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[2009] WASCA 163
Court of Appeal (WA)
2009-09-11
Buss JA
Original judgment source is linked above.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
CITATION : AUXIL PTY LTD -v- TERRANOVA [2009] WASCA 163
Jurisdiction : DISTRICT COURT OF WESTERN AUSTRALIA
Citation : TERRANOVA & ANOR -v- AUXIL PTY LTD & ORS [2008] WADC 29
Contract - Contract to purchase land - Misrepresentation by agent as to value of purchaser's offer - Claim by vendor for difference between contract price and market value of land - Whether unaccepted offers to purchase land admissible as direct evidence of market value of that land - Whether unaccepted offer admissible for other purposes in connection with value of land - Relevant principles
Adelaide Brighton Cement Ltd v The State of South Australia [2001] SASC 381
Armagas Ltd v Mundogas SA [1985] UKHL 11; [1986] AC 717
Baiyai Pty Ltd v Guy [2009] NSWCA 65
Beale v Trinkler [2008] NSWSC 347
Benzlaw & Associates Pty Ltd v Medi-Aid Centre Foundation Ltd [2007] QSC 233
Blefari v Minister (1962) 8 LGRA 1
Bone v Commissioner of Stamp Duties [1972] 2 NSWLR 651
Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499
Chen v Karandonis [2002] NSWCA 412
Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48
Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd [1975] HCA 49; [1975] 133 CLR 72
Electricity Trust of South Australia v O'Leary (1986) 42 SASR 26
Expectation Pty Ltd v PRD Realty Pty Ltd [2004] FCAFC 189; (2004) 140 FCR 17
Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480
Goold v Commonwealth of Australia [1993] FCA 157; (1993) 42 FCR 51
Gregory v Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547
Harris v Municipal Council of Sydney (1910) 10 SR (NSW) 860
Henderson v Amadio Pty Ltd (No 1) [1995] FCA 1300; (1995) 62 FCR 1
HML v The Queen [2008] HCA 16; (2008) 235 CLR 334
Hustlers Pty Ltd v The Valuer-General (1967) 14 LGRA 269
In Marriage of Smith (1991) 102 FLR 359
IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205
James Patrick & Co Pty Ltd v The Minister of State for the Navy [1944] ALR 254
Jones v Sutherland Shire Council [1979] 2 NSWLR 206
Marcolongo v Mattiussi [2000] NSWSC 834
McDonald v Deputy Federal Commissioner of Land Tax (NSW) [1915] HCA 54; (1915) 20 CLR 231
MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167
Nelungaloo Pty Ltd v The Commonwealth [1947] HCA 58; (1947) 75 CLR 495
Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146
Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451
Phillipou v Housing Commission (Vic) (1969) 18 LGRA 254
Plenty v Pattinson [2001] SASC 42; [2002] ANZ ConvR 171
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
Public Trustee v Brock [1922] SASR 51
R v Soma [2003] HCA 13; (2003) 212 CLR 299
Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158
Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418
Stockl v Rigura Pty Ltd [2004] NSWCA 73; (2004) 12 BPR 23,151
Ting v Blanche [1993] FCA 524; (1993) 118 ALR 543
Valentini v City of Salisbury [1997] SASC 6275; (1997) 69 SASR 332
1 BUSS JA: I have read the proposed reasons for judgment of Newnes JA. Most of the background facts, the material reasoning of the learned trial judge (Goetze DCJ) and a summary of the grounds of appeal are set out in his Honour's reasons. I will not repeat them except to the extent necessary to explain my reasons.
Appeal: grounds 1 and 2: outline of the relevant facts and the trial judge's reasons
2 By a written contract dated 28 August 2002, the first respondents (Mr and Mrs Terranova) agreed to sell to the second respondent (Cityzone) the land at Lot 46 Kingsway Road, Landsdale (the Land) for $1,275,000. The purchase price was payable by a deposit of $20,000 on or before 29 August 2002, with the balance payable at settlement. The due date for settlement was on or before 20 November 2002. Settlement was actually effected on 4 March 2003.
3 In the District Court action, Mr and Mrs Terranova claimed, in substance, that by reason of misleading or deceptive conduct in trade or commerce by the appellants (Auxil and Mr Oud), they sold the Land for less than its market value. They sought as damages the difference between the contract price ($1,275,000) and the market value of the Land, being either $1,400,000 or more, or, alternatively, $1,275,000 or more plus the market value of a block from a future subdivision of the Land, as set out in an offer to purchase dated 12 June 2002 made by Fimmano Consultancy Services Ltd (Fimmano).
4 The learned trial judge found that Auxil and Mr Oud had engaged in misleading or deceptive conduct as alleged, and entered judgment for Mr and Mrs Terranova in the sum of $101,000 plus interest, the $101,000 being his Honour's assessment of the value of a block from the future subdivision of the Land (namely, $123,000) less the commission payable to a real estate agent on the sale of the Land (Auxil having received no commission on the sale from Mr and Mrs Terranova to Cityzone).
2.1 Evidence of offers to buy the vacant land;
2.2 That the second appellant [Mr Oud] 'thought' that he could sell the property for a price 'approaching $1,700,000'.
6 Counsel for Auxil and Mr Oud argued that the learned trial judge erred in assessing the value of the Land in that he relied on evidence of unaccepted offers to purchase the Land and evidence of Mr Oud's belief as to the amount for which the Land could be sold. Counsel submitted that if the evidence in question was disregarded then there was no evidence to the effect that the value of the Land exceeded the contract price of $1,275,000.
7 The unaccepted offers to purchase relied on by the learned trial judge comprised a written offer dated 12 June 2002 from Fimmano to Mr and Mrs Terranova and an oral offer made on 26 February 2003 from Cityzone to Mr and Mrs Terranova.
8 By its written offer dated 12 June 2002, Fimmano offered to purchase the Land for $1,275,000 and, after subdivision, the provision to Mr and Mrs Terranova of a block of land of approximately 800 sqm on the eastern boundary at the northern end of the subdivision. By cl 8, the offer was subject to a satisfactory 'due diligence' investigation. Settlement was to occur no later than 1 November 2002. Mr and Mrs Terranova were satisfied with the purchase consideration, but not the proposed settlement date. They made a counter offer on the same terms, with the exception that settlement was to occur within 90 days after 16 May 2002. Fimmano did not accept the counter offer.
9 The oral offer of 26 February 2003 from Cityzone was made by its solicitor to Mr and Mrs Terranova's solicitor. The terms of the offer were confirmed in a letter dated 27 February 2003 from Mr and Mrs Terranova's solicitor to Cityzone's solicitor. Relevantly, Cityzone offered to settle the dispute which had emerged between the parties as to the purchase consideration payable for the Land, by postponing settlement to December 2003, paying Mr and Mrs Terranova $200,000 in advance of settlement, paying a purchase price of $1,275,000 (out of which the $200,000 advance payment would be made) and the provision to Mr and Mrs Terranova of a block with an area of 853 sqm upon the subdivision of the Land. Mr and Mrs Terranova rejected this offer. As I have mentioned, on 4 March 2003, the contract dated 28 August 2002 was settled on its terms.
10 Evidence of the unaccepted offers from Fimmano and Cityzone was adduced, without objection, as part of Mr and Mrs Terranova's case. The unaccepted offer from Fimmano was originally marked for identification as MFI 4. See ts 106. Later, it was tendered as exhibit 4. See ts 162. Newnes JA says that it 'appears to have been admitted into evidence in connection with the narrative of events'. See [100] below. It was not, however, tendered or received in evidence on that basis. It was tendered and received unconditionally. Newnes JA also says that the unaccepted offer from Cityzone was tendered 'in the course of the evidence of the former solicitor for the Terranovas, as part of the correspondence between the solicitors for the parties'. See [100] below. George Grasa, a legal practitioner, proved the terms of the oral offer of 26 February 2003 from Cityzone. See ts 288 - 289. The letter dated 27 February 2003, which confirmed the terms of the oral offer of 26 February 2003, was tendered and received in evidence unconditionally as exhibit 20.13. See ts 266 - 267. The evidence of the unaccepted offers was not admitted into evidence subject to any express or implied qualification. It was admitted generally, and not on a limited or particular basis. Later in the trial, after the tender and in the course of submissions, counsel for Auxil and Mr Oud asserted that, as a matter of law, the offers '[were] not admissible evidence as to value' (ts 292), and no weight should be given to them.
11 The learned trial judge said that the offers from Fimmano and Cityzone were contemporaneous with relevant events, concerned the Land and not 'other land', were made by entities that had been joined as third parties to the proceedings, and were made to Mr and Mrs Terranova [92]. His Honour purported to distinguish McDonald v Deputy Federal Commissioner of Land Tax (NSW) [1915] HCA 54; (1915) 20 CLR 231, and to follow observations of Wilcox J in Goold v Commonwealth of Australia [1993] FCA 157; (1993) 42 FCR 51 to the effect that it would be anomalous and unjust to adopt a blanket rule excluding evidence of unaccepted offers as proof of value.
Appeal: grounds 1 and 2: the relevant authorities
12 I turn now to consider the authorities relating to the admissibility of unaccepted offers as evidence of value.
13 In McDonald, the appellant appealed from the decision of Ferguson J, given under s 46 of the Land Tax Assessment Act 1910 - 1911 (Cth). In the primary proceedings the appellant claimed that the Commissioner's assessment of the unimproved value of the land (£2 2s 6d per acre) was excessive. The appellant contended the unimproved value to be approximately £1 7s 6d per acre. Ferguson J reduced the Commissioner's assessment, but only to £2 per acre. The High Court (Isaacs, Powers & Rich JJ) dismissed the appeal.
14 The primary judge in McDonald held that evidence of an unaccepted offer by the appellant/owner to sell the subject property was inadmissible. His Honour also held that evidence of an oral agreement (which did not culminate in a binding contract) between the appellant/owner and a third party to sell the subject property was inadmissible. The offer was contained in a letter written by the appellant's agent to Ormond, offering to sell the property at a specified price. The oral agreement was made between the appellant and McClarty at a specified price, but McClarty withdrew before the contract was reduced to writing, he refusing to sign.
15 The reasons for judgment of the High Court were read by Isaacs J. His Honour referred to Harris v Municipal Council of Sydney (1910) 10 SR (NSW) 860, which decided that evidence of an offer to purchase land in the vicinity of the plaintiff's land was not admissible as evidence of the value of the plaintiff's land itself (238). The case gave no reasons beyond the weight of authority. Most of the authorities were United States decisions.
16 Isaacs J emphasised the necessity to search for principles:
On what principle is the act or opinion of a third person, manifested on some former occasion, respecting the value of other land, not on oath, not in presence of the parties, the opinion not capable of being tested by cross-examination, admissible at all to affect adversely one of the parties to the litigation? (238) (emphasis added).
His Honour postulated the question by reference to 'other land', even though the unaccepted offer and the oral agreement which were excluded by the primary judge related to the subject land.
17 Isaacs J said the answer to the question was to be found 'in the principle that the rules of evidence followed by the Courts have been adopted for the better furtherance of justice, and are moulded so as to attain that object in the best possible manner' (238). A little later, his Honour elaborated:
When the matter has reached the point of a concluded contract, there has been a definite concrete fact established, which not only evidences value, but to some extent helps to create or modify it. Where an owner has actually parted with his land for a fixed sum and a buyer has parted with his money for the land, a clear event has arisen, which, based on the ordinary instincts and impulses of human nature, indicates a consensus of opinion between two adverse parties in the community respecting the value of similar lands. Some advantage to justice is therefore manifestly possible from considering it, and the law presumes that up to that point the disadvantages of having to undertake the collateral inquiries as to comparison do not outweigh the possible advantages.
But if the negotiations do not end in a concluded bargain, the field is at once open to a multitude of other considerations before the same point of opinion is reached. Excursions into the realm of collateral circumstances would be endless. They would so add to the cost, delay and uncertainty of litigation as on the whole to render a great disservice to the cause of justice. The Court might have to inquire whether the owner or the other party really terminated the negotiations, and, if so, for what reason. Had either of the parties discovered the true worth of the property or been misinformed by some means as to its real value? Did the owner mistrust the ability of the purchaser, or did the latter find an adverse claimant to the property, or did his circumstances change, or was there a personal quarrel? Or did he learn of a still better bargain? Or, again, was the offer a sham on either side, or both sides? Such inquiries would render litigation intolerable, and defeat the purpose for which they were permitted.
Consequently, though the logical relevance may be the same when once the fact of a real firm offer is reached, whether it be accepted or not, yet to reach that point in the latter case is practically in such a different position in relation to the true function and aim of Courts of Justice, as to be placed legally in a different position also. The exception in favour of the indirect evidence ends where it fails to serve with advantage, and the line of demarcation is drawn at actual contract. This is in accord with the vast weight of authority, and finds support in text-books such as Best on Evidence (secs 92 and 93); Wigmore (secs 443 - 444), and Halsbury's Laws of England (vol xiii, par 625) (239 - 240).
18 In James Patrick & Co Pty Ltd v Minister of State for the Navy [1944] ALR 254, Nelungaloo Pty Ltd v The Commonwealth [1947] HCA 58; (1947) 75 CLR 495 and Gregory v Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547, Justices of the High Court sitting at first instance held that the reasoning in McDonald applied to the admissibility of evidence of an unaccepted offer relating to the subject property.
19 In James Patrick, Williams J said that, in the case of land, 'it is clearly established in Australia that the only admissible evidence of collateral facts affecting value is that of concluded contracts - McDonald' (257). His Honour then observed that 'possibly' the evidence of offers is admitted in England (258).
20 In Nelungaloo, 507, Williams J reiterated that, on the authority of McDonald, the only admissible evidence of collateral facts affecting the value of the land is that of concluded contracts. His Honour then proceeded to contrast the position in English law.
Authorities in this Court establish that in determining the value of land or shares evidence of a price offered for the property in question, in the course of negotiations which do not result in a concluded contract, is not admissible: McDonald v. Deputy Federal Commissioner of Land Tax (NSW) ((1915) [1915] HCA 54; 20 CLR 231); James Patrick and Co. Pty. Ltd. v. Minister of State for the Navy ((1944) 50 ALR 254; (1945) 51 ALR (CN) 501) (562).
His Honour decided that in the case before him evidence of an offer was admissible because it was followed by a concluded contract, and the fact that the offer was made threw some light on the extent to which the price finally agreed upon could be regarded as indicative of the real value of the shares in question (562 - 563).
22 It is true, as Spigelman CJ (Mason P & Hodgson JA agreeing) noted in MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 [94], that an intermediate court of appeal is not bound to follow a single judge of the High Court exercising original jurisdiction. See also Bone v Commissioner of Stamp Duties [1972] 2 NSWLR 651, 654 (Jacobs P), 664 (Hope JA); Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499, 504 (Gummow J). Their judgments must nevertheless be accorded the utmost respect.
23 In Goold, Wilcox J heard two compensation claims under the Lands Acquisition Act 1989 (Cth). The principal point in dispute concerned a valuation issue. His Honour rejected the contention advanced by counsel for the respondents that evidence of an offer to purchase or sell a parcel of land (as distinct from evidence of a concluded contract) is never admissible in connection with the assessment of its value.
24 Wilcox J examined the decision in McDonald. After setting out the reasoning of Isaacs J, he said:
[W]hatever the logical attraction of considering an offer for a comparable property, the necessity to consider not only its comparability (as with a concluded sale), but also the circumstances surrounding the offer, makes that course inexpedient. It is not difficult to see the force of that view. But, curiously in the light of the facts before the court, Isaacs J confined his discussion to the case of an offer relating to land other than that falling for valuation. He did not discuss the admissibility of an offer relating to the land to be valued; although, of course, his view that an offer to sell that land was inadmissible appears from the decision itself (58).
25 Wilcox J then cited the decision of Williams J in James Patrick and the decision of Gibbs J in Gregory. He noted that neither of them had adverted to the distinction between an unaccepted offer for the purchase of other land, where the court has to consider both comparability and genuineness, and an unaccepted offer for the subject land, where the court has to consider only genuineness (59). His Honour added:
Neither judge enunciated any reasons for his ruling that the evidence was inadmissible. In each case the judge simply treated McDonald as determinative (59).
26 Wilcox J referred to three Australian cases where evidence of an unaccepted offer to purchase the subject land had been held to be admissible, namely, Blefari v The Minister (1962) 8 LGRA 1; Hustlers Pty Ltd v The Valuer-General (1967) 14 LGRA 269; Phillipou v Housing Commission (Vic) (1969) 18 LGRA 254. Significantly, as his Honour observed, in none of these cases was the unaccepted offer treated as 'direct evidence' of value. In Blefari, 5, Else-Mitchell J said that, under some circumstances, an unaccepted offer may have probative value. In Hustlers, 277, Else-Mitchell J held that the unaccepted offers in question formed a basis for finding that later sales were not forced sales. In Phillipou, 259, Barber J held that an unaccepted offer could be relied on for the purpose of establishing the existence of a person who might be prepared to pay more than the ordinary market price for the subject land.
27 According to Wilcox J, it would be 'anomalous and unjust for the courts to adopt a blanket rule excluding offer evidence' (59). The adoption of a blanket rule might exclude 'cogent evidence of the interest of a particular purchaser in the land being valued, a person who was willing to pay more than ordinary market price' (59 - 60). His Honour added:
Of course, before placing reliance upon a mere offer, a court must consider carefully the question of its genuineness. The offer might be a sham, designed to prop up an inflated compensation claim or to reduce rates and taxes; in either case without any cost to the offerer. It might be an attempt to manipulate the market for some other ulterior purpose, perhaps a purpose extraneous to the litigation. If the offer was genuine when made, it might not have led to a concluded contract, even if resumption had not intervened. The offer might have been withdrawn. The purchaser might have failed to complete the transaction. Because of matters such as these, even a genuine offer cannot be regarded as direct evidence of value. But it seems to me that, once the court is satisfied about genuineness, an offer by an arm's length party to purchase the land under valuation is something that the judicial valuer ought to take into account in considering the possibility of a sale at a price different from that indicated by conventional evidence, such as an analysis of comparable sales, or of a hypothetical development, or a calculation of the capitalised value of the rental return. How much weight should be given to such an offer is a question to be determined by reference to the facts of the particular case. In some cases, the appropriate weight may be minimal; in others considerable (60).
28 Finally, in the course of his discussion of the admissibility of unaccepted offers, Wilcox J expressed the view that Isaacs J in McDonald was discussing the use of unaccepted offers as 'direct evidence' of value, and not the use of such evidence as an indication of the existence of a person willing to pay a higher price for the subject land than the market value (60). In short, Wilcox J considered that Isaacs J 'should not be understood to have intended to exclude all offer evidence in all cases' (60). (emphasis added)
29 In Henderson v Amadio Pty Ltd (No 1) [1995] FCA 1300; (1995) 62 FCR 1, 122, Heerey J expressed his agreement with Wilcox J's comments in Goold that it would be anomalous and unjust to adopt a blanket rule excluding offer evidence. Heerey J then made this point:
Although the present case is not concerned with the particular kind of issue as to which Wilcox J thought evidence of genuine offers might be relevant, his Honour shows that it is unsafe to assert in unqualified terms that a specified kind of evidence is per se inadmissible without careful analysis as to the purpose for which it is sought to be used in the instant case (122).
See also Adelaide Brighton Cement Ltd v The State of South Australia [2001] SASC 381 [6] (Debelle J).
30 In Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48, a Full Court of the Federal Court examined whether a trial judge had erred in his assessment of the value of a property in the context of a claim for damages in respect of loss suffered by reason of misleading or deceptive conduct in contravention of, relevantly, s 52 of the Trade Practices Act 1974 (Cth). The appellant contended that the trial judge had erred in his assessment of value by taking into account unaccepted offers to purchase that had been made for the property.
31 Black CJ, French and Tamberlin JJ, in joint reasons, examined the decision and reasoning in McDonald, and concluded:
It seems clear to us the decision of the High Court in McDonald, as applied by single justices of the High Court in James Patrick & Co Pty Ltd v Minister of State for the Navy [1944] Argus Law Reports 254 and Gregory v Commissioner of Taxation (Cth) [1971] HCA 2; (1971) 123 CLR 547, is determinative as to whether it is an error to take into account evidence of offers. Whatever weight may be properly given to evidence of offers for limited or general purposes, it is clear that such evidence is not permissible as direct evidence of value.
Insofar as the trial judge used the evidence in that way he was, we consider, in error in doing so. To the extent that such evidence may be admissible in a general way, as to which see Wilcox J in Goold v Commonwealth [1993] FCA 157; (1993) 42 FCR 51 at 60 ('Goold') and Heerey J in Henderson v Amadio (No 1) [1995] FCA 1300; (1995) 62 FCR 1 at 122, it provided an insufficient additional basis upon which a conclusion as to value might have been arrived at. Moreover, even if such evidence is used in a general way, it would only be used if it were accompanied by an assessment of relevant factors such as the genuineness of the offer and whether it was made at arm's length (see Goold at 60). In this case, his Honour's findings do not disclose a consideration of that nature and we must conclude that the evidence of offers was wrongly taken into account and did not provide support for the judge's conclusion.
Having now examined the various elements that his Honour did take into account, it follows from our discussion that his Honour's conclusions about value cannot stand. Whilst we appreciate that his Honour, having rejected the valuation evidence as he did, faced a difficult task we nevertheless must conclude that that general and practical approach his Honour adopted was erroneous in point of principle [128] - [130].
32 In Expectation Pty Ltd v PRD Realty Pty Ltd [2004] FCAFC 189; (2004) 140 FCR 17, a Full Court of the Federal Court (Carr, Emmett & Gyles JJ) said, in the course of determining an appeal against the dismissal of proceedings by the appellant for damages pursuant to, relevantly, s 82 of the Trade Practices Act:
A vendor's open offer to sell at a particular price might be of some relevance to market value in the same way that an actual unconditional open offer by a purchaser with the means to effect the purchase might have some relevance to market value. A vendor's offer might set the top limit and a prospective purchaser's offer the bottom limit. (The discussion of the authorities in the Full Court in Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48 at [121] - [129] exemplifies the difficulties inherent in evidence of this kind.) [90].
33 In recent years a line of authority has emerged in New South Wales as to the true principle enunciated in McDonald and exceptions to it. I will refer to the principal decisions of the Court of Appeal of New South Wales.
34 In Chen v Karandonis [2002] NSWCA 412, it was necessary for the trial judge, in assessing damages in a tort action, to estimate the value of a shareholding in Himway Holdings, a Hong Kong proprietary company. On appeal, one of the issues was whether the trial judge was entitled to take into account, in estimating the value of the shareholding, an offer by Chou, a defendant, to sell the shareholding in question. There was no other evidence as to value. Beazley JA (Heydon & Hodgson JJA agreeing) said:
Accordingly, to the extent that anything is known about Himway it amounts to this. Chou said he was proposing to sell his shareholding for $HK1.5 million. It is not clear from the context in which he made this statement whether he meant the shareholding in Himway or merely his shareholding. If he meant the latter, then presumably a sale price of all the shares would be in the order of $HK3 million.
The appellant submitted that there was no warrant to assume that Chou was only referring to his shareholding of Himway. The fact is, as I have explained, that is simply not clear. The respondent further submitted that an offer to sell or purchase shares is no evidence of value: McDonald v Deputy Federal Commissioner of Land Tax (NSW) [1915] HCA 54; (1915) 20 CLR 231 at 239 - 240. The point made in McDonald is quite different from the use sought to be made of Chou's evidence as to the proposed sale. McDonald was a land tax case and the question involved was what was the improved value of certain pastoral land for land tax purposes ...
Here the Court does not have available to it any evidence of value as might be derived from a sale of the shares. All that is available is the evidence of the proposed sale. The proposed sale is either for $HK1.5 million or $HK3 million. On the approach I have considered available, the Court may use that range of figures as some basis upon which to assess the loss [71] - [73]. (original emphasis)
35 In Stockl v Rigura Pty Ltd [2004] NSWCA 73; (2004) 12 BPR 23, 151, the Court of Appeal of New South Wales, in the context of an appeal against a trial judge's decision that a mortgagee had not breached its duty of good faith in exercising its power of sale, considered the trial judge's approach to valuation evidence as to the current market value of the property in question. The property had been offered for sale at an auction. There was only one bid, which was not accepted. On appeal, an issue arose as to whether the trial judge was entitled to take into account, as evidence of current market value, the unaccepted bid at the auction. Palmer J (Mason P & Ipp JA agreeing) said:
It used to be regarded as well established in resumption or taxation cases that offers to buy or sell, as distinct from concluded sales, could never be admissible as evidence of the value of property: McDonald v Deputy Federal Commissioner of Land Tax (NSW) [1915] HCA 54; (1915) 20 CLR 231, at 239 - 240; Marcus Clark & Co Ltd v Commissioner for Railways (1949) 29 VLR 98, at 107. That proposition has been modified somewhat so that a genuine offer to buy the particular land the subject of the dispute may now be taken into account in certain circumstances: see Goold & Rootsey v Commonwealth of Australia [1993] FCA 157; (1993) 42 FCR 51, at 56ff. But the purpose of determining market value in a resumption or taxation case is very different from the purpose in determining market value in cases where the exercise of a mortgagee's power of sale is challenged. In the latter type of case, the essential and ultimate question is not what is the market value of the mortgagor's land but, rather, whether the mortgagee, in exercising a power of sale, has acted with good faith. The test of good faith focuses primarily upon whether the mortgagee has seriously failed to take reasonable steps in all of the circumstances to obtain a proper price, and not upon what valuers may say the property should have sold for: see eg Pendlebury v Colonial Mutual Life Assurance Society Ltd [1912] HCA 9; (1912) 13 CLR 676, at 700; Australia & New Zealand Banking Group Ltd v Bangadilly Pastoral Co Pty Ltd [1978] HCA 21; (1978) 139 CLR 195, at 288 [sic]; Hawkesbury Valley Developments Pty Ltd v Custom Credit Corp Ltd (1994) 8 BPR 15,581 at 15,582 - 583.
In my opinion, where the answer to the question whether the mortgagee has properly conducted the sale process is debatable so that valuation evidence may assist, it would be unrealistic to exclude from consideration what offers were made for the property. If no offer was received, or only very low offers, the cause may lie in deficient advertising or marketing, as was the case in Pendlebury. On the other hand, if the court can see that the advertising and marketing campaign was in itself satisfactory but produced only low offers, or even no offer, then the court may deduce that the demand in the market for that property was weak and may view the sale price actually achieved in that light.
In the present case, the trial judge came to the conclusion that the sale process had been conducted satisfactorily. For reasons to which I will come in a moment, I do not think that that finding should be disturbed. Accordingly, in my view, the trial judge was entitled to have regard to the fact that there was no offer for the Property other than the unaccepted bid of Mrs Patten and that her bid was $640,000. Those circumstances were evidence going to the weakness of the then current market for the Property. Her Honour was entitled to have regard to the weakness of the market in determining whether the sale price achieved was, in itself, evidence of a breach of Adolfson's duty of good faith or whether it was a true reflection of the market value at the time of sale [37] -[39].
36 In MMAL Rentals, the Court of Appeal of New South Wales (Spigelman CJ, Mason P and Hodgson JA agreeing) considered how the 'fair market value' of shares in a proprietary limited company should be determined. The salient facts of the case were these. A proprietary limited company operated a car rental business. Shares in the company were owned as to 20% by Thrifty Inc of the United States and as to 80% by the appellant, MMAL Rentals. Shares in MMAL Rentals were held by the respondent as to 18.75% and by Mitsubishi Motors Australia Ltd as to 81.25%. Mitsubishi held an option to acquire the respondent's shares in MMAL Rentals for a 'fair market value' upon the termination of a management agreement between the operating company and the respondent. Mitsubishi exercised its option and a dispute arose as to the value of the shares. The trial judge rejected valuations made by expert witnesses called by each of the parties. Both parties appealed.
37 The appellants in MMAL criticised the use made by the trial judge of an offer by Mitsubishi in 1996 to purchase the respondent's shares in MMAL Rentals for $535,000. Spigelman CJ noted the trial judge identified the offer as a 'sign post' and had taken it into account [38]. His Honour quoted the trial judge:
Whilst an unaccepted offer is usually no evidence of value, the circumstance that the only likely buyer is prepared to pay $535,000 for the shares which have little assets backing rather than use them goes a long way to making one think that a value of $58,911 is sorely suspect [37].
38 Spigelman CJ referred to and expressed his agreement with the analysis of McDonald made by Wilcox J in Goold; in particular, with Wilcox J's rejection of the proposition that McDonald and subsequent cases authoritatively established the proposition that evidence of an offer is never admissible in a valuation case [86] - [87].
39 The Chief Justice added a further factor which, in his view, narrowed the scope of McDonald as a precedent. The valuation in McDonald was required for the purposes of land tax legislation which required a test of 'what a buyer would give'. This was not the exchange bargain test of market value identified in Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418. His Honour expressed the opinion that McDonald was not an authority on the admissibility of an offer to purchase in a case in which a market value must be determined [88] - [90].
40 Spigelman CJ noted that the reasoning in McDonald focuses upon the inadmissibility of an offer with respect to land other than the subject land, even though in McDonald itself the relevant offer was an offer in relation to the subject land [92]. His Honour then observed:
Even if the reasoning in McDonald is applicable to an offer of sale or purchase the particular property the subject of valuation, it remains a decision about the admissibility of evidence. It is unnecessary to set out the passage from the judgment of the Court delivered by Isaacs J in McDonald. It is sufficient to note that it focuses on the degree of inconvenience that may be associated with investigating the comparable nature of land the subject of the offer. That critical part of the reasoning would not apply to an offer with respect to the very land or property in issue. In such a case I would have thought that the relevance of the offer is sufficient to make it admissible, although its weight will depend on surrounding circumstances.
I do not regard McDonald as constituting authority for the proposition which it is said to contain. This Court is not bound by judgments of single judges of the High Court. In an appropriate case it would be open to this Court to reconsider the matter [93] - [94].
41 The Chief Justice said, at [95], that it was unnecessary, in the context of the appeal before the court, to 'qualify' the conclusion of the Full Court of the Federal Court in Cordelia Holdings that the line of authority commencing with McDonald should be accepted as establishing the proposition that 'such evidence is not permissible as direct evidence of value' [128].
42 According to Spigelman CJ, where a valuation must refer to the special potentiality of particular property for a specific purchaser, an offer by that purchaser to purchase that property is not only relevant, but highly probative [96] - [97]. Although expert evidence may prove that the offer is inadequate, unless there are special considerations the offer clearly establishes 'a floor' [97]. His Honour then applied these principles to the particular case before the court:
Where, as here, a particular purchaser has manifested its intention to acquire the particular property in a context where, on normal valuation principles based on maintainable earnings it may appear that the value is nil, the exclusion of the evidence of an offer by that purchaser would be 'absurd', to use the language of Cozens-Hardy MR in Inland Revenue Commissioners v Clay ([1914] 3 KB 466 at 472), and 'unjust' to use the language of Hope JA in Mordecai v Mordecai ((1988) 12 NSWLR 58 at 68) and 'anomalous and unjust' to use the language of Wilcox J in Goold quoted above.
A similar issue arose in this Court in Chen v Karandonis [2002] NSWCA 412 in which a party sought damages for the loss of interest in shares in a context in which there was no acceptable evidence of the value of the shareholding. There was, however, evidence that one of the appellants had offered to sell the shares at a particular price. Beazley JA, with whom Heydon and Hodgson JJA agreed, held (at [71] - [73]) that the evidence of the offer was admissible and distinguished McDonald in part on the basis that there was no other evidence of value and that the offer provided some basis on which to make the relevant assessment.
This analysis is equally applicable in the present case. The offer was not merely admissible, it was cogent evidence of, at least, a minimum value to the purchaser with a special interest and, accordingly, probative evidence of at least a minimum price for Mr Bruning's shareholdings. Indeed, as I have said, it is difficult to conceive, in the particular circumstances of the present case, what better evidence of the minimum value there could be [98] - [100].
43 Recently, in Baiyai Pty Ltd v Guy [2009] NSWCA 65, Handley AJA (Beazley & Giles JJA agreeing) held, in considering a claim in negligence against a solicitor where the value of a piece of land was relevant to the calculation of damages, that an informal agreement to purchase the land, which did not proceed, was evidence of its value. His Honour said:
The appellant was left with the subject property and the mortgage for $50,000. In August 1998, a Mr and Mrs Searle agreed informally to purchase the property for $165,000 and payment of some of the vendor's expenses. A contract was issued on these terms but the sale did not proceed. The offer was evidence of the value of the land: MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 CA, 181 - 5 [22].
Appeal: grounds 1 and 2: applicable legal principles
44 The reasoning and decision in McDonald concerned the admissibility in evidence of unaccepted offers to purchase in a land tax assessment appeal where the unimproved value of the appellant's land was the critical issue. As Gleeson CJ explained in HML v The Queen [2008] HCA 16; (2008) 235 CLR 334 [5] - [6], the basic principle governing the admissibility of evidence is this: evidence that is relevant is admissible unless there is some good reason for rejecting it. Evidence that is irrelevant is inadmissible. Evidence that is relevant may be rejected for reasons relating to its content, or to the form or circumstances in which it is tendered. Evidence will be relevant if it could rationally affect, directly or indirectly, the assessment of the probability of the existence of a fact in issue.
45 Several propositions in relation to proof of the value of land are discernible from my review of the authorities.
46 First, the general rule of admissibility is that an unaccepted offer to purchase land is not admissible as 'direct evidence' of its value.
47 Secondly, the general rule does not exclude evidence of an unaccepted offer in each and every case.
48 Thirdly, where evidence of an unaccepted offer to purchase land is sought to be tendered, the purpose for which the tender is made should be ascertained and analysed.
49 Fourthly, although an unaccepted offer to purchase land is not admissible as 'direct evidence' of its value, the evidence may be admissible, in a particular case, for limited or general purposes.
50 Fifthly, the limited or general purposes for which evidence of an unaccepted offer may be admissible include establishing:
(a) that later sales sought to be relied on in assessing the value of the land were not forced sales;
(b) the existence of a person who might be prepared to pay more than the ordinary market value of the land;
(c) the demand in the market for the land in the context of evaluating whether a mortgagee of the land breached its duty of good faith in exercising its power of sale;
(d) the special potentiality of the land for a specific purchaser where the offer has been made by that purchaser and in respect of that land.
Also, an unaccepted offer to purchase land may be admissible for the general purpose of providing some assistance in determining the lower limit of the market value of the land in the case of a purchaser's actual unconditional open offer to purchase at a specific price or for the limited purpose of checking the methodology adopted by an expert valuer in his or her evidence. The illustrations I have given are not, of course, intended to be exhaustive.
51 Sixthly, evidence of an unaccepted offer to purchase land should not, ordinarily, be accorded any weight unless the trial judge has found that the offer was genuine. Factors to be considered in evaluating the genuineness of an offer include, for example, whether the purchaser was willing and able to complete the purchase in accordance with the terms of the offer, whether the purchaser was at arm's length from the vendor, and why the offer was not accepted.
52 It is unnecessary, in this appeal, to consider whether any difference or tension exists between the decisions of the Full Court of the Federal Court on the one hand and the decisions of the Court of Appeal of New South Wales on the other.
53 At the trial, there were five witnesses, namely, Mr Terranova, Mrs Terranova, Mr Oud, Donald Victor Eftos and Mr Grasa. All of them, except Mr Oud, were called by counsel for Mr and Mrs Terranova.
54 Mr Oud was a real estate sales representative. He was not a licensed or qualified valuer.
55 Mr Eftos was a certified practising valuer. He gave evidence as to the value of Lot 51, Mossfield Retreat, Landsdale, being the block of land referred to in the offer dated 12 June 2002 from Fimmano. It is an extraordinary feature of the trial that Mr Eftos did not give any evidence as to the value of the Land. His failure to give this evidence was unexplained.
56 At material times, Mr Grasa acted for Mr and Mrs Terranova. He proved the terms of the oral offer of 26 February 2003 from Cityzone that were confirmed in the letter dated 27 February 2003.
57 Before the trial, Auxil and Mr Oud obtained default judgment against the third respondent (Mr Boyle). He was not called as a witness.
58 Cityzone was the second third party in the District Court action, having been joined by Auxil and Mr Oud. Fimmano was originally joined as the third third party in the action, but the claim against it by Auxil and Mr Oud was not pursued.
59 Cityzone did not adduce any evidence at the trial. No director or other officer of Cityzone or Fimmano was called as a witness.
60 As I have mentioned, the unaccepted offers from Fimmano and Cityzone to purchase the Land were tendered and received in evidence unconditionally, and without objection, as part of Mr and Mrs Terranova's case. See [10] above. A trial judge does not make an error of law in accepting the tender of inadmissible evidence to which no objection is made. See R v Soma [2003] HCA 13; (2003) 212 CLR 299 [79] (McHugh J).
61 In Jones v Sutherland Shire Council [1979] 2 NSWLR 206, Samuels JA said:
In my opinion, the general principle which emerges from the authorities (leaving aside the question of statements which are both admissions and self serving) is this. If evidence, admitted without objection, is legally admissible in proof of some issue in the case, its evidentiary use should be confined to that purpose. The testatrix's statements in Hughes' case ((1979) [1979] HCA 2; 53 ALJR 249) provide an example. If, on the other hand, evidence, admitted without objection, is not legally admissible in proof of any issue, it may, once in, be used 'as proof to the extent of whatever rational persuasive power it may have'. Suppose a hearsay document is tendered. It is not legally admissible to prove the truth of the assertions it contains, which are, however, relevant to an issue in the case. It might none the less be legally admissible as original evidence of the making of those assertions. But suppose further that there is in fact no issue to which, as original evidence, the document is relevant. No objection is taken to the tender, and the document is admitted. It is then evidence in proof of the issue to which it is relevant, the want of objection having waived the complaint, which would have been fatal, that, being hearsay, it was legally inadmissible (219).
62 This passage in Jones was explained and qualified by McLelland J in Ritz Hotel Ltd v Charles of the Ritz Ltd (1988) 15 NSWLR 158:
I think however that in this passage the words 'not legally admissible in proof of any issue' (like the expression 'incompetent' in the statement from McCormick - Law of Evidence (1954) par 54 quoted by Asprey JA in McLennan v Taylor (1966) 85 WN (Pt 1) (NSW) (1) 525, in a passage referred to by Samuels JA in Jones (at 216)), must be interpreted in a limited way. For example, if one party were to tender a copy letter from himself to the other party, which was admitted without objection it might be said that without production, or proof of unavailability, of the original, and proof of execution and receipt, the copy letter was literally 'not legally admissible in proof of any issue' or 'incompetent', yet it would ordinarily be wrong for the court by virtue only of the circumstance that the copy letter was tendered and admitted without objection, to use that letter 'as proof to the extent of whatever rational persuasive power it may have' inconsistently with the hearsay rule, that is, as evidence of the truth of an assertion in it. This is because it would not ordinarily be reasonable to infer from the tender of, and absence of objection to, such a copy letter that the parties were waiving the application of the hearsay rule in relation to it, or (to put it another way) that the letter was being tendered otherwise than as original evidence. The absence of objection in such a case could be sensibly understood as a waiver only of a failure to produce or account for the original, and of formal proof of execution and receipt of the letter. Likewise, if a document when tendered is described by the tendering party in a particular way and then admitted without objection, the absence of objection would normally be understood as a waiver only of the necessity for proof that the document is as described (170 - 171).
See also the discussion in Cross On Evidence (7th Aust ed) [1665].
63 In the present case, the unaccepted offers from Fimmano and Cityzone were not only admitted without objection, but also without any explanation for the tender and the absence of objection. It may be inferred that any evidentiary objection was waived. The offers were therefore available as proof to the extent of whatever rational persuasive power they may have had.
64 The learned trial judge did not analyse or make any findings as to the genuineness of the offers. As I have mentioned, he merely concluded that they were contemporaneous with relevant events, concerned the Land and not 'other land', were made by third parties to the proceedings, and were made to Mr and Mrs Terranova [92]. Nevertheless, it may be inferred from the evidence that the offer from Cityzone was genuine in that the offer was made on 26 February 2003 for the purpose of settling a dispute which had arisen between Mr and Mrs Terranova and Cityzone in relation to the contract dated 27 August 2002, the terms of the contract bore some similarity to the terms of the offer, and the contract was settled on 4 March 2003. However, there is no basis in the evidence for any finding of genuineness in relation to the offer from Fimmano.
65 I agree with Newnes JA, for the reasons he gives, that no weight should have been attached to the offers of 12 June 2002 and 26 February 2003, either individually or together, in determining whether the market value of the Land at the material time exceeded the contract price. Also, I agree with his Honour, for the reasons he gives, that no weight should have been attached to the evidence of Mr Oud's belief as to the amount for which the Land could have been sold. Further, I agree with him that, on the evidence, it was not open to the learned trial judge to find that the market value of the Land at the material time exceeded the contract price.
66 Grounds 1 and 2 of the appeal have been made out.
67 I agree with Newnes JA, for the reasons he gives, that ground 3 of the appeal has been made out.
68 I agree with the observations of Newnes JA in relation to ground 4 of the appeal.
69 I agree with Newnes JA, for the reasons he gives, that grounds 5, 6 and 7 of the appeal are without merit.
70 The appeal by Auxil and Mr Oud against the judgment entered for Mr and Mrs Terranova should be allowed, the judgment set aside and the claim by Mr and Mrs Terranova dismissed.
71 The appeal by Auxil and Mr Oud against the learned trial judge's order dismissing their claims against Cityzone and Mr Boyle should be dismissed.
72 MILLER JA: I agree with the orders proposed by Newnes JA. I agree also with the reasons of Buss JA in relation to grounds 1 and 2 of the grounds of appeal and with the reasons of Newnes JA in relation to the remaining grounds of appeal.
73 NEWNES JA: This is an appeal against a judgment of Goetze DCJ in the District Court, in which the first respondents were awarded damages under s 82 of the Trade Practices Act 1974 (Cth) (the Act) against the appellants for misleading or deceptive conduct contrary to s 52 of the Act. The appellants' claim against the second and third respondents for contribution or indemnity was dismissed.
74 The first respondents (the Terranovas) were the owners of a property (the Land) comprising approximately 8 acres in the suburb of Landsdale. The Terranovas had purchased the Land in about 1992. The Terranovas are approximately 60 years of age and, although they have been in Australia for approximately 40 years, both have limited ability to read and speak English.
75 In 2001, the Terranovas decided to sell the Land. They wanted an amount of $1.7 million for it. On 4 November 2001, the Terranovas instructed the second appellant (Mr Oud), a licensed real estate sales
representative employed by the first appellant (Auxil), a real estate agent in Kalamunda, to sell it. Mr Oud had been a licensed real estate representative since 1975 and, although he worked from offices in Kalamunda, he considered that he had sufficient experience to sell the Land.
76 It was not in issue at the trial that any purchaser of the Land would subdivide it into residential lots for resale as urban development was, by that stage, reaching Landsdale.
77 Mr Oud erected a 'For Sale' sign on the Land and caused a number of newspaper advertisements to be published. The Land was advertised for sale at the sum of $1.7 million sought by the Terranovas. Mr Oud gave evidence that initially he received 'numerous enquiries' about the Land (although in re-examination he said that that comprised some six to eight enquiries), but it was not until February 2002 that Mr Oud received the first offer to purchase it.
78 The February 2002 offer was expressed to be made by Fimmano Consultancy Services Ltd (Fimmano) or its nominee, and was in the sum of $800,000. The offer was provided to Mr Oud by the third respondent (Mr Boyle). Mr Boyle's precise role does not clearly emerge from the evidence but it appears that he was a real estate sales representative or agent acting in some capacity on behalf of Fimmano.
79 The Terranovas rejected the offer and made a counter-offer in the sum of $1.42 million. That led Fimmano to make a further counter-offer in the sum of $1.05 million. The Terranovas in turn made a further counter-offer in the sum of $1.4 million. That was not accepted by Fimmano and there, for a period of time, the matter rested.
80 Some two months later, on 30 April 2002, Mr Boyle gave Mr Oud an offer by Fimmano or its nominee to purchase the Land for the sum of $1.125 million. Mr Oud presented the offer to the Terranovas. Approximately two weeks later, the Terranovas instructed Mr Oud that they would make a counter-offer in the sum of $1.3 million. Mr Oud wrote this figure on the offer but was then instructed by the Terranovas to cross it out and substitute as the consideration the sum of $1.275 million and the provision to the Terranovas of a block of land of 1200 sq m after Fimmano had completed a subdivision of the Land. The latter proposal was suggested by Mr Oud as a means to 'rekindle the negotiations'.
81 It appears that the counter-offer was conveyed to Fimmano on or about 16 May 2002 but was not accepted by Fimmano.
82 There the matter rested until a further offer, dated 12 June 2002, was made by Fimmano or its nominee. Fimmano offered to purchase the Land for the sum of $1.275 million and (following sub-division) the provision to the Terranovas of a block of land of approximately 800 sq m on the eastern boundary at the top end of the subdivision. Clause 8 of the offer provided that the offer was subject to 'due diligence' and that settlement was to be no later than 1 November 2002.
83 The Terranovas were satisfied with the consideration but not with the proposed settlement date. They made a counter-offer on the same terms, save that settlement was to be within 90 days from 16 May 2002. The counter-offer was not accepted by Fimmano.
84 There, again, the matter rested, until, on or about 26 August 2002, a further offer was made in the name of Fimmano or its nominee. On this occasion, the nominee was stated to be the second respondent (Cityzone). Once again the offer was conveyed to Mr Oud by Mr Boyle. Fimmano offered to purchase the Land for the sum of $1.275 million with settlement to occur on or before 1 April 2003. The offer did not include provision for a block of land to be provided to the Terranovas after sub-division.
85 Mr Oud presented the offer to the Terranovas, who rejected it. They informed Mr Oud that because of the extended date for settlement in the offer they did not want to make a counter-offer.
86 Mr Oud informed Mr Boyle that the offer was not accepted. He told Mr Boyle that the settlement date was 'too far away'. He did not refer to the absence in the offer of the provision of a block of land to the Terranovas after sub-division.
87 The following day, 27 August 2002, Mr Boyle provided another offer to Mr Oud. On this occasion Cityzone was the offeror. Cityzone offered to purchase the land for the sum of $1.275 million, with settlement on or before 20 November 2002. The offer again did not provide for a block of land to be provided to the Terranovas after subdivision. When Mr Boyle handed the offer to Mr Oud, he also gave Mr Oud a plan of a proposed subdivision which showed a lot numbered 36 comprising 853 sq m. Mr Oud gave evidence that Mr Boyle said to him words to the effect 'they [being the Terranovas] must be happy they are getting 853 sq m'. Mr Oud understood that to mean that the Terranovas would be provided with a block after subdivision.
88 Mr Oud said he read the offer and saw that the offeror was Cityzone, which he understood from Mr Boyle to have some connection to Fimmano. Mr Oud said he focused on the amount of $1.275 million in the offer and did not check the conditions of the offer to verify that the consideration included the sub-divided block.
89 Mr Oud subsequently presented the offer to the Terranovas together with the plan of the proposed subdivision. He told the Terranovas that the offer met their terms and recommended they accept it. The Terranovas then signed the offer by way of acceptance and it was returned to Cityzone. The deposit of $20,000 was subsequently paid by Cityzone.
90 On 1 October 2002, Mr Boyle sent to Mr Oud an application for rezoning which required the signature of the Terranovas as registered proprietors of the Land. It was only then that Mr Oud read the terms of the contract of sale and realised that it did not contain a term that Cityzone was to transfer a block of land to the Terranovas after the proposed subdivision.
91 There were subsequently attempts by the Terranovas to vary the terms of the contract to include provision for a block from the subdivision. In the course of negotiations, on 26 February 2003, Cityzone made an oral offer to settle the dispute by postponing settlement to December 2003, paying the Terranovas $200,000 in advance of settlement, and paying for the Land the sum of $1.275 million and providing a block with an area of 853 sq m. The oral offer was confirmed in a letter from the Terranovas' solicitors of 27 February 2003. That offer was not acceptable to the Terranovas. Ultimately the negotiations proved fruitless and, on 4 March 2003, the contract was settled on its terms.
92 The Terranovas then brought proceedings for damages against Auxil and Mr Oud, alleging that they had engaged in misleading or deceptive conduct, contrary to s 52 of the Act, and/or were negligent in misrepresenting the consideration in the offer made by Cityzone.
93 Auxil and Mr Oud in turn brought third party proceedings against Mr Boyle and Cityzone, alleging, among other things, that Mr Boyle, as the agent of Cityzone, had engaged in misleading or deceptive conduct or was negligent in representing to Mr Oud that the offer by Cityzone included provision of a block of land to the Terranovas.
94 The Terranovas claimed to have lost the opportunity to sell the Land for $1.4 million or more, or for a combination of $1.275 million or more plus a block from the Land after sub-division. They sought the difference between one or other of those amounts and the contract sum of $1.275 million.
95 The action went to trial in December 2007 and judgment was delivered on 22 February 2008. In the meantime, on 4 November 2003, in the contribution proceedings default judgment had been entered against Mr Boyle in his personal capacity, for damages to be assessed. Mr Boyle took no part in the trial or in this appeal.
96 At the trial, the liability of Mr Oud and Auxil to the Terranovas was conceded. In any event, the trial judge made a finding ([62]) that Mr Oud was negligent in failing to read the offer from Cityzone and in advising the Terranovas that the offer met the terms they required. He also found that by so advising the Terranovas, Mr Oud had engaged in conduct that was misleading and deceptive. It was not in issue at the trial (or on this appeal) that the relevant representation was made in trade or commerce. His Honour went on to find that Auxil was vicariously liable for the conduct of Mr Oud. His Honour said that he would assess damages under the Act.
97 I would simply note in passing that, so far as liability under the Act is concerned, his Honour's finding, with respect, misstates the position under the Act. Based on the findings of fact that he made, the trial judge should have found that Auxil (by Mr Oud) engaged in conduct that was misleading and deceptive contrary to s 52 of the Act. His Honour must also be taken to have found that Mr Oud was personally liable under s 75B of the Act. However, in this respect his Honour's findings were not in issue on the appeal and for the purposes of the appeal nothing turns on them.
98 The trial judge found as a fact that, but for the conduct of Mr Oud in informing the Terranovas that the offer from Cityzone included a block of land as part of the consideration, they would not have accepted the offer. His Honour held ([86]) that the Terranovas were entitled to be placed in the position they would have been in had the contravening conduct not occurred. He found that the Terranovas had lost the opportunity to sell the Land for $1.4 million or more, or for $1.275 million or more plus a block of land after the subdivision. His Honour said:
On the evidence, there is a high degree of probability that [the Terranovas] would, in due course, have found a purchaser willing to meet their requirements for the sale of their property, such that there does not seem to be any valid reason to adjust an award of damages to reflect the degree of probability ...
... [the Terranovas] have therefore really lost the value of the lot which was to be transferred to them upon completion of the sub-division [86] - [87].
99 In concluding that the Terranovas would have found a purchaser to acquire the Land on the terms they required, his Honour relied upon a number of factors. His Honour had regard to Mr Oud's evidence that he had more than 25 years experience as a real estate representative and he thought he could sell the Land for a figure approaching $1.7 million; to Mr Oud's assessment of the Land as being 'prime' and 'hot' for subdivision; and to Mr Oud's evidence that he had 'numerous enquiries' about it, albeit the only offers received were from Fimmano and Cityzone. His Honour also had regard to the fact that it was Mr Oud's suggestion the Terranovas counter-offer in the sum of $1.275 million and a block from the subdivision, which Mr Oud thought might 'rekindle' the negotiations_._
100 His Honour also relied upon the offer made by Fimmano on 12 June 2002 and the offer made by Cityzone on 26 February 2003, in determining that the Terranovas would readily have been able to sell the Land for the amount they wanted. The first offer appears to have been admitted into evidence in connection with the narrative of events (ts 106, 162) and the second offer was tendered, in the course of the evidence of the former solicitor for the Terranovas, as part of the correspondence between the solicitors for the parties (ts 267), albeit in neither case was the document expressed to be tendered or admitted on a particular basis.
101 The trial judge rejected a contention on behalf of Auxil and Mr Oud that no reliance could be placed on those offers in determining the value of the Land. His Honour concluded that evidence of an arm's length offer to purchase the land was admissible as to the value of the Land, if the court was satisfied that the offer was genuine.
102 The trial judge found that the block which the Terranovas would have obtained from the proposed subdivision would have had a value of $123,000. That was based on the evidence of a valuer, Mr Eftos, called by the Terranovas, and on evidence of the sale of a lot from the subdivision carried out by Cityzone. I should mention that Mr Eftos did not give any evidence as to the value of the Land.
103 The trial judge concluded that the appropriate measure of the Terranovas' damage was the difference between the contract price and the sum of $1.4 million, alternatively the loss of the opportunity to sell the Land for $1.275 million and a block of land after subdivision. Having regard to the value of $123,000 which the trial judge attributed to the subdivided block, there is no significant difference between the monetary values resulting from the two methods by which his Honour found damages could be assessed.
104 His Honour concluded that the loss or damage should be determined as at the date of settlement, when the Terranovas transferred the Land to Cityzone. That was not in issue on the appeal.
105 The trial judge found that the Terranovas were entitled to judgment in the sum of $101,000 plus interest. The sum of $101,000 was calculated as the value of a block from the subdivision of the Land, an amount of $123,000, less the real estate agent's commission on the sale of the Land (Auxil having received no commission on the sale to Cityzone).
106 The trial judge dismissed the third party proceedings by Auxil and Mr Oud against Cityzone. His Honour concluded that Mr Boyle had represented to Mr Oud that Cityzone was prepared to purchase the Terranovas' property for the sum of $1.275 million and to transfer a block to them upon the subdivision of the land, and that that representation was misleading and deceptive. Again, it was not in issue that the representation had been made in trade or commerce. His Honour found, however, that in misrepresenting to Mr Oud the offer made by Cityzone, Mr Boyle was not acting as the agent for Cityzone. His Honour concluded that the fact that Cityzone had authorised Mr Boyle to present the offer to Mr Oud did not, without more, permit an inference to be drawn that Mr Boyle had any authority, real or apparent, from Cityzone to discuss the terms or effect of the offer with Mr Oud.
107 His Honour also found that Mr Boyle's misrepresentation was not a cause of the damage suffered by Auxil and Mr Oud, but rather that it was Mr Oud's reckless conduct in not reading the Cityzone offer that was the sole cause of that damage. His Honour also found ([98]) in respect of a claim by Auxil and Mr Oud under the Law Reform (Contributory Negligence and Tortfeasors') Contribution Act 1947 (WA) (the Tortfeasors' Contribution Act) that no relevant duty of care was owed by Mr Boyle or Cityzone.
108 The trial judge was required to assess damages pursuant to the default judgment that Auxil and Mr Oud had obtained against Mr Boyle. His Honour observed ([99]) that the claim against Mr Boyle was in negligence and under s 52 of the Act. As I have said, his Honour found ([98]) that no duty of care was owed by Mr Boyle. He also noted that if Mr Boyle was not the agent of Cityzone, the Act had no application to him and there was no alternative claim against Mr Boyle under the Fair Trading Act 1987 (WA). His Honour concluded ([148]), apparently for those reasons and in light of his finding that Mr Boyle's conduct was not the cause of the Terranovas' loss, that no damages were to be assessed against Mr Boyle.
109 The appellant relied on the following grounds of appeal:
2.1 evidence of offers to buy the vacant land;
2.2 that [Mr Oud] 'thought' that he could sell the property for a price 'approaching $1,700,000'.
110 In relation to the first three grounds of appeal, it was submitted on behalf of the appellants that there was no evidence upon which the trial judge could conclude that the Land was of a greater value than $1.275 million. No evidence was given at trial by a valuer as to its value. Mr Oud did not value it and he was not qualified to do so. Nor did Mr Oud carry out any appraisal of the Land and his statement that he thought he could sell it for a price 'approaching $1,700,000' was irrelevant on the question of value.
111 It was further submitted that the trial judge erred in using evidence of previous offers for the Land as evidence of its value. Counsel argued that it is established law that evidence of an offer to buy or sell land is inadmissible as proof of value, although it may be admissible for other purposes. Reference was made to McDonald v Deputy Federal Commissioner of Land Tax (NSW) [1915] HCA 54; (1915) 20 CLR 231, 239 - 240, and Gregory v Federal Commissioner of Taxation [1971] HCA 2; (1971) 123 CLR 547.
112 Accordingly, there was no admissible evidence at trial as to the value of the Land.
113 Counsel further argued that, having correctly found that the rule for determining loss required a comparison between the position the Terranovas were in and the position that they would have been in had there been no contravening conduct, the trial judge erred in finding that the Terranovas ought to be compensated on the basis that they had lost the opportunity to sell the Land for $1.4 million or more, or for $1.275 million plus a block after subdivision.
114 It was submitted that the 'loss of opportunity' approach was erroneous. In order to recover on that basis it was necessary for the Terranovas to establish that they had lost property or a right of value. In order for a 'lost opportunity' to be relevant, it would have been necessary for the Terranovas to establish that they could, and would, have entered into a contract to sell the Land for $1.275 million plus a subdivided block. If that had been established, the value of the contract would then have to be reduced according to the degree of likelihood the sale would not have been completed by reason of non-fulfilment of contract conditions.
115 There was no admissible evidence at trial to support a finding that the Terranovas would (as opposed to might) have sold the Land for such an amount. Further, if such a finding was open, then the value of the loss had to be discounted for the chance that the contract would not have been completed and reduced for the prospect of delay in settlement. There was no basis for the finding of the trial judge that by March 2003 the Terranovas would have sold the Land for $1.275 million and a block of land worth $123,000.
116 It was argued that the trial judge should have found that the measure of damages was the difference between the value of the Land and the sum that the Terranovas received for it. There being no evidence as to the value of the Land, the claim should have been dismissed.
117 In relation to ground 4, it was submitted that his Honour erred by considering, not whether Mr Boyle's misrepresentation materially contributed to the acceptance of the contract by the Terranovas, but rather whether the misrepresentation was 'a real inducement to Mr Oud misleading and deceiving [the Terranovas]'. The question was whether Mr Boyle's conduct was a cause of any loss suffered by the Terranovas. It was sufficient that the misrepresentation played some, even if a minor, part in a course of action taken by the deceived party. As a matter of fact and common sense, the conduct of Mr Boyle contributed to the error made by Mr Oud and accordingly contributed to the Terranovas being misled.
118 On grounds 5 to 7, it was submitted that the trial judge erred in finding that Mr Boyle was not the agent of Cityzone. Counsel argued that where an agent is appointed to do something there is implied authority to do all acts which may be necessary to do that thing. In the present case, Mr Boyle had authority to present Cityzone's offer. Mr Boyle was employed or engaged by Cityzone. He was the only person who was in a position to state for Cityzone what its offer was when it was presented; he was not a mere courier delivering or presenting documents. His implied and apparent authority necessarily extended to stating what the offer was.
119 It was submitted on behalf of the Terranovas that in determining the value of the Land the trial judge was entitled to have regard to the evidence of Mr Oud, given Mr Oud's experience and his expertise in relation to land in the Landsdale area. While Mr Oud did not carry out a formal appraisal, he had the skill and the experience to assess the prospects of selling the Land at a given price. It was further submitted that the trial judge had correctly rejected the contention of Auxil and Mr Oud that evidence of an offer to buy land is inadmissible as proof of value. The learned trial judge had correctly concluded that evidence of the offers made for the Land were admissible for that purpose.
120 Counsel argued that the trial judge was entitled to find that the Land was worth $1.4 million given the evidence of Mr Oud that he believed he could sell it for a price approaching $1.7 million, the offers that had been made for it, the numerous enquiries directed to Mr Oud when the Land came on the market, and the desirability of the Land for development purposes.
121 It was submitted that the trial judge correctly assessed the value of the lost opportunity of the Terranovas to sell the Land on terms acceptable to them and it was not incumbent on the Terranovas to establish that it is certain they would have sold it on such terms. Loss of a chance was compensable even if its realisation is unlikely on the balance of probabilities.
122 It was submitted on behalf of Cityzone that there was no evidence Mr Boyle was acting as the agent of Cityzone in representing the terms of the offer made by Cityzone. The only evidence as to the authority of Mr Boyle was the admission by Cityzone in the pleadings that Mr Boyle was authorised to present the offer on its behalf. Such authority did not give Mr Boyle actual or apparent authority to describe orally the terms of a written offer and to do so was superfluous to the task that Mr Boyle was to carry out.
123 It was further submitted that, in any event, Mr Boyle's conduct was not a cause of any relevant loss. Mr Oud's conduct was properly characterised as so unreasonable as to have severed the chain of causation between the misrepresentation made to him by Mr Boyle and the consequences of his own misrepresentation to the Terranovas. Mr Oud's conduct was completely outside the bounds of a real estate agent acting for vendors and was not caused by Mr Boyle's conduct. Alternatively, the causal significance of Mr Boyle's action was negligible when compared with the failure by Mr Oud to read the terms of the offer made to his clients before informing the clients of the terms of that offer. Auxil and Mr Oud were not, therefore, entitled to contribution.
124 The first three grounds of appeal can conveniently be dealt with together, as they were in argument on the appeal. The substance of the first two grounds is that, in assessing the value of the Land at the time of sale, the trial judge erred in relying upon evidence as to offers to buy the Land and as to Mr Oud's belief as to the amount for which it could be sold. The appellants say that once that evidence is excluded there is no admissible evidence that the value of the Land exceeded the contract sum of $1.275 million. The third ground of appeal is that the trial judge erred in approaching the Terranovas' claim as a loss of opportunity claim.
125 It is convenient to start with the third ground of appeal, which can be dealt with quite shortly. The claim was not a loss of opportunity claim, as that concept is generally understood, but simply a claim for the difference between the market value of the Land and the contract price. In a loss of opportunity case, the claimant has by reason of the wrongful conduct of the other party sustained loss or damage in the form of the loss of a commercial opportunity which had some value (not being a negligible value), the value being ascertained by reference to the degree of probabilities or possibilities of the opportunity being fulfilled: see Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332, 355.
126 The Terranovas, however, claimed, in effect, that by reason of the misleading conduct of Auxil and Mr Oud they had sold the Land for less than the amount for which they would otherwise have been able to sell it; that is, for less than its market value. They do not suggest that but for the misleading conduct they would have taken up some other opportunity which was available to them, for example, their own development of the land or some other alternative use of it. Nor, I should add, was there any evidence to suggest that they would have been able to sell it for more than its market value.
127 The Terranovas therefore sought the difference between the contract price and what they alleged was the amount for which they would have been able to sell the land, assessed either as the sum of $1.4 million or, alternatively, the sum $1.275 million and a block from a future subdivision as contained in the offer from Fimmano of 12 June 2002. On the findings of the trial judge there was, as might be expected, no significant monetary difference between the two methods of assessing the loss.
128 While I consider that the trial judge erred in approaching the claim as one of a loss of opportunity, for practical purposes I do not think anything turns on it.
129 Turning to the first two grounds of appeal, there is a long line of authority to the effect that evidence of offers to purchase land is not admissible as direct evidence of the value of the land.
130 In Harris v Municipal Council of Sydney (1910) 10 SR (NSW) 860, the Full Court of the Supreme Court of New South Wales held that evidence of an offer to buy a property in the vicinity of the property in question was not admissible as evidence of the value of the latter property. The court, however, did not have to consider whether evidence of an offer to buy the land in question was admissible as evidence of its value.
131 In McDonald, the trial judge was required to assess the value of certain pastoral land for the purposes of the Land Tax Assessment Act 1910-1911 (Cth). Under the Act, what had to be determined was the price which a willing buyer would give for the land supposing the seller announced reasonable conditions. The trial judge rejected evidence of two offers for the land. The first offer was evidenced by a letter from the agent of the owner offering to sell the land to a specific person for a nominated price. The offer was not accepted. The High Court held that the offer was not evidence, as required by the Act, of the price a buyer would give under reasonable conditions. It was at best evidence of the owner's belief as to the value of the land. The second was a verbal agreement by a person to purchase the land from the owner at a specific price. The person subsequently withdrew before the contract was reduced to writing and no binding contract came into existence.
132 In considering whether evidence of the offers was admissible on the issue of value, Isaacs J, speaking for the court, referred to the decision in Harris, observing that in that case the court had given no reasons beyond the weight of authority, mostly American. Isaacs J continued:
We have to search for principles. On what principle is the act or opinion of a third person, manifested on some former occasion, respecting the value of other land, not on oath, not in presence of the parties, the opinion not capable of being tested by cross-examination, admissible at all to affect adversely one of the parties to the litigation?
The answer is found in the principle that the rules of evidence followed by the Courts have been adopted for the better furtherance of justice, and are moulded so as to attain that object in the best possible manner.
It sometimes happens that facts unconnected with the facts directly in issue are valuable aids as indicating, though indirectly, the truth as to the central facts to be ascertained. To exclude them utterly and absolutely would defeat justice. And yet, there is not between them and the central facts the visible connection which would make them direct evidence. The law makes exceptions, where justice is best served by doing so. And, where the value of a given piece of land is in issue, it is the constant practice to admit evidence of actual sales of similar land where they may be regarded as throwing light on the value of the subject land. As to whether any particular sale can be so regarded must, in the first instance, be determined by the primary tribunal, and this is subject to review.
In the Metropolitan Asylum District v Hill, 47 LT 29 at p 35, Lord Watson says -
'In order to entitle him to give such evidence, he must, in the first instance, satisfy the Court that the collateral fact which he proposes to prove will, when established, be capable of affording a reasonable presumption or inference as to the matter in dispute.'
But if it is so regarded, then by a process of comparison, and elimination, the common factor may be elicited, and a means afforded for arriving at a just conclusion.
It is true that from a logical standpoint, a bona fide offer of £1000 is just as good evidence the moment before acceptance as the moment after. Why, then, should one be received, and the other rejected? The answer is found in the same principle, namely, the better service to justice on the whole.
When the matter has reached the point of a concluded contract, there has been a definite concrete fact established, which not only evidences value, but to some extent helps to create or modify it. Where an owner has actually parted with his land for a fixed sum and a buyer has parted with his money for the land, a clear event has arisen, which, based on the ordinary instincts and impulses of human nature, indicates a consensus of opinion between two adverse parties in the community respecting the value of similar lands. Some advantage to justice is therefore manifestly possible from considering it, and the law presumes that up to that point the disadvantages of having to undertake the collateral inquiries as to comparison do not outweigh the possible advantages.
But if the negotiations do not end in a concluded bargain, the field is at once open to a multitude of other considerations before the same point of opinion is reached. Excursions into the realm of collateral circumstances would be endless. They would so add to the cost, delay and uncertainty of litigation as on the whole to render a great disservice to the cause of justice. The Court might have to inquire whether the owner or the other party really terminated the negotiations, and, if so, for what reason. Had either of the parties discovered the true worth of the property or been misinformed by some means as to its real value? Did the owner mistrust the ability of the purchaser, or did the latter find an adverse claimant to the property, or did his circumstances change, or was there a personal quarrel? Or did he learn of a still better bargain? Or, again, was the offer a sham on either side, or both sides? Such inquiries would render litigation intolerable, and defeat the purpose for which they were permitted.
Consequently, though the logical relevance may be the same when once the fact of a real firm offer is reached, whether it be accepted or not, yet to reach that point in the latter case is practically in such a different position in relation to the true function and aim of Courts of Justice, as to be placed legally in a different position also. The exception in favour of the indirect evidence ends where it fails to serve with advantage, and the line of demarcation is drawn at actual contract. This is in accord with the vast weight of authority, and finds support in text-books such as Best on Evidence (secs 92 and 93); Wigmore (secs 443-444); and Halsbury's Laws of England (vol XIII, par 625) (238-240).
133 It is apparent that although in McDonald the offers were to purchase the land itself, the above discussion was framed in terms of an offer to purchase comparable land. However, as the court concluded on the basis of that discussion that evidence of the offers to purchase the land itself were inadmissible, it is, in my view, clear that the case is authority for the proposition that evidence of offers to purchase the land in question are not admissible as evidence of the value of the land.
134 In James Patrick & Co Pty Ltd v The Minister of State for the Navy [1944] ALR 254, Williams J held that evidence of offers to purchase a ship was not admissible in the assessment of the value of the ship. His Honour referred to McDonald as authority that the only admissible evidence of collateral facts affecting value is that of concluded contracts (257).
135 In Gregory, the question was whether evidence of an offer made by a person to sell their shares in a company for a specific price was admissible on the question of the value of the company's shares. Gibbs J said:
Authorities in this Court establish that in determining the value of land or shares evidence of a price offered for the property in question, in the course of negotiations which do not result in a concluded contract, is not admissible: McDonald v Deputy Federal Commissioner of Land Tax (NSW) [1915] HCA 54; (1915) 20 CLR 231; James Patrick and Co Pty Ltd v Minister of State for the Navy (1944) 50 ALR 254; (1945) 51 ALR (CN) 501 (562).
136 Gibbs J held, however, that in that case the evidence was admissible because it had been followed by a concluded contract and the fact that a contract was made threw some light on the extent to which the price arrived at might be regarded as an indication of the real value of the shares.
137 The decisions in McDonald and Gregory have been followed in a number of cases.
138 The Full Court of the Family Court in In Marriage of Smith (1991) 102 FLR 359, having referred to the above decisions, concluded that it was established law in Australia that evidence of offers to purchase or sell property are not admissible on the issue of the value of the property.
139 In Public Trustee v Brock [1922] SASR 51, evidence of an offer to purchase certain land was held to be inadmissible as to the value of the land. The same conclusion was reached in Valentini v City of Salisbury [1997] SASC 6275; (1997) 69 SASR 332. In Electricity Trust of South Australia v O'Leary (1986) 42 SASR 26, the Full Court of the Supreme Court of South Australia held that evidence of an offer to purchase a race horse was inadmissible as to the value of the horse. In Plenty v Pattinson [2001] SASC 42; [2002] ANZ ConvR 171, Duggan J found, referring to McDonald, that an option to purchase was not admissible on the issue of the value of the land.
140 In Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370, 378, Ipp J (with whom Malcolm CJ agreed) held that evidence of offers to purchase certain mining tenements (which had been referred to in a valuation report on the tenements) was inadmissible, referring to Gregory.
141 In Ting v Blanche [1993] FCA 524; (1993) 118 ALR 543, a case involving a question as to the fair market rental value of a property, Hill J referred to Gregory as authority for the proposition that 'evidence of an offer is not evidence of value for the simple reason that offers may be made in all sorts of circumstances but not come to fruition' (553). In Marcolongo v Mattiussi [2000] NSWSC 834, Young J regarded it as clear that an offer that had not yet blossomed into a contract was not admissible as evidence of value (referring to McDonald), although his Honour concluded that accepted offers which had reached the stage of exchange of contracts may be taken into account.
142 There is, however, authority that evidence of an offer to buy land may be admissible for purposes other than as direct evidence of the value of the land.
143 Thus in Hustlers Pty Ltd v The Valuer-General (1967) 14 LGRA 269, 277, Else-Mitchell J admitted evidence of offers to sell land on the issue of whether the sale was a forced sale. In Phillipou v Housing Commission (Vic) (1969) 18 LGRA 254, evidence of an offer to buy the land was admitted as relevant to whether there was a purchaser who was prepared to pay more than the market price.
144 In Goold v Commonwealth of Australia [1993] FCA 157; (1993) 42 FCR 51, Wilcox J having considered McDonald, James Patrick and Gregory, observed that in at least three Australian cases - Blefari v Minister (1962) 8 LGRA 1, Hustler and Phillipou - evidence of an offer to purchase land had been admitted, although his Honour pointed out that in none of those cases had it been admitted as direct evidence of the value of the land. His Honour went on to say:
It would be anomalous and unjust for the courts to adopt a blanket rule excluding offer evidence. Such a rule might exclude cogent evidence of the interest of a particular purchaser in the land being valued, a person who was willing to pay more than an ordinary market price (59 - 60).
Of course, before placing reliance upon a mere offer, a court must consider carefully the question of its genuineness. The offer might be a sham, designed to prop up an inflated compensation claim or to reduce rates and taxes; in either case without any cost to the offeror. It might be an attempt to manipulate the market for some other ulterior purpose, perhaps a purpose extraneous to the litigation. If the offer was genuine when made, it might not have led to a concluded contract, even if resumption had not intervened. The offer might have been withdrawn. The purchaser might have failed to complete the transaction. Because of matters such as these, even a genuine offer cannot be regarded as direct evidence of value. But it seems to me that, once the court is satisfied about genuineness_,_ an offer by an arm's length party to purchase the land under valuation is something that the judicial valuer ought to take into account in considering the possibility of a sale at a price different from that indicated by conventional evidence, such as an analysis of comparable sales, or of a hypothetical development, or a calculation of the capitalised value of the rental return. How much weight should be given to such an offer is a question to be determined by reference to the facts of the particular case. In some cases, the appropriate weight may be minimal; in others considerable (60). (emphasis added)
Even if I was satisfied that the offers contained in the letters were genuine and would not have been subject to any unusual conditions, it would be contrary to legal principle to use them as direct evidence that each parcel was worth $500,000 (which was the amount of the offer) (64).
147 The decision in Goold has been referred to with approval in a number of subsequent cases. For instance, in Henderson v Amadio Pty Ltd (No 1) [1995] FCA 1300; (1995) 62 FCR 1, Heerey J referred to it in concluding that evidence of offers to purchase land was admissible on the question of whether a valuer honestly held on reasonable grounds the opinion he had expressed. In Adelaide Brighton Cement Ltd v The State of South Australia [2001] SASC 381, Debelle J having referred to, among other cases, Gregory and Goold, concluded that evidence of offers to purchase was admissible for the purpose of checking the valuer's methodology. And in Stockl v Rigura Pty Ltd [2004] NSWCA 73; (2004) 12 BPR 23,151 [37] - [38], evidence as to offers to purchase was held to be admissible on the question of whether a mortgagee had exercised its power of sale in good faith.
148 In none of those cases, however, has it been suggested that the general principle set out in McDonald and Gregory, that evidence of offers to purchase land is not admissible as to its value, is not good law. On the contrary, that principle has been constantly reiterated.
149 The principle was recently considered by the Full Court of the Federal Court in Cordelia Holdings Pty Ltd v Newkey Investments Pty Ltd [2004] FCAFC 48. In that case, the trial judge had taken into account on the issue of value several offers that had been made for the property in question, although he placed their significance 'at the lower end of the scale of weight' because they did not result in sales ([126]). On appeal, the Full Court held that the trial judge had erred in admitting evidence of the offers. In the course of their joint judgment, Black CJ, French J (as his Honour then was) and Tamberlin J said:
It seems clear to us the decision of the High Court in McDonald, as applied by single justices of the High Court in James Patrick ... and Gregory ... is determinative as to whether it is an error to take into account evidence of offers. Whatever weight may be properly given to evidence of offers for limited or general purposes, it is clear that such evidence is not permissible as direct evidence of value.
Insofar as the trial judge used the evidence in that way he was, we consider, in error in doing so. To the extent that such evidence may be admissible in a general way, as to which see Wilcox J in Goold ... and Heerey J in Henderson v Amadio (No 1) ... it provided an insufficient additional basis upon which a conclusion as to value might have been arrived at. Moreover, even if such evidence is used in a general way, it would only be used if it were accompanied by an assessment of relevant factors such as the genuineness of the offer and whether it was made at arm's length (see Goold at 60). In this case, his Honour's findings do not disclose a consideration of that nature and we must conclude that the evidence of offers was wrongly taken into account and did not provide support for the judge's conclusion [128] - [129].
150 A somewhat different view appears to have been taken by the Court of Appeal of New South Wales in MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167. In that case, a question arose as to the value of the respondent's shareholding in the appellant. The only other shareholder was Mitsubishi Motors Australia Ltd. The trial judge, in assessing the value of the shares, took into account an earlier offer Mitsubishi had made to the respondent for his shares. The appellant contended that such evidence was inadmissible for that purpose. Spigelman CJ (with whom Mason P and Hodgson JA agreed) held (183) that McDonald is not authority for the proposition that an offer to purchase is inadmissible in a case in which the market value of property must be determined. His Honour distinguished McDonald on the basis that there the court had been concerned, not with market value, but with the application of a statutory definition of value, and also with offers made for comparable land, not the land in question. His Honour considered that McDonald was also distinguishable because it was a decision about the admissibility of evidence that focused on the degree of inconvenience associated with investigating the comparable nature of land the subject of the offer, such reasoning not being applicable in respect of an offer for the very land in question.
151 Spigelman CJ referred to the decision in Cordelia, observing that it was not necessary to qualify the conclusion reached in that case. That was because, even if there was a general rule that evidence of offers was not admissible as direct evidence of value, MMAL fell within an exception to it. His Honour held (184) that where a valuation refers to the special potentiality of particular property for a specific purchaser, an offer by that purchaser to purchase that property is not only relevant but highly probative and (184) where, as in MMAL, on normal valuation principles it may appear that the value of the shares was nil, it would be absurd and unjust to exclude evidence of the offer. Spigelman CJ considered (185) that the Mitsubishi offer was cogent evidence of, at least, the minimum value of the shares to a purchaser with a special interest.
152 That case was followed in Baiyai Pty Ltd v Guy [2009] NSWCA 65, where it was held that an offer to purchase certain land was admissible evidence of the value of the land. From the reasons for judgment, it would appear, however, that the parties in that case had entered into a contract which did not proceed. See also Beale v Trinkler [2008] NSWSC 347 [31] - [37] and Benzlaw & Associates Pty Ltd v Medi-Aid Centre Foundation Ltd [2007] QSC 233 [123] - [128].
153 In my respectful view, however, McDonald is authority that evidence of offers to purchase land is inadmissible as direct evidence of the value of the land. While the discussion in McDonald was, in its terms, directed to offers for comparable land, there was in fact no such offer in question in the case. The court had before it for consideration the admissibility of the offer made by the owner and the verbal offer made by a third party. As I have said, in concluding that the latter offer was inadmissible, the court must, in my view, be regarded as applying the reasoning in the case to that offer.
154 I also do not, with respect, understand the essential reasoning of Isaacs J to have focused on the degree of inconvenience associated with investigating the comparable nature of land. As I understand the reasoning of Isaacs J, it was directed to the difficulties and uncertainties involved in determining whether an offer which did not lead to a contract represented the real value of the property, as opposed to the relative certainty which results when a contract has been entered into under which one party has parted (or is bound to part) with their money and the other with their land.
155 In my respectful view, to the extent that what was said in MMAL might be thought to suggest to the contrary, the conclusion of the Full Court of the Federal Court in Cordelia is to be preferred, namely that McDonald is authority that evidence of offers to purchase land is inadmissible as direct evidence of the value of the land. That is not to say that such evidence is not admissible for other purposes in connection with the value of land, but that was not the issue in the present case.
156 In the present case, the trial judge distinguished McDonald on the basis that the offers by Fimmano and Cityzone were contemporaneous with relevant events, they concerned the land in question, they were made by third parties to the action, and they were made to the owners.
157 In my respectful opinion, the latter three factors do not provide any basis of distinction. As I have already observed, while the discussion in McDonald was framed in terms of offers made in respect of comparable land, in concluding that the verbal offer for the land in question was also inadmissible the High Court must be taken to have found that evidence of such an offer was, on the same basis, inadmissible. Indeed, as I have also observed, the factors which led the High Court to conclude that offers were not admissible focussed on the unreliability of unaccepted offers (as opposed to a binding contract) as indicators of value.
158 Nor, with respect, do I consider that what the trial judge regarded as the contemporaneity of the offers provides a relevant point of distinction. The offers by Fimmano and Cityzone were made on 12 June 2002 and 26 February 2003 respectively. The contract of sale was entered into on or about 27 August 2002. The former was more than two months before the contract was entered into and the latter almost six months afterwards. Whether in the circumstances the offers are to be regarded as contemporaneous might be a moot point. In any event, the reasons given in McDonald for excluding such evidence do not turn upon questions of timing but rather on the basis that to allow such evidence would lead the court into endless 'excursions into the realm of collateral circumstances' as to the nature and circumstances of the offer and the reasons it did not lead to a concluded contract; that is, that unaccepted offers were an inherently unreliable indicator of the value of the property, at least without potentially extensive enquiries into the circumstances surrounding the offer. I do not, therefore, consider that McDonald is distinguishable on the basis that the offers in question happen to have been made within a few months of the relevant time.
159 The trial judge referred ([93]) to Goold as a case where evidence had been accepted of an arm's length offer to purchase land once the court was satisfied that the offer was genuine, and said that he intended to follow Goold. With respect, however, I consider that the trial judge misunderstood the decision in Goold. In Goold, Wilcox J found (64) that offers to purchase the land were admissible as evidence that a person may pay more than the market value but accepted that they were inadmissible as direct evidence of the value of the land. In this case, there was no evidence that the Land had some special value to Cityzone or Fimmano that would cause either to pay more than the market value.
160 In my view, the trial judge should have found that evidence of the offers by Fimmano and Cityzone were not admissible as evidence of the value of the Land and accordingly his Honour should have placed no reliance on the offers for that purpose.
161 In any event, even if such evidence was admissible, I do not consider that any weight could be attached to the offers of 12 June 2002 and 26 February 2003, whether individually or together, as establishing the value of the Land.
162 The offer by Fimmano of 12 June 2002 followed earlier offers by Fimmano of $800,000, $1.05 million, $1.125 million and $1.275 million. The offer of 12 June 2002 was for a consideration of $1.275 million and a block of land but it also contained a condition, not contained in the contract of sale, namely 'due diligence', and it provided for settlement by 1 November 2002. A counter-offer by the Terranovas reducing the settlement date to 90 days from 16 May 2002 was rejected by Fimmano. No further offer in excess of the sum of $1.275 million was made prior to the offer in the course of settlement negotiations in February 2003. The offer by Fimmano dated 26 August 2002 was for the sum of $1.275 million, with settlement by 1 April 2003 and subject to 'due diligence'. The next offer, on 27 August 2002, was by Cityzone in the sum of $1.275 million with settlement by 20 November 2002. The provision as to due diligence was not included. That was the offer accepted by the Terranovas.
163 The offer of 12 June 2002 has to be considered in circumstances where the offer which preceded it, and the two offers which succeeded it, were each for the sum of $1.275 million. How Fimmano came to offer the amount it did in the offer of 12 June 2002, but did not do so thereafter, was not explained in the evidence. In the circumstances, in my view his Honour was not entitled to rely simply upon the 12 June 2002 offer as evidence of the value of the Land. That offer provided no better evidence of value than the two offers which succeeded it.
164 The offer of 26 February 2003 was made in the context of attempting to resolve a dispute as to the terms of the contract. I should add that it also envisaged a lengthy settlement period of some ten months before the balance of the purchase price would be paid. I do not consider that any weight could be attached to that offer as evidence of the market value of the Land.
165 In my view, therefore, even if evidence of the offers was admissible, when the offers were viewed in their context they did not provide grounds upon which an inference could properly be drawn that the market value of the Land was $1.4 million, or $1.275 million plus a block of land, or that the market value exceeded the contract sum of $1.275 million.
166 Nor, with respect, I do consider that the evidence of Mr Oud provided any assistance in determining the value of the Land. The trial judge appears ([73] - [75]) to have taken into account Mr Oud's evidence that:
167 The fact (as the trial judge found) that up to the point of sale Mr Oud thought he could sell the Land for a sum approaching $1.7 million would seem to indicate simply that Mr Oud held onto that belief in the teeth of all the indications to the contrary. On the evidence, despite (ts 353) numerous newspaper advertisements, considerable time and effort promoting the land to prospective purchasers, and speaking to numerous people about the land, between November 2001 and August 2002 the only offers to purchase the Land were those from Fimmano and Cityzone for substantially less than that amount.
168 The fact that Mr Oud thought the Land was 'prime' and even 'hot' for subdivision says nothing about the actual value of the Land. And although Mr Oud had referred to having had 'numerous enquiries' (in re-examination (ts 393) described as six to eight enquiries) shortly after the Land was first advertised for sale in about November 2001, the first offer for the Land was not received until February 2002, and that was the offer made by Fimmano in the sum of $800,000. As I have mentioned, it appears from the evidence that in the period November 2001 to August 2002 the only offers received for the Land were the offers by Fimmano and Cityzone, to which I have referred.
169 I do not, with respect, consider that any weight could be attached to Mr Oud's suggestion of a consideration of $1.275 million plus a block of land, or his recommendation that the Terranovas accept an offer for such consideration. The fact that Mr Oud made the suggestion in order to 'rekindle' negotiations tends to suggest that he intended it to be a starting price for further negotiation rather than being his considered assessment of the actual value of the Land. In any event, on the evidence it appeared to be no more than a reflection of the fact that, prior to the offer of 30 April 2002, the Terranovas had said they wanted $1.4 million for the Land. Mr Oud's recommendation that an offer of $1.275 million plus a block of land be made, and that such an offer be accepted, appears to have been essentially consistent with that.
170 Indeed, it is apparent from the evidence given by the Terranovas and Mr Oud that the negotiations in respect of the price were throughout dictated by the Terranovas' firm views as to what was acceptable to them, not by any assessment by Mr Oud as to the market value of the Land. There is no evidence that the Terranovas ever sought Mr Oud's opinion as to the market value of the Land and it was not in issue that Mr Oud did not carry out a valuation of the Land and was not a licensed valuer. The Terranovas' views as to what was an acceptable price for the Land had no probative value as to its market value.
171 In my view, on the evidence it was not open to the trial judge to find that the value of the Land exceeded the sum of $1.275 million. The onus of proving, on the balance of probabilities, that they had suffered loss lay on the Terranovas: Sellars v Adelaide Petroleum (355). That involved proving that the value of the Land at the time of sale exceeded the contract price of $1.275 million. There was no reason why that could not have been proved (if it were the fact) by valuation evidence and it was not unreasonable to expect the Terranovas to call such evidence. The Terranovas chose not to do so. Moreover, their decision not to do so occurred in circumstances where the Terranovas did call a valuer, Mr Eftos, to give evidence as to the value of a block from the subdivision of the Land. Mr Eftos was not, however, asked to give evidence about the value of the Land. There was no explanation for the absence of the latter evidence.
172 The result, however, was that there was no evidence which was capable of establishing that the Terranovas had suffered any loss. The Terranovas' claims were brought under s 82 of the Act and in negligence. Loss is the gist of an action under s 82 of the Act: Sellars v Adelaide Petroleum (351); as it is in a claim in negligence. The failure to prove loss therefore means that those claims must fail.
173 I would uphold grounds 1, 2 and 3 of the grounds of appeal.
174 It is convenient to turn next to grounds 5, 6 and 7 of the grounds of appeal. In my view, there is no substance in these grounds. The case for Auxil and Mr Oud at trial was put on the basis that Mr Boyle had apparent authority to act on behalf of Cityzone in making representations as to the terms of the offer.
175 In order to make good that case, Auxil and Mr Oud had to establish that Cityzone (by a person who had actual authority to do so) had represented that Mr Boyle had authority to tell them orally what the terms or effect of the written offer were.
176 A representation creating an apparent authority of an agent may be made in a number of ways but the most common form of representation by a principal is by conduct, that is, by permitting the agent to act in the management or conduct of the principal's business. By permitting the agent to act in the management or conduct of the business, the principal thereby represents to anyone dealing with the agent that he or she has authority to do those acts on behalf of the company which an agent authorised to do acts of the kind which he or she is in fact permitted to do normally does in the ordinary course of such business. See Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480, approved in Crabtree-Vickers Pty Ltd v Australian Direct Mail Advertising & Addressing Co Pty Ltd [1975] HCA 49; [1975] 133 CLR 72, 78; Northside Developments Pty Ltd v Registrar-General [1990] HCA 32; (1990) 170 CLR 146, 159, 172. See also Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451, 466, and the decision of the House of Lords in Armagas Ltd v Mundogas SA [1985] UKHL 11; [1986] AC 717, 777.
177 The principle is stated in Bowstead & Reynolds on Agency (17th ed), Art 74 as follows:
Where a person, by words or conduct, represents or permits it to be [represented] that another person has authority to act on his behalf, he is bound by the acts of that other person with respect to anyone dealing with him as an agent on the faith of any such representation, to the same extent as if such other person had the authority that he was represented to have, even though he had no such actual authority [307].
178 As Keane JA pointed out in IVI Pty Ltd v Baycrown Pty Ltd [2005] QCA 205 [42], as a matter of legal principle, the boundaries of the apparent authority of an agent are drawn according to what the principal represents, whether implicitly or explicitly, about the authority of the agent and the extent to which these representations have been relied upon by the third party.
179 In its defence, Cityzone admitted that it authorised Mr Boyle to present the written offer to the Terranovas' agent, but denied that Mr Boyle was authorised to tell the Terranovas or their agent what the terms of the offer were. Mr Terranova gave evidence that Mr Caratti (a director of Cityzone) told him that Mr Boyle 'worked for' Cityzone. There was no evidence, however, as to the capacity in which Mr Boyle worked for Cityzone.
180 The case for Auxil and Mr Oud was that by appointing Mr Boyle to present the offer, Cityzone represented that he had authority to state what the terms of the offer were. It was submitted that Mr Boyle was more than a mere courier. He was the agent or employee of Cityzone and the only person who could, when the offer was presented, say what its terms were.
181 In my view, the evidence fell a long way short of what was required to make out a case based on apparent authority. The fact that Mr Boyle had been authorised by Cityzone to convey the written offer to Mr Oud did not give rise to a representation by Cityzone that Mr Boyle was authorised to say orally what the terms of the offer were. The terms of the offer had been reduced to writing by Cityzone and the offer spoke for itself. On the evidence, Mr Boyle's task was simply to present the written offer. Such a task did not involve saying orally what was already said in writing in the document.
182 In my respectful opinion, the trial judge correctly found that Auxil and Mr Oud had failed to establish that Mr Boyle was acting as the agent of Cityzone in representing that the offer included a block of land as part of the consideration. That conduct of Mr Boyle was not, therefore, conduct of Cityzone for the purposes of s 84(2) of the Act.
183 I would dismiss grounds 5, 6 and 7 of the grounds of appeal.
184 By ground 4 of the grounds of appeal, Auxil and Mr Oud appeal against the finding of the trial judge that the misleading conduct of Mr Boyle was not a cause of the Terranovas' loss. In view of my conclusion that the Terranovas failed to make out any loss, it is unnecessary to decide that issue. Insofar as it concerns the liability of Cityzone to Auxil and Mr Oud, it is also rendered unnecessary to do so by my conclusion that Mr Boyle was not the agent of Cityzone for the purpose of the misleading conduct.
185 Nor is it necessary to consider this ground in respect of the claim against Mr Boyle in his personal capacity. The originating process against Mr Boyle was not included in the appeal papers but it appears from the trial judge's reasons that Auxil and Mr Oud claimed against Mr Boyle under s 52 of the Act and in the alternative sought contribution from Mr Boyle under the Tortfeasors' Contribution Act. The trial judge concluded that there were no damages to be assessed under the default judgment entered against Mr Boyle.
186 As I mentioned earlier, his Honour appears to have found that the claim against Mr Boyle under the Act could not be sustained if (as his Honour found) Mr Boyle was not the agent of Cityzone for the purpose of the misleading conduct. His Honour also appears to have found that Mr Boyle owed no duty of care to Auxil and Mr Oud with the result that the claim under the Tortfeasors' Contribution Act was not made out.
187 His Honour's further finding that Mr Boyle's conduct did not materially contribute to the Terranovas' loss was the only ground upon which Auxil and Mr Oud sought to impugn the findings of the trial judge in respect of the claims against Mr Boyle in his personal capacity. That would not, however, avail Auxil and Mr Oud while the other findings stood. Nor would it serve any purpose in light of my conclusion that the Terranovas failed to prove any loss. In those circumstances, I do not think it is necessary to canvass this ground of appeal.
188 I would allow the appeal against the judgment entered for the Terranovas, set aside the judgment and dismiss the Terranovas' claim. I would dismiss the appeal against the order of the trial judge dismissing the claims by Auxil and Mr Oud against Cityzone and Mr Boyle.
(1988) 82 ALR 499
(1986) 42 SASR 26
(2004) 140 FCR 17
(1993) 42 FCR 51
(1971) 123 CLR 547
(1995) 62 FCR 1
(1991) 102 FLR 359
(1915) 20 CLR 231
(2004) 63 NSWLR 167
(1947) 75 CLR 495
(1990) 170 CLR 146
(2004) 218 CLR 451
(1993) 118 ALR 543
(1912) 13 CLR 676
(1978) 139 CLR 195
(1944) 50 ALR 254
(2008) 235 CLR 334
(1995) 12 WAR 370
(2003) 212 CLR 299
(1988) 15 NSWLR 158
(1994) 179 CLR 332
(1907) 5 CLR 418
(1997) 69 SASR 332