June that that proposed amendment was not accepted. Contrary to the plaintiffs’ submissions, both counterparts of the contract were tendered, albeit by the cross-defendants. A comparison of clause 27.3 between the two counterparts (Exhibits XD16 and XD17) shows that they are identical.

Plaintiffs’ Post-Contractual Conduct

50 Chadreel and Denes Ebner relied upon the plaintiffs’ conduct after 19 June 2001:

(a) as demonstrating that the evidence of Mr Young and Mr Cass about the events leading up to 19 June 2001, and their evidence that they believed no contract had come into existence, should not be accepted;

(b) as confirmatory of the authority of Mr Coupe;

(c) as evidence that a contract had been formed; and

(d) as giving rise to an estoppel precluding the plaintiff from denying that a contract had been formed, because after 19 June the parties adopted the contract as the conventional basis of their relationship until each purported to terminate it.

51 On 22 June 2001 Mr Denes sent two letters to Mr Cass. One letter asked for a cheque for $231 for financial institutions duty payable on the transfer of the deposit into Denes Ebner’s trust account. The letter commenced “We refer to exchange of contracts on 19 June 2001”.

52 Another letter sent to Mr Cass on that day said “We confirm that we received the original front page of the contract signed by the purchasers. We would like to annex the original front page to our contract. The deposit shown on the original front page of the contract is $385,000 being 5% of the purchase price. We note that the deposit is in fact $770,000 payable as $385,000 on exchange and the balance as stipulated in the contract. Please confirm that we may amend the original front page of the contract to correspond with the front page of the contract we have exchanged.”

53 Mr Cass did not respond to this correspondence. He did not deny that an exchange of contracts had taken place.

54 On 24 June 2001 there was held what was called the “inaugural meeting of the JV Club”. It was attended by, amongst others, Mr & Mrs Young, Mr Coupe, Mr Cass, Mr Abbott and Mr Lockhart. The minute of the meeting records that: “Andrew Ward confirmed that the 90 day contract will not present a problem for settling of the $7,700,000 needed. ….. Completion was predicted to be in the year 2003. This would indicate that there is a need for many more sites with hopefully a shorter completion period to satisfy our demand. Kevin set the target of 4,000 units to be sold through the club in the next six months. This would mean 133 sites or 20 sites per month.”

55 Mr Denes gave evidence that at no time after 19 June did Mr Cass ever put forward the view that there was no legally enforceable contract. I accept that evidence. Mr Cass said that he asked Mr Denes for the original contract so that he could advise his client about it. He said that he believed that no contract had been formed because he was still awaiting the original document. However all of Mr Cass’s correspondence after 19 June is only consistent with his understanding that a contract was then on foot. Indeed at the end of the evidence the original signed contract from the vendor was tendered from the plaintiffs’ discovery. The plaintiffs tendered a letter from Mr Cass dated 3 June 2003 to Mr Geddes, the solicitor for the plaintiffs in this litigation, enclosing the original contract of sale. No explanation was provided as to how Mr Cass had possession of the original contract of sale or when he obtained it. However a file note from Mr Denes dated 19 July 2001 records a telephone conversation of that day with Mr Cass. (Exhibit XD2 page 36). His file note reads:

“ Urgent
Received copy contract.
Pages executed by the purchaser.
What we gave to Paul.
Need copy contract signed by purchaser.
Urgent ”

56 In response to that telephone call Mr Denes sent a fax on 19 July 2001 to Mr Cass enclosing a copy of the front page of the contract signed by Mr & Mrs Young together with copies of the special conditions which had been amended and the amendments initialled by Mr Coupe. I infer that Mr Cass wished to check the alterations to the contracts signed by and on behalf of the plaintiffs against the counterpart copy signed for the vendor which he then held.

57 On 3 August 2001 Mr Cass wrote to Mr Denes in relation to substituting the cash deposit with a deposit bond. He said “In accord with the agreement between the parties and pursuant to the Contract of Sale, we note that the provision therein to exchange the deposit monies (cash) held in your Trust account with the enclosed Deposit Bond”. The deposit was duly replaced with a bond.

58 On 3 August 2001 Mr Coupe wrote to Mr Braune in relation to the signage on the site. On behalf of Mr & Mrs Young he asked Mr Braune to issue a termination (demolition) notice under the lease for the existing signage on the site. On the same day, on behalf of Mr & Mrs Young, he advised Mr Braune that they had no objection to his entering into a monthly rental agreement with the Department of Community Services for short term parking on the property. This correspondence was copied to Mr & Mrs Young. It is consistent with Mr & Mrs Young purporting to exercise rights as purchasers of the property.

59 Also on 3 August 2001 Mr Lockhart wrote to Mr Braune. He said that there had been a superb response to the marketing campaign for units in the proposed development. He asked for an extension of the settlement date for sixty days to allow time for the completion of a prospectus which their legal advice said was required. Again this conduct is only consistent with Mr Lockhart believing that a contract was in existence.

60 Chadreel rejected Mr Lockhart’s request for an extension of the time for settlement. On 10 August 2001 Mr Denes wrote to Mr Cass and advised that his client had made other arrangements in reliance on completion taking place on the due date and were accordingly unable to agree to an extension. If Mr Cass believed there was no contract in existence, I would expect him to have replied that there was no due date for completion because there was no contract. He did not.

61 Instead, on 6 September 2001 Mr Cass, on behalf of his clients, sought an extension for settlement of six weeks to 31 October 2001. Why he did so if he or the plaintiffs believed there was no contract was not explained. The request was rejected on 10 September 2001.

62 On 12 September 2001 Mr Denes wrote to Mr Cass noting that settlement was due to take place on 17 September 2001. He advised that if the purchaser failed to settle the vendor would issue a notice to complete in accordance with the provisions of the contract. He advised that the vendor had exchanged contracts for the purchase of another property and settlement was due to take place under that contract the next day. The vendor was relying on the sale of the Regent Street property to provide the balance of the purchase price payable on completion of its purchase.

63 On 14 September Mr Young wrote to Denes Ebner referring to a letter received from his solicitors, Cass Legal Group, confirming the request for an extension of time for settlement of the contract. He asked that “the date for settlement to be extended to 29 October 2001” and that “interest to be paid by the purchaser at the rate stipulated in the contract in respect of the unpaid balance of the purchase price from the completion date until the date of the actual completion of the contract”. He also proposed payments by the purchaser to the vendor in successive amounts of $385,000 on 28 September, 5 October (at which time the deposit guarantee bond would be returned), 12 October and 17 October. Again this correspondence is only explicable on the basis of Mr Young understanding that a contract was in existence.

64 The matter did not settle on 17 September. On 19 September 2001 Denes Ebner sent to Mr Cass a notice to complete requiring completion to take place on 4 October 2001 with time being of the essence of the contract.

65 By a letter dated 12 September 2001, but sent on 27 September 2001, Mr Cass wrote to Mr Allen, the National Operations Manager of the Investors Club. He said:

“ We note that the provisions of the contract dated 19 June 2001 provided for settlement on 19 September 2001. In that regard we note that same did not complete on the basis of the Purchasers’ further requirements to arrange finance for the purchase.
We have received a Notice to Complete from the Vendor’s Solicitors on or before 4 October 2001 with time to remain the essence of the Contract (sic) .
We note your prior telephone advice is that finance has been satisfactorily arranged and that in that regard we request that you advise when same will be available such that settlement may be completed on this matter. ”

66 On 3 October 2001 Mr Cass again wrote to Denes Ebner reiterating a proposal apparently submitted by his clients to Denes Ebner on the same day. It was described as follows:

“ The existing Contract [dated 19 June 2001] on the site be extinguished subject to the execution of a new unconditional contract on the following terms ”

Proposed terms for a new contract were then set out. They included that the new contract be for a price of $5,200,000 and that the vendor accept the retail component of the completed development “in lieu of the balance (i.e. $2,500,000) of the monies pursuant to the former contract dated 19 June 2001”. Again this correspondence recognised the existence of the contract.

67 On 4 October Mr Denes advised that the vendor would not re-negotiate the terms of the contract. On 5 October Mr Cass, writing on behalf of the purchasers, purported to rescind the contract. He said:

“We are informed that our client entered into the Contract of Sale for the abovementioned property on the basis of advices from your clients as to the value [alleged] for the property. In that regard we are informed by our clients that certain statements were made by your clients, said statements which did induce our clients to execute the Contract under conditions of extreme urgency and pressure.
We are further informed that your clients maintained that the property was worth in the vicinity of $9,000,000 and that they were willing to sell it to our clients at the reduced price of $7,700,000 provided same was executed immediately. Our clients subsequently signed the Contract in the belief that the purchase would be well supported by a valuation. The valuation in fact has not substantiated same. …..
Our clients have endeavoured to re-negotiate the purchase of the Contract, and in that case we refer their direct discussions with you clients (sic) and subsequent correspondence from this office to yours. Said re-negotiations have proven to be unsuccessful. Accordingly our clients feel that they have little choice, and to which we now hold their instructions to give you Notice that they herein terminate the Contract forthwith.
…….”

68 Again this is a clear admission of the existence of the contract which the purchasers purported to rescind for misrepresentation.

69 On 8 October 2001 Denes Ebner, on behalf of the vendor, accepted the letter from Cass Legal Group of 5 October 2001 as a repudiation of the contract. The vendor terminated the contract accordingly.

70 On 23 October 2001 Mr Allen sent an email to various people associated with the Investors Club including Mr & Mrs Young. It stated:

“Kevin has advised that the vendors have taken the next step in getting the balance of deposit on this contract. Kevin will be launching his legal action against this contract later this week. He has requested that all of you provide the following .
- Bullet point comments on how you may see an attack on this contract”

At no stage prior to the commencement of proceedings was it ever asserted by or on behalf of the purchasers that no contract was in existence. It is inconceivable that if the plaintiffs or their solicitor considered that there was no existing contract of sale that they would not have said so and asked for the deposit back.

71 The post-contractual conduct of the parties is relevant to deciding whether or not the parties intended to be bound. (Howard Smith & Co Ltd v Varawa (1907) 5 CLR 68 at 77; Barrier Wharfs v W Scott Fell & Co Ltd (1908) 5 CLR 647 at 668, 669 and 672; B Seppelt & Sons Ltd v Commissioner for Main Roads (1975) 1 BPR 9147 at 9149, 9154-9156; Film Bars Pty Ltd v Pacific Film Laboratories Pty Ltd (1979) 1 BPR 9251 at 9255; Brambles Holdings Ltd v Bathurst City Council (2001) 53 NSWLR 153 at 163-4, [25]). That conduct is consistent only with both parties intending to be contractually bound, albeit that the plaintiffs asserted a right to rescind the contract on the basis they were induced to enter into it by false representations. The conduct is also inconsistent with the evidence of Mr Young and Mr Coupe that they believed no contract was formed. Given that I have found that Mr Cass held the counterpart copy of the contract signed for the vendor, the plaintiffs’ acknowledgment of a contract recognised Mr Coupe’s authority to bring the contract into existence.

Estoppel

72 It is unnecessary to decide the third defendant’s alternative case based on conventional estoppel. However the plaintiffs’ failure to assert that contracts had not been exchanged must have contributed to the vendor’s assumption that a contract was in existence. Had the plaintiffs raised any doubt about whether a contract had come into existence Chadreel could have requested them to address any matter raising the doubt. Until they received a valuation of the property, the plaintiffs would have obliged. The plaintiffs were then intent on marketing the development to members of the Investors Club, and had received payments from members towards the sale price of units. The vendor apparently was relying on completion of the contract to provide funds for the purchase of another property on which it had exchanged. There is a strong case that the plaintiffs are estopped from denying the existence of the contract. However I am satisfied that the third defendant and the plaintiffs entered into a binding contract for the sale of the property. They did so on the terms signed by Mr Coupe that there be a deposit of 10% of which $385,000 was payable on exchange and the remaining $385,000 was payable only after a default which entitled the vendor to terminate the contract.

73 It is for these reasons that I dismissed paragraphs (a) and (b) of the plaintiffs’ claims for relief.

Plaintiffs’ Claim Against Third to Fifth Defendants for Fraudulent Misrepresentations and Misleading and Deceptive Conduct

The plaintiffs’ claims for relief for misrepresentations underwent a number of amendments during the hearing to bring the pleading into line with the affidavit evidence upon which they relied. Because the case was conducted on the issues raised by the pleadings and because the evidence relied on by the plaintiffs was criticised, either because it departed from the pleadings or because it copied the pleadings, it is desirable to set out the key paragraphs. The final version of the statement of claim, being a second further amended statement of claim, alleged that:

“12 On 17th June 2001, the first defendant rang the first named plaintiff in Melbourne from a place in Sydney where present at the time were Eduard Litver and Kurt Stephen Braune who were directors of the third defendant. The conversation was on a speaker phone or some such other equipment on the first defendant’s side. He introduced the two directors of the third defendant/vendor to the first named plaintiff. Then knowing that the plaintiffs will rely on his representations, the first defendant made the following representations about a property at Redfern Sydney known as 21-69 Regent Street, Redfern:-
i. He had found a property at Redfern, Sydney which was suitable for the plaintiffs purposes of development.
ii. It was the best buy he had ever seen.
iii. It had an approved DA.
iv. It was worth $9M but the owners were willing to sell it for $7.7m if an unconditional contract was entered into immediately because they needed the money to fund another legal matter.
v. The owners wanted a 5% deposit.
12A The said representations were also made by the First Defendant to the First Plaintiff prior to the said teleconference.
Particulars
Affidavit of Kevin Young dated 17 June 2003, paragraph 23

13. At various times during the conversation each of the directors of the third defendant said:-
(a) Paul is right.
(b) It’s a good buy for you.
(c) We are only selling it so cheap because we need the money.
13A In the same telephone conference, Kurt Stephen Braune, the fifth defendant, made the following further representation:
The Regent Street property had been bought by the third defendant for $6 million.
13B On 16 June 2001, in a telephone conversation the First Defendant represented to the First Plaintiff that the Vendors paid a shade over 6 million dollars two years ago for the property.
Particulars
Affidavit of Kevin Young dated 17 June 2003, paragraph 23

14. Towards the end of the conversation, in response to the first plaintiff raising doubts about part of the property involving commercial development which formed 15% to 21% of the total development, Eduard Litver made the following representation:-
Don’t worry, Kevin, my forte is commercial, I will be quite happy to buy the commercial bit from you at $3.1m.
15. As a result of the said representations by the first, second, third, fourth and fifth defendants on or about the 18th June 2001, the plaintiffs were induced to execute a contract for sale to purchase the said property in the sum of $7.7m.
16. They were also induced to pay a deposit of $385,000.00 shortly thereafter.
17. The representation regarding the value was untrue.”

74 The plaintiffs alleged that the third, fourth and fifth defendants were guilty of fraudulent misrepresentations in that “knowing that the value of the property at $9,000,000 and the purchase price of $7,700,000 which was being represented by the first defendant was false (sic), reiterated it through its true directors and Eduard Litver impliedly confirmed the misrepresentations when he made the representations in paragraph 14.” (Paragraph 39 of Second Further Amended Statement of Claim).

75 The plaintiffs claimed that the fifth defendant, Mr Braune, was also guilty of fraudulent misrepresentation for representing that the Regent Street property had been bought by the third defendant for $6,000,000.

76 Alternatively the plaintiffs allege that the third to fifth defendants contravened s 52(1) of the Trade Practices Act or s 42(1) of the Fair Trading Act by endorsing the first defendant’s misrepresentations in circumstances which put pressure on the plaintiffs to exchange quickly.

77 Alternatively they allege that by failing to tell Mr Young that Mr Coupe’s representations were not true, they became knowingly concerned in and aided and abetted his misleading and deceptive conduct.

78 Accordingly as against the third to fifth defendants the plaintiffs rely on two alleged misrepresentations. First, that the property was worth $9,000,000. Secondly, that Chadreel had bought the property for $6,000,000. The first representation was alleged to have been made by Mr Coupe but confirmed by Mr Litver and Mr Braune. The second representation was alleged to have been made by Mr Braune.

79 The alleged representation by Mr Litver that he would be quite happy to buy the commercial bit of the development from Mr Young for $3,100,000 was relied on as an implied confirmation of the other representations.

80 The plaintiffs must prove:

(a) that the representations were made;

(b) that they were untrue or otherwise misleading or deceptive;

(c) for the case of fraudulent misrepresentations, that the 3rd to 5th defendants knew they were untrue, or were recklessly indifferent as to their truth; and

(d) that the plaintiffs relied upon them.

81 The representations are alleged to have been made to Mr Young on 17 June 2001.

82 When the statement of claim was filed the plaintiff alleged that the telephone call was made to him in Adelaide. He was not in Adelaide on 17 June and at the hearing the plaintiffs were given leave to amend to allege that at the time he was in Melbourne. Mr Coupe in his oral evidence, Mr Litver and Mr Braune all denied that they took part in a conversation by speakerphone with Mr Young on 17 June. For reasons already given I accept that denial.

83 Mr Coupe initially swore that he attended the offices of Denes Ebner on 17 June with Mr Braune and Mr Litver and their solicitor as well as Mr Menere. He deposed to a telephone conference having taken place on that day. When he gave oral evidence he amended the dates in his affidavit. He said that he had been mistaken about the dates in his affidavit and that he had been working in response to the plaintiffs’ affidavits which said that the date of the teleconference was on the 17th whereas he now accepted from other documents that he had seen that the conference was on the 19th.

84 Mr Young remained adamant that the teleconference where the third and fifth defendants spoke to him took place on Sunday 17th June and not on the Tuesday. I infer that the reason for his insistence was that he feared that his contention that no contract had come into existence would suffer if he acknowledged that the conversation of which he spoke had occurred on the Tuesday. As I have said, it was his case that he understood a contract had been made on the Sunday, but that he believed it had been discharged at the time the front page of the contract was faxed to him on the Tuesday so that when he faxed the front page back with the alteration of the deposit he had made a counter-offer which was not accepted. That version of events, which I have rejected, would not have been even arguable had the telephone conference in which he was told the contracts were being exchanged occurred on the Tuesday evening.

85 This highlights two difficulties in the plaintiffs’ case. The first is that a case of fraudulent misrepresentation must be distinctly alleged and as distinctly proved. No leave was sought to amend the pleading to allege a claim of fraudulent misrepresentation made in the telephone conference on 19 June. I could not uphold a claim based upon an alleged fraudulent misrepresentations made in a telephone conference on 17 June where I am satisfied that no such telephone conference took place.

86 The plaintiffs’ second difficulty is their establishing that they relied upon the misrepresentations to enter into the contract to purchase the property. They deny that they entered into a contract on 19 June. How, it may be asked, can the plaintiffs maintain that they relied on the representations to enter into a contract whilst at the same time they deny they did any such thing?

The Evidence of the Representations

87 Mr Young gave evidence that on the Sunday night he participated in a telephone conference in which the following was said:

“Braune: You will have no problems getting finance. It will value at $9,000,000 easy. It has cost us nearly that. We paid over $6,000,000 and we got the DA. You know how much that costs and how much in increases the value. You also know how expensive holding costs are.

Young: We know residential property only. We know nothing about selling commercial property. The last commercial project I was involved in was a 3-shop development in Riding Street, Balmoral, Brisbane. They took twelve months to sell and forever to lease, costing me a lot of money.

Litver: Kevin, you haven’t got to worry about that. My forte is commercial and I would be happy to buy back the commercial part of this development for $3,500,000.”

Mr Young deposed that later he said that:

“Okay, I am relying on you guys that it will value up and that we will be delivering a good buy for our members.”

88 Mrs Young did not participate in the telephone conference.

89 Mr Young did not say in his affidavit that Mr Coupe made any representation as to the value of the property, or the price paid for the property, in the telephone conference in which Mr Braune and Mr Litver participated. In his affidavit he said that it was on Saturday 16 June 2001 that he received a telephone call from Mr Coupe who then made the statements which give rise to his claim against Mr Coupe. It follows that on Mr Young’s evidence the third to fifth defendants could not be liable to the plaintiff for failing to correct misrepresentations made by Mr Coupe to Mr Young in their presence. He says that it was Mr Braune who represented on 17 June that the property would easily value at $9,000,000 and that the vendor had paid over $6,000,000 for it. This was not the case he pleaded.

90 It may be observed that whereas the pleading alleged that Mr Litver offered to buy back the commercial part of the development for $3,100,000, Mr Young said Mr Litver offered $3,500,000.

91 In his affidavit sworn on 13 June 2003 Mr Cass said he participated in a telephone conference call subsequent to a conversation that he had with Mr Young on Sunday 17 June. He said he believed Mr Litver and Mr Braune participated. He did not place a date on that conversation. In his oral evidence given on 10 June 2004, on the trial of the separate question, Mr Cass said that Mr Denes was also a participant in this conversation and that the call occurred on Sunday 17 June 2001. (T97). When Mr Cass gave evidence on 17 June 2004, on the trial of the remaining issues, he acknowledged that the evidence which he had given earlier, that Mr Denes participated in a conference call on 17 June 2001, was incorrect. He gave confusing evidence as to how many telephone conference calls there were with Mr Young in which Mr Litver, Mr Braune or Mr Denes participated. He adhered to his previous evidence that the conversation set out below occurred on Sunday 17 June 2001.

92 In his affidavit of 13 June 2003 Mr Cass deposed that that the following conversation occurred:

“ Paul Coupe said:-
‘ I have found property at Redfern which is suitable for your purposes of development. It is the best buy I have ever seen. It is an approved DA. It is worth $9,000,000 but the owners are willing to sell it for $7,700,000 if an unconditional contract is entered into immediately because they need the money to fund another legal matter. The owners want a 5% deposit.’
Eduard Litver and Kurt Braune said, at various times during the conversation words to the following effect:
‘Paul is right. It’s a good buy for you. We are only selling it so cheap because we need the money.’
Kevin Young said:
‘I have no experience with commercial property except with 4 small shops which cost me a fortune and I have not touched commercial since’.
Eduard Litver said:
‘Don’t worry Kevin, my forte is commercial and I would be happy to buy back the commercial component of the development.’”

93 He went on to say that Mr Litver and Mr Braune said words to the effect that “Paul is right. It’s a good buy for you. We are only selling it so cheap because we need the money.”

94 Mr Cass said that he had not provided a statement to the plaintiffs or their solicitors prior to late May or early June of 2003 as to what evidence he would be able to give in the proceedings. (T312). He was shown the pleadings before he swore his affidavit. The statement of claim was filed on 30 May 2002. It contained paragraphs 12 and 13 in the same terms as the later pleading from which I have quoted above except that in paragraph 12 it alleged that Mr Young was in Adelaide. It is a remarkable feature of Mr Cass’s affidavit that the conversation which he relates, tracks the allegations in paragraphs 12 and 13 of the statement of claim word for word. The pleading was not drawn from a statement of his evidence. I conclude that he copied the statement of claim when preparing his affidavit.

95 Mr Braune and Mr Litver denied the conversations which Mr Young and Mr Cass deposed to. Mr Braune said that to the best of his recollection he did not make any statement in relation to the value of the property or the reasons Chadreel was selling the property during the telephone conference. He denied making the statement about how much money the vendor had paid for the property. He also denied that Mr Litver offered to buy back the commercial part of the property for $3,500,000. To the best of his recollection Mr Litver did not make any statement in relation to buying back the commercial part of the development during the telephone conference.

96 Mr Litver also denied that either he or Mr Braune made any of the alleged statements as to the value of the property, or that the property was a good buy, or was cheap, or as to the price for which the property had been purchased. He agreed that he may have said that commercial was his forte and he would consider buying the commercial component, but denied making any commitment to do so or stating any price at which he would be prepared to do so.

97 Mr Coupe denied representing that the property was worth $9,000,000, or saying that it was the best buy he had ever seen.

98 In his affidavit Mr Coupe did not deny having told Mr Young that the vendor had paid a shade over $6,000,000 for the property two years ago. Mr Young had said in his affidavit that such a statement had been made to him by Mr Coupe on Saturday 16 June 2001, but until the hearing itself the statement of claim did not include a cause of action against Mr Coupe based on that alleged representation.

99 In his oral evidence Mr Coupe denied making the statement which Mr Young attributed to him, but admitted that he may have said that he had been told that the property had been bought by the vendors for $6,000,000 but had not independently checked if that were so. In his evidence in chief Mr Coupe said that “I believed that I said they told me they paid $6,500,000”.

100 I reject the plaintiffs’ submission that between swearing his affidavit and giving oral testimony Mr Coupe changed his evidence on this topic. Until an amendment was made late in the course of the hearing, there was no allegation against Mr Coupe based upon the alleged representation.

101 Mr Coupe also said that he was not sure whether the information that the vendors had bought the property for $6,000,000 came from the vendors or their agents. (T406, 416). Subsequently he agreed that the strong likelihood was that any information of that type came to him not from the vendor but from the vendor’s agent. By that he meant Mr Menere.

102 No case was made by the plaintiffs that the third defendant was liable for any misrepresentation alleged to have been made by Mr Menere. Mr Menere was not cross-examined on the subject.

103 Mr Litver and Mr Braune were not shaken in cross-examination. Where their evidence conflicted with that of Mr Cass and Mr Young, I prefer their evidence.

104 I have taken into account that once the plaintiffs faced the prospect of the contract being terminated they asserted that the vendor had represented the property was worth $9,000,000. That assertion was later repeated in internal correspondence within the plaintiffs’ camp. The allegation was not a recent invention. Nonetheless the plaintiffs’ case depends on my acceptance of the evidence of either Mr Young or Mr Cass.

105 Mr Young was not an impressive witness. My principal reasons for preferring the evidence of Messrs Litver and Braune are as follows. First, Mr Young’s answers were often not responsive to the questions asked of him. Secondly, his conduct after 19 June 2001 was manifestly inconsistent with his holding the belief, to which he swore, that no contract had been entered into. Thirdly, he insisted that the telephone conference with Mr Litver, Mr Braune, Mr Cass, Mr Coupe and, he said, the vendor’s solicitor, occurred on Sunday 17 June. That evidence is contrary to the objective facts. Thus, when cross-examined about Mr Cass’s facsimile to Mr Denes of 19 June which enclosed the s 66W certificate and referred to the telephone conference with Mr Young at 6.45 pm, Mr Young simply denied that he had had such a conversation with Mr Cass at that time and insisted that the conversation took place on the Sunday 17th June. Fourthly, his affidavit varied in significant respects from the statement of claim which he also verified. Fifthly, from time to time he made statements which it is impossible to accept. An example is his evidence referred to in paragraph 14 above that despite his years of experience he did not understand what the term “exchanging” meant. Sixthly, he had been declared bankrupt in 1984 and remained bankrupt for 5 years. He gave evidence before me that he then had about $1,000,000 in real estate. If this was true it was not disclosed in his verified statement of affairs. He had not filed tax returns from 1975 to 1984. Seventhly, he acknowledged that the control of the Investors Club rested solely with him and his wife. He asserted that the Australian Securities and Investments Commission had investigated the Club and were very, very happy. (T285). In fact, ASIC contended and the Supreme Court of Queensland ultimately held that the schemes by which the plaintiffs raised moneys from members of the Club to assist with the plaintiffs’ purchase and development of properties were unlawful. On 10 February 2003 Muir J of the Supreme Court of Queensland held that a scheme called a joint venture project scheme by which members of the Club were invited to pay monies to assist in the purchasing of real property developments undertaken by the plaintiffs, including the development at Regent Street Redfern, was a managed investment scheme which was unregistered and which the plaintiffs were operating contrary to the provisions of s 601ED(5) of the Corporations Act.

106 I have already found that Mr Cass copied the statement of claim when preparing his affidavit. Mr Cass, it will be recalled, placed the conversation to which he deposed as having occurred on Sunday 17 June. After this conversation, assuming it to have occurred on the Sunday, Mr Cass received the proposed special conditions of contract. Special condition 23 contained an acknowledgment by the purchasers that they were purchasing the property as a result of and had relied entirely upon their own knowledge and enquiries relating to an inspection of the property. The condition contained an acknowledgment that the purchasers did not rely upon any statement, representation or warranty if any were made by or on behalf of the vendor. Mr Cass said that he believed that in fact the purchasers were relying upon statements and representations made by or on behalf of the vendor. (T334). However he did not propose any amendment to the condition in his facsimile to Mr Denes of 19 June. His explanation was that he didn’t think it was desirable to go into the matter until he had the original contracts. He said that he could not advise on facsimile provisions. (T335). I cannot accept that evidence. He negotiated the special conditions with Mr Denes. His facsimile of 19 June proposed that a contract would be entered into before the signing of the original agreements. If the representations were made as he says, there is no adequate explanation as to why he raised no issue about the special condition which purported to exclude reliance on any such representation.

107 Although there were inconsistencies between Mr Coupe’s affidavit and his oral evidence, I accept his denial, supported as it is by the evidence of Mr Litver and Mr Braune, that he did not make the representations in a telephone conference in which Mr Young, Mr Cass, Mr Litver and Mr Braune participated which are alleged in the statement of claim. I will return to the question as to what statements he made to Mr Young when Messrs Litver and Braune were not present.

108 For these reasons I am satisfied that the two alleged misrepresentations were not made to Mr Young by Mr Braune or by Mr Coupe in the presence of Mr Braune and Mr Litver.

Falsity of Representations

109 Had the representations been made the plaintiffs would still have had to prove their falsity and their reliance on them.

110 The value of land at a particular date is a question of fact, which is usually established by adducing opinions about that fact. In the context in which the representations were allegedly made, the statements attributed to Mr Braune that the property would value at $9,000,000 easy, and to Messrs Braune and Litver that Paul Coupe was right in saying that it was worth $9,000,000 and it was a good buy, were statements of their opinion about the value of the land. The urgency of the transaction does not transmute them to statements of fact as the plaintiffs contended. The plaintiffs did not establish that Mr Braune and Mr Litver did not hold those opinions unless that could be inferred from the fact, which was known to the plaintiffs, that they were willing to sell for $7,700,000. Nor did they lead evidence that such opinions could not reasonably have been held at the time.

111 The plaintiffs did establish that the vendor paid $3,050,000, not $6,000,000, when it purchased the property.

Reliance

112 Even if the statement that the property was worth $9,000,000 and that $7,700,000 was a good price had been made to Mr Young by or in the presence of the vendors, or if Mr Braune had said that the property had been bought for $6,000,000, I do not accept that Mr Young would have relied on such a statement. Mr Young had a long history of dealing in real estate. The marketing material for the Investors Club says that he had undertaken all legal conveyancing activities and completed settlements on his own behalf in excess of 600 property transactions. He has 31 years experience in financial management and real estate. He had available to him over a dozen researchers. He gave evidence that the researchers could easily check what price a vendor had paid for the property and that this was information available to all his researchers through their home computers or by going to head office for the information. He said that it was compulsory for researchers to check that. He was asked this question:

“ Q. If anything was said in relation to how much a vendor paid for a contract (sic) and it was said by a vendor, you wouldn’t automatically accept it and rely on it would you?
A. No. Vendors lie. ”

113 It is inherently improbable that a man experienced in real estate would rely on a representation made or adopted by a vendor of real property that he was selling it at substantially below what it was worth. Mr Young’s evidence as to his lack of confidence in the truthfulness of vendors of real property shows that he is unlikely to do so.

114 The plaintiffs relied on the principle that where a material representation is made which is calculated to induce the representee to enter into a contract and the person does so, it is a fair inference of fact that he was induced to do so by the representation. (Gould v Vaggelas (1985) 157 CLR 215 at 236). However that inference may be rebutted and would be rebutted in this case if I found the representations had been made.

115 On any view of it, the transaction appears to be extraordinary. There is no doubt that the contract was entered into with great haste and, so far as appears from the evidence, little was done by way of assessment of the true value of the property. For example, no independent valuation was obtained by or for the purchasers prior to exchange. The explanation for that lies in the so-called Investors Club.

116 Mr Cass deposed in his affidavit of 13 June 2003 that Mr Allen, the National Operations Manager of the Club, said that “I am not happy that Kevin is going full steam ahead. Wayne [Abbott] has also said to me that he wishes that Kevin would slow down and give us all an opportunity to better consider and undertake searches and valuations over the property”. The plaintiffs called neither Mr Abbott, nor Mr Allen, nor Mr Lockhart. However Mr Young was anxious to acquire sites which would allow him to sell units off the plan to some 1000 investors by 31 December 2001. In his communications to investors after the contract had been terminated by the vendor, he told the investors that the contract could not proceed unless the vendor accepted a lower price. He said that any savings in the purchase price of the properties would be passed on to them. It appears to me that the corollary was also true. If he had an assured source of purchasers for the development, he could afford to take risks on price.

117 The Investors Club prepared an information memorandum for members offering 87 units including car spaces in the proposed development for prices ranging from $222,000 to $524,000. Loans for the purchases could also be arranged through the Club. (Exhibit 3D7). An application for finance made on behalf of the plaintiffs stated that: “the Investors Club has at its heart the exit strategy that all developers would love to have. The sheer volume of sales recorded through its national and international marketing services network provide the lender with the comfort of the clearly defined and well managed exit strategy for this and all developments undertaken by the group”.

The exit strategy was that:

“ Each and every purchaser will be locked in by contracts that is for all intents and purposes ‘unconditional’ ”.

118 A meeting of the “JV Inner Cell” attended by, inter alia, Messrs Young, Allen, Abbott, Cass, Lockhart and Hamilton dated 6 August 2001 stated:

“Sales now stand at 38. We have a letter of offer from the NAB to provide $4,620,000 in loan funds to settle the land. JV Equity Contributions from the 38 sales should provide $2,745,000. Including associated costs to settle the land total funds required are $8,750,000. This leaves a shortfall of $2,000,000 in round figures. (sic)
The above analysis dictates that a further 20-25 sales are required to effect settlement of the land.
Equity Partners may need to be called and all present were asked to look for any opportunity to meet this shortfall. No mezzanine funding is to be sought at this time, only genuine equity investment partners.”

119 The risk which Mr & Mrs Young ran in purchasing the property without an adequate assessment of its value, was ameliorated by their access to a pool of potential purchasers to whom units in the completed development could be marketed.

120 For these reasons, even had I been satisfied that the alleged representations had been made, I would not have been satisfied that the plaintiffs relied upon them.

121 All of the ways in which the plaintiffs sought to put their claim against the third, fourth and fifth defendants depended upon my accepting that the representations allegedly made by them or in their presence had been made, and that the plaintiffs had relied upon them. I have rejected that case.

Proposed Further Amendment to Statement of Claim

122 After the close of evidence and in the course of final submissions the plaintiffs said that they proposed to seek a further amendment to the statement of claim. The statement of claim had been amended on a number of occasions during the hearing. Paragraph 40 of the Second Further Amended Statement of Claim alleged that the third defendant breached s 52 of the Trade Practices Act by “endorsing the first defendant’s misrepresentation in circumstances in which it put pressure on the plaintiffs to exchange quickly”. The proposed amendments alleged that the third defendant breached s 52 of the Trade Practices Act in the manner set out in paragraphs 12, 13 and 13A of the statement of claim: namely, by saying that the representations allegedly made by the first defendant were correct; that the property was a good buy for you; that we are only selling it so cheap because we need the money; and that the vendors had bought the property for $6,000,000. The third defendant opposed the proposed amendments.

123 The difficulty with the proposed amendment is that in the existing statement of claim it is only the representations regarding value that are alleged to be untrue. (Paragraph 17 and 39). There appears to be implicit in the proposed different particulars to paragraph 40 an allegation that all of the conduct that was the subject of the particulars as to representations in paragraphs 12, 12A and 13A was misleading or deceptive. However the case was not conducted on that basis. Mr Epstein SC, who appeared for the third to fifth defendants, took as an example, the alleged representation in sub-para 12(iv) that “the owners ….needed the money to fund another legal matter”. Mr Epstein submitted that in the conduct of the trial neither the plaintiffs nor the defendants treated the supposed representation as to the funding of another legal matter as a relevant consideration bearing upon any of the issues of the case.

124 I agree with this submission. The only allegation of falsity was in the alleged representations about value. I refuse the plaintiffs leave to amend the second further amended statement of claim in the manner proposed by the third further amended statement of claim.

Repayment of Deposit

125 The plaintiffs sought “relief from forfeiture of the deposit pursuant to s 55(2A) of the Conveyancing Act 1999”. That claim for relief was added by an amendment made on the first day of the hearing, although foreshadowed earlier. Leave to make the amendment had earlier been opposed on the basis that the plaintiffs had not given particulars of the grounds upon which they contended that relief under s 55(2A) of the Conveyancing Act was available to them. Notwithstanding that submission, the plaintiffs did not seek to provide particulars of the grounds upon which that relief was sought. I allowed the amendment on the basis that the grounds upon which the plaintiffs could rely for the relief claimed would be those grounds which had elsewhere been pleaded against the third defendant.

126 Thus the grounds upon which the plaintiffs are entitled to claim relief under s 55(2A) of the Conveyancing Act are:

(a) that the third defendant represented that the value of the property was $9,000,000 or knew that the first defendant represented to the plaintiffs that the value of the property was $9,000,000;

(b) that it impliedly confirmed this misrepresentation by Mr Litver representing that he would be quite happy to buy the commercial bit of the development from the plaintiffs at $3,100,000; and

(c) that Mr Braune represented that Chadreel had purchased the property for $6,000,000.

127 I have already found that neither the first defendant nor the fourth or fifth defendants made the alleged representations that the property was worth $9,000,000 nor that Mr Braune represented that the property had been purchased for $6,000,000. The allegation that Mr Litver said that he would be happy to buy the commercial bit of the development from the plaintiffs for $3,100,000 was not alleged to have been an untrue statement of Mr Litver’s state of mind. It was characterised in the pleading as an implied confirmation of the alleged misrepresentation as to value. How it confirmed a value of $9,000,000 was not explained.

128 In any event I am not persuaded that the representation alleged was made. Mr Litver and Mr Braune denied that the representation was made. Mr Young said that Mr Coupe had told him before the telephone conference on 19 June that Mr Braune had offered to purchase the commercial component of the property. However that offer was not accepted by Mr Young. According to Mr Coupe, Mr Young had said that he wasn’t sure of the real value of the commercial part of the development and declined the offer of the buy-back as he felt he would be better off selling that or retaining it himself later. Mr Coupe said that Mr Braune had offered to buy the commercial component for either $1,500,000 or $2,500,000. (T412, 413, 415).

129 Mr Cass also deposed that Mr Litver said to Mr Young that “my forté is commercial and I will be happy to buy back the commercial component of the development.” But he did not say that Mr Litver nominated a price which he would do so.

130 In a letter dated 3 October 2001 from ProPacific Projects Pty Ltd to Mr Cass which was signed by Mr Coupe and authorised by Mr Allen for and on behalf of Mr & Mrs Young and copied to Mr & Mrs Young, Mr Coupe said that “the vendor expressed a willingness during the negotiations for the purchase of the land to enter into a contract for sale for the retail component of the completed project of approximately 790m² for the sum of $2,500,000.” On 3 October 2001 Mr Cass, on behalf of his clients, proposed that the existing contract of 19 June 2001 be extinguished subject to the execution of a new unconditional contract for the sale of the property for $5,200,000 together with the vendor’s acknowledgement and agreement to receive the retail component of the completed development in lieu of the balance of $2,500,000 of the monies payable pursuant to the former contract dated 19 June 2001. This offer was rejected on 4 October 2001.

131 This correspondence is inconsistent with the statement having been made by Mr Litver or Mr Braune that they were prepared to purchase the commercial component of the development for $3,500,000, rather than $2,500,000. It is inconsistent with the allegation in the statement of claim.

132 Whatever offer, if any, was made by Mr Braune or Mr Litver to buy back the commercial component of the development, it was not an offer which Mr Young accepted. Mr Cass did not seek to include in any of the special conditions any promise by the vendor or Mr Litver or Mr Braune to re-purchase any part of the development. Mr Young did not say that he accepted Mr Litver’s offer.

133 The plaintiff has not made good the grounds upon which it claimed relief under s 55(2A) of the Conveyancing Act. I do not regard it as unjust or inequitable for the vendors to have terminated the contract and to be entitled to the deposit paid and payable under it. The fact that the purchasers acquired the property after minimal investigation does not advance their claim for relief. The contract of sale included a warranty in clause 37 that they did not require credit in order to pay for the property, or if they did require credit in order to pay for the property they had already obtained such credit on reasonable terms acceptable to them. However it appears that the reason the contract was not completed was because the plaintiffs were unable to arrange finance to complete the transaction. There was a paucity of evidence about the steps taken by them to endeavour to obtain finance and to complete the contract. The only valuation put into evidence was one obtained after the time for completion had expired.

134 Nor can I ignore the fact that the contract was entered into by the plaintiffs with the intention of marketing the units in the proposed development to members of the Investors Club. The scheme by which the plaintiffs raised and proposed to raise moneys from members of the Club to assist with the purchase and the development was unlawful.

135 Further, the third defendant re-sold the property at a loss of $600,000 and incurred expenses on the re-sale of $7,660. This represents 7.9% of the purchase price. Even if the plaintiffs obtained relief under s 55(2A) of the Conveyancing Act, they would be liable for damages to the third defendant in this amount.

136 For these reasons I refuse the plaintiffs’ claim for relief under s 55(2A) of the Conveyancing Act.

Third Defendant’s Cross Claim

137 The third defendant claims the following relief:

“1. A declaration that it is discharged from further performance of the contract [dated] 19 June 2001;

2. a declaration that it is entitled to retain the deposit of $385,000;

3. an order that the further amount of $385,000 be paid as liquidated damages;

….

5. interest at the rate of 10% per annum from 4 October 2001 to the date of payment or judgment.

….”

138 The third defendant is entitled to the declarations which it seeks.

139 I have referred to clause 44 of the special conditions of the contract previously. There was no submission that clause 44 did not contain a genuine pre-estimate of damage. The only defence to the claim for the recovery of damages and interest, in the event that I found that the third defendant validly terminated the contract and it was not rescinded by the plaintiffs for the alleged misrepresentations, was the claim for relief under s 55(2A) of the Conveyancing Act. Accordingly the third defendant was entitled to payment of the sum of $385,000 from 5 October 2001. That is the day after the plaintiffs failed to complete the purchase in accordance with the notice to complete. From that day Chadreel was entitled to terminate the contract.

140 Chadreel claimed interest at the rate of 10% per annum on that sum pursuant to clause 27.4 of the special conditions. That clause provided as follows:

“27.4 Default interest
Notwithstanding anything herein contained, if the Purchaser shall fail to complete this contract by the later of the Completion Date and the date the Vendor is ready willing and able to complete (the “effective date”), the Purchaser must pay the Vendor in cash on completion, in addition to the balance of purchase moneys and any other monies payable on completion, interest on the balance of purchase moneys payable at the rate of ten (10%) per centum per annum calculated on daily rests computed with effect from and including the effective date up to and including the date of actual completion. The Purchaser shall not be entitled to require the Vendor to complete this Contract unless such interest is paid to the Vendor on completion and the parties agree it is an essential term of this Contract that such interest be so paid. The Purchaser acknowledges that any interest payable as aforesaid represents a genuine pre-estimate of the liquidated damages likely to be suffered by the Vendor as a result of completion not taking place on or before the due date.”

141 Clause 27.4 specifies the interest which is payable on the balance of the purchase price on completion of the contract. It does not impose interest on the monies payable pursuant to clause 44 of the special conditions where the vendor having terminated the contract is entitled to recover the outstanding deposit of $385,000 as liquidated damages. Accordingly interest is payable on the sum of $385,000 from 5 October 2001 at the rates prescribed from time to time pursuant to s 94 of the Supreme Court Act 1970.

Claim Against the First and Second Defendants

The Issues

142 This claim arises because of the plaintiffs’ failure against the third defendant. The plaintiffs allege that by November 2000 Mr Coupe had become the plaintiffs’ locater, assessor and architect of properties that they intended to buy. They allege that in or about June 2001 Mr Coupe was instructed by the plaintiffs to locate and assess a suitable property for development in Sydney. The plaintiffs claim that Mr Coupe represented to Mr Young in a telephone conversation on 16 June 2001 that the vendors paid a shade over $6,000,000 two years previously for the property and that it was easily worth $9,000,000. They allege that in the telephone conversation on 17 June 2001, in which Mr Litver and Mr Braune participated, Mr Coupe made the representations which I have previously set out. The plaintiffs allege that the representations regarding the value of the property were untrue.

143 The plaintiffs allege that the first defendant was guilty of fraudulent misrepresentation because he knew that the property was not worth $9,000,000. As a particular of the allegation of fraudulent misrepresentation the plaintiffs also alleged that the first defendant failed to make any proper assessment of the true market value of the property by comparing its sale price with other similar properties in the locality.

144 The plaintiffs also allege that the first defendant owed a duty of care to act with proper skill, care and responsibility in the assessment of properties which he was recommending the plaintiffs purchase. They allege that he was negligent in representing that the property was a good buy at $7,700,000. The particulars of negligence are that the first defendant: failed to make a proper assessment of the market value of the property before making the representation as to its price; failed to warn the plaintiff that he had not made any or any proper assessment of the true market value by comparing the sale price of the property with other similar properties in the locality; and made the representation regarding the price without ascertaining the true market value of the property.

145 The plaintiffs also allege that there was a contract between the first defendant and them pursuant to which he promised to act as their agent and exercise his best endeavours to locate and evaluate property for development. The plaintiffs allege that the first defendant breached the contract when he fraudulently or negligently attempted to induce the plaintiffs to buy the property for $7,700,000.

146 The plaintiffs alleged that the first defendant owed the plaintiffs a fiduciary duty whereby he was obliged to carry out his duties for the plaintiffs honestly and with their best interests in mind. They allege that he breached that fiduciary duty by fraudulently or negligently attempting to induce the plaintiffs to buy the property for the price of $7,700,000.

147 The plaintiffs also allege that by falsely representing to the plaintiffs that the property was worth $9,000,000, the first defendant contravened s 52(1) of the Trade Practices Act 1974 and s 42(1) of the Fair Trading Ac 1987.

148 The same allegations are made against the second defendant. The plaintiffs claim against both the first and second defendants damages and exemplary damages. Although the statement of claim seeks an order for the taking of accounts against the first and second defendants no submissions were advanced in support of that claim for relief.

149 Although the claims are put in various ways, in essence they are either based on alleged representations that the property was worth $9,000,000, or that the vendor had paid over $6,000,000 more than two years previously, or they are based on Mr Coupe having had a duty to take reasonable care in recommending that the property be purchased for $7,700,000 which he failed to discharge.

The Representations

150 Mr Young gave evidence by affidavit that on Saturday 16 June 2001 Mr Coupe said to him in a telephone conversation words to the following effect:

“I’ve got a real beauty for you. Even your discounted prices that you give to your Club members, my feasibility shows that you’ll make a profit of 2.5m. Its (sic) at Strawberry Hills, only a few kilometres from the GPO. It has an approved DA for 88 units with commercial below. It’s the best buy I have ever seen in my life. They paid a shade over $6,000,000 two years ago and spent a million in getting the DA. So it’s easy worth $9,000,000 but I think we can steal it for $7,700,000 because I’ve got the vendors over a barrel. They need a sale by Monday because of some court case they are in. NL has seen it and done his own research and agrees we must get.”

151 According to Mr Young he first heard of the Redfern property on Saturday 16 June 2001 and under pressure from Mr Coupe agreed to contracts being exchanged for the purchase of the property on Sunday 17 June 2001 for $7,700,000 with a 5% deposit. Although the negotiations leading to an exchange of contracts were conducted over a short time frame, the time was not as short as Mr Young deposed to.

152 I accept Mr Coupe’s evidence that at some time before 14 June 2001 he said to Mr Young words to the following effect:

“I have found a property at Redfern which is suitable for your purposes. It has an approved DA for 88 units. They are asking $9,000,000 but I think we can get it for $7,700,000. The owners want a 5% deposit. I believe this is a good deal. It appears to be the right price based on the price per unit sales that is being achieved in Sydney in the inner city area at the present.”

153 I have already given my reasons for rejecting Mr Cass’s evidence about what he said were the representations made by Mr Coupe on 17 September 2001. I have also given my reasons for not accepting Mr Young as a reliable witness. I add that the assertion made for the plaintiffs on 5 October 2001 was that it was the directors of the vendor, not Mr Coupe, who represented that the property was worth in the vicinity of $9,000,000. I am satisfied that Mr Coupe did not represent that the property was worth $9,000,000.

154 The next contention alleged against Mr Coupe was that he told Mr Young that the vendors had paid a shade over $6,000,000 for the property over two years ago. The plaintiffs said, correctly, that Mr Coupe did not refute this evidence anywhere in his two affidavits. They then submitted that he changed his evidence when he gave oral evidence in chief on this topic.

155 I have referred to Mr Coupe’s evidence on this matter at paragraphs 98 to 101.

156 I am not satisfied that Mr Coupe told Mr Young that the vendors had paid $6,000,000 for the property. It was not submitted for the plaintiffs that if Mr Coupe said to Mr Young that he had been told that the vendors paid $6,000,000 for the property, that that statement was untrue, or that Mr Coupe was liable for not checking its correctness.

157 In any event, I am not satisfied that it was Mr Coupe’s responsibility to check the correctness of the statement. The plaintiffs employed researchers to make any such checks. Nor did the plaintiffs rely upon any statement by the vendors as to what they had paid for the property. Mr Young said that he would not rely upon such a statement made by a vendor of real property because vendors lie.

Did Mr Coupe Know the Property Was Available for $6,500,000?

158 According to Mr Coupe, Mr Young asked Mr Coupe and Mr Nicholas Lockhart to go down to Sydney to carry out an evaluation of the property.

159 On 14th June 2001 Mr Lockhart and Mr Coupe attended a meeting at the Ritz-Carlton Hotel with Mr Litver, Mr Braune, Mr Paul Menere of City Unit Sales Pty Ltd, and a Mr Tatich. Mr Tatich appears to have paid no significant part in the meeting. At that meeting Mr Lockhart made an offer of $6,500,000 for the property. I think it probable that in doing so he was acting on instructions from Mr Young. Mr Young said that he gave instructions to Mr Coupe to offer $6,500,000 for the property at some time on the Saturday or Sunday. (T235). However, I do not accept that evidence. It is clear from a file note prepared by Mr Menere on or before 9 July 2001 that an offer was made for “the Investors Club” of $6,500,000 on 14 June 2001. That offer was rejected. Negotiations over the weekend resulted in agreement on a price of $7,700,000.

160 The plaintiffs alleged that Mr Coupe knew that the vendor was prepared to sell the Redfern property for $6,500,000, and hence, Mr Coupe’s representation that the property was a good buy at $7,700,000 was known by him to be false. In an affidavit sworn on 7 May 2004 Mr Menere says that in May 2001 he told Mr Coupe that the Regent Street site was available for $6,500,000. He also said that he held a copy of a contract for the sale of the land with a price of $6,500,000 which the vendor had supplied to him and had a copy of an agency agreement between the vendor and City Unit Sales also showing a price of $6,500,000. He said that he had shown Mr Coupe a copy of that sale contract with the price of $6,500,000 on it before the meeting on 14 June at the Ritz-Carlton Hotel.

161 It appears that on 4 June 2001 terms had been discussed for a proposed sale of the property to a Mr Blomfield for a price of $6,500,000. Mr Braune was prepared to exchange contracts at that price if there were a quick exchange.

162 Mr Coupe denied having been told that the Regent Street property was available for $6,500,000. Mr Coupe said that Mr Menere told him that there had been an offer of $6,500,000 for the Regent Street property. Mr Coupe did not deny having been shown a copy of a contract with the price of $6,500,000 on it on the day of the meeting at the Ritz-Carlton Hotel.

163 It is quite clear that on 14 June the vendors were not prepared to sell the property for $6,500,000. Mr Litver refused that offer at the meeting. Mr Menere’s file note prepared in about July 2001 proceeded as follows:

“The Investor Club made an offer of $6,500,000 but it was rejected by Mr Littver. (sic)
After discussions at the meeting, Mr Litiver (sic) indicated he was now looking at a price of $7,500,000 on advice from Richard Ellis. Paul and Nick returned to the Gold Coast but continued discussions with Metro over the weekend and they agreed on a price of $7,700,000 which included our fee of $200,000. On Saturday evening he indicated to me they were close to a deal. Paul Coupe telephoned on Sunday and said he would be down on Monday to pay the 5% cash deposit.”

164 I do not accept the plaintiffs’ submission that Mr Coupe “knew that the Redfern property was being offered for sale at $6,500,000.” I do not accept that it was.

165 Mr Coupe got the figure of $7,700,000 as the price which he thought the vendor would accept from discussions with Mr Menere. (T382).

166 The basis on which Mr Coupe formed the belief that purchase of the property for $7,700,000 would be a good deal was on enquiries concerning similar sales which he had made with Mr Menere and a local real estate agent in Regent Street. He was told that it appeared to be a fair price. (T383).

Evaluation of the Property and Price

167 Mr Coupe characterised his task initially as being to locate a suitable property for purchase. His statement that he had found a property which was suitable for the plaintiff’s purposes was a statement of opinion. It is not alleged that he did not hold the opinion. Nor was there no reasonable basis for it. Development consent had been given to the construction of 88 units. Mr Coupe had been asked by Mr Young to find a property with a DA to build residential units. The property was suitable for that purpose.

168 Mr Coupe denied that it was his task to evaluate the property. The Investors Club had its own researchers who, he was told, were capable of assessing a property within 48 hours. He was accompanied in his discussions with the vendors by Mr Nick Lockhart, the National Marketing Manager of the Investors Club. Mr Young said that because the deal was done over the weekend and the contract was formed on the Sunday, he did not use the researchers who he had available to research the site. He also said, however, that as Mr Lockhart was a party to the negotiations he was “under the impression that one of my researchers was riding shotgun for me”.

169 I do not accept that it was any part of the task which Mr Coupe agreed to undertake that he personally would carry out an evaluation of a proper price to pay for the property. He was not a valuer or a property developer. There was no formal or written retainer. Mr Young asked Mr Coupe and Mr Lockhart to go down to Sydney to carry out an evaluation of the property. I do not accept that Mr Coupe was thereby charged with the responsibility for determining whether the price to be offered for the property fairly represented its value. An evaluation of the reasonableness of the price to be offered would depend upon enquiries to be made by the researchers of the Investors Club as well as such opinions as might be offered by Mr Lockhart and Mr Coupe or Mr Abbott, and ultimately Mr Young’s own assessment. However from Mr Young’s perspective the key consideration was that he wanted to acquire sufficient development sites before the end of 2001 that would yield 1,000 new units to be sold to members of the Investment Club.

Claims in Contract Tort and for Breach of Fiduciary Duty

170 In my view there was no contract between the first or second defendants and the plaintiffs for the first or second defendant to use their best endeavours to locate or evaluate a suitable property for purchase. Although Mr Coupe anticipated, as happened, that a company in which he was interested would be engaged by the plaintiffs to manage the construction of the proposed development, that was not the quid pro quo for any promise by Mr Coupe or his company to locate and evaluate a property. I accept however that Mr Coupe assumed responsibility to the plaintiffs to use his best endeavours to locate and evaluate a suitable development site for purchase and was under a duty of care in carrying out that task. However, as I have said, I do not consider that that extended to his assuming responsibility for assessing the fairness of the price offered. He did not breach his duty of care. Although in some respects Mr Coupe occupied a fiduciary position with respect to the plaintiffs, he did not breach any fiduciary duty. He did not contravene a duty of loyalty. He did not prefer his interests to those of the plaintiffs. The claim for breach of fiduciary duty was misconceived. Not every breach of duty by a fiduciary is a breach of fiduciary duty. The plaintiffs’ claims in truth were claims in tort or for breach of the Fair Trading Act or Trade Practices Act for misleading and deceptive conduct.

Value of the Property

171 The evidence does not establish that at 19 June 2001 the property was worth less than $7,700,000. On 21 July 2001 Mr Coupe prepared a Feasibility Study for the project for the plaintiffs. Using the land purchase price of $7,700,000 and estimated construction costs of $15,500,000 and projected sales of the units and rental income net of GST of $32,700,000, his assessment indicated that the project could yield to Mr & Mrs Young a profit of $5,584,000. He was not cross-examined on any aspect of the study.

172 On 3 October 2002 the third defendant sold the property for $7,100,000. This was after the development consent for the property had expired.

173 On 20 July 2001 a Mr Kevin Brennan, the Club’s branch manager for Victoria, provided a report on the Redfern property. The report was prepared after Mr Brennan spent three days in Sydney reviewing the Club’s joint venture at Redfern. He noted a number of developments in Alexandria, Waterloo and Redfern. He gave his opinion that in the long run Redfern would outperform property values in Alexandria and was a preferable location to Waterloo. He referred to the asking prices for units in those developments, implicitly asserting that they supported the anticipated sales prices for the units in the Regent Street development. He concluded by saying that the project was the Club’s most promising development to date. His report was included in an application for finance submitted by Mr Hamilton on behalf of the plaintiffs. Mr Hamilton’s report stated that Rod Hunt would be the quantity surveyor for the project and that they had confirmed the building cost of $15,500,000. (Exhibit 3D8). These documents appear to corroborate Mr Coupe’s Feasibility Study.

174 On 3 September 2001 Mr Abbott advised the valuers, Heron Todd White, that “we believe our purchase price of $7,700,000 to be fair.” Mr Young said that he had no complaint with the letter. It appeared, however, that the plaintiffs did not obtain valuations in 2001 that supported a valuation of $7,700,000. It appears from exhibit 1D20 that Heron Todd White valued the property at $6,000,000, although their valuation was not in evidence. Mr Menere told Mr Abbott in about September 2001 that Stanley & Thompson, valuers, had put a figure of $7,500,000 to the land component. That valuation was not in evidence. Mr Parkinson of Landmark White (NSW) Pty Ltd valued the property on 27 September 2001 at $5,000,000. For the reasons which I gave in my judgment of 22 June 2004 I made an order that insofar as that report and annexure 10 to it contained representations of fact and expressions of opinion, they not be used as evidence of the truth of the facts stated in them or as evidence of facts about the existence of which opinions were stated in them. I made that order because Mr Parkinson who had sworn an affidavit exhibiting his report was not made available for cross-examination. The result is that there is no evidence that the property was not worth what the plaintiffs agreed to pay for it.

Conclusion

175 It follows that the claims against the first and second defendants fail. I have found that the representations alleged against Mr Coupe were not made. I have found that Mr Coupe did not know that the property could be purchased for $6,500,000 and that was not the fact. I have found that Mr Coupe did not breach the duty he undertook to perform for the plaintiffs and that it was not part of his duty that he should evaluate the fairness of the price to be offered for the property. In any event, there is no evidence that the amount of $7,700,000 which the plaintiffs agreed to pay for the property was more than what it was then worth.

176 For these reasons the claims against the first and second defendants fail.

177 The orders and declarations I make are as follows:

1. Refuse leave to amend the Second Further Amended Statement of Claim;

2. Dismiss the balance of the plaintiffs’ claims for relief against the defendants;

3. On the third defendant’s first cross-claim:

i. declare that the contract dated 19 June 2001 between the cross-claimant and the cross-defendants for the purchase of the property known as 21-69 Regent Street Redfern was terminated by the cross-claimant on 8 October 2001 and the cross-claimant was discharged from further performance thereof;
ii. declare that the cross-claimant is entitled to retain the deposit of $385,000.
iii. direct that judgment be entered for the cross-claimant against the cross-defendants in the sum of $385,000 together with interest at the rates prescribed from time to time pursuant to s 94 of the Supreme Court Act 1970 from 5 October 2001 to the date of this judgment.


4. Order that the plaintiffs pay the defendants’ costs of the proceedings including the cross-claimant’s costs of the first cross-claim;

5. The exhibits may be returned after 28 days.

******

Last Modified: 11/03/2004