TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMER
PROTECTION LEGISLATION – ENFORCEMENT AND REMEDIES –
ACTIONS FOR
DAMAGES – ASSESSMENT OR AVAILABILITY OF DAMAGES – PARTICULAR CASES
Source
Original judgment source is linked above.
Catchwords
TRADE AND COMMERCE – COMPETITION, FAIR TRADING AND CONSUMERPROTECTION LEGISLATION – ENFORCEMENT AND REMEDIES –ACTIONS FORDAMAGES – ASSESSMENT OR AVAILABILITY OF DAMAGES – PARTICULAR CASES– DAMAGES ARISING OUT OF PURCHASEOF LAND OR BUSINESS OR LEASE –where plaintiffs separately entered into a contract to purchase a luxuryapartment off the planfrom the developer vendor – where, in entering thecontract, plaintiffs relied on representations made by the real estate agentthat the ocean view from the apartment would be uninterrupted – wherecontracts settled and plaintiffs were dissatisfied withtheir view as it wasobstructed by a new building – where plaintiffs claimed that therepresentations with respect to the viewwere false, misleading and deceptivein contravention of s 52 and s 53A Trade Practices Act 1974 (Cth)– where plaintiffs instituted proceedings against the developer on thebasis that the real estate agent was its agent
duly authorised to make these
representations – where the defendant contended that the real estate agent
was only authorised
to market the apartments for sale – whether the
representations made by the real estate agent fell within the scope of its
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty
Ltd [2002] HCA 41
(2002) 210 CLR 109, considered
ICI Australia Operations Pty
Limited v Trade Practices Commission [1992] FCA 474
(1992) 38 FCR 248, cited
MacCormick v Nowland [1988] FCA 53, cited
Marginson v Ian
Potter & Co (1976) 136 CLR 161, cited
Mark Bain Constructions Pty
Ltd v Tim Barling, Alex Watson and Timothy Scott [2006] QSC 48, cited
Marks v GIO Australia Holdings [1998] HCA 69
(1998) 196 CLR 494, considered
Martin v Osborne [1936] HCA 23
(1936) 55 CLR 367, considered
Mister Figgins
Pty Ltd v Centrepoint Freeholds Pty Ltd [1981] FCA 15
(1981) 36 ALR 23, applied
Moore v Flanagan (1920) 1 KB 919, cited
Mullens v Miller
(1882) 22 Ch Div 194, applied
Petersen v Moloney [1951] HCA 57
(1951) 84 CLR 91,
considered
Pollak v National Australia Bank Limited [2002] FCA 237,
cited
Potts v Miller [1940] HCA 43
(1940) 64 CLR 282, cited
QCoal P/L &
Anor v Cliffs Australia Coal P/L & Anor [2009] QCA 358, cited
Re
Benlist Pty Limited v Olivetti Australia Pty Limited [1990] FCA 289, cited
Scott v Numurkah Corporation [1954] HCA 14
(1954) 91 CLR 300,
cited
Sellars v Adelaide Petroleum (1994) 179 CLR 332, cited
South Australia v Johnson (1982) 42 ALR 161, cited
Thompson v
Australian Capital Territory Television [1996] HCA 38
(1996) 186 CLR 574, cited
Toteff v Antonas [1952] HCA 16
(1952) 87 CLR 647, cited
Unsted v Unsted
[1947] NSWStRp 44
(1947) 47 SR (NSW) 495, cited
Wardley Australia Ltd v Western Australia
[1992] HCA 55
(1992) 175 CLR 514, applied
Warwick Entertainment Centre Pty Ltd v
Alpine Holdings Pty Ltd [2005] WASCA 174, applied
Webb Distributors (Aust) Pty Ltd v Victoria [1993] HCA 61
(1993) 179 CLR 15, cited
Judgment (98 paragraphs)
[1]
For the reasons already referred to, the exclusion clause does not have those effects.
[2]
[174] Mrs Avis alleged in paragraph 21 of her statement of claim that if the representations had not been made, she would not have entered into any agreement to purchase unit 8, Number One Park and:
[3]
(b) Mrs Avis would have searched for a penthouse or other type of apartment or a house in the Noosa or Sunshine Beach area (i.e. somewhere between Coolum and Noosa, that had uninterrupted surf views (alternative property);
[4]
(c) Mrs Avis would have found an alternative property sometime in the middle of 2003; and
[5]
(d) Mrs Avis would have succeeded in purchasing that alternative property for a price within her budget, namely between $1.0 and $1.45 million.
[6]
(i) Unit 1, 'Splash' 25 Park Crescent, Sunshine Beach
[7]
(ii) Unit 2, 'Splash' 25 Park Crescent, Sunshine Beach
[8]
(e) Further or alternatively to sub-paragraphs (c) and (d) herein, Mrs Avis would not have purchased any property, having failed to fine [sic] or purchased [sic] an alternative property having uninterrupted surf views.
[9]
Further or alternatively to paragraph 21 above, despite the making of the representations pleaded in paragraphs 5, 6 and 8A above, had Mr Bain not made the representations referred to in paragraph 11 above:
[10]
(a) Mrs Avis would refused [sic] to settle the contract for the purchase of the property on the basis of the misleading or deceptive conduct pleaded in paragraph 17 above; and
[11]
(b) Mrs Avis would have acted as pleaded at paragraphs 21(b) to 21(e) above.
[12]
The alternative property would have increased in value in line with the general appreciation in values in the Sunshine Beach area of approximately 34% between the middle of 2003 and May 2008 and thus (if purchased for $1,225,000) be worth at May 2008 approximately $1,646,400.
[13]
24A. The plaintiff sold the property in January 2009 for $890,000.
[14]
In the premises pleaded in paragraphs 21 to 24A above, by the making of the representations pleaded in paragraphs 5, 6, 8A and 11 above, the plaintiff lost the opportunity to acquire an alternative property and profit from its increase in value since the middle of 2003, the quantum thereof being the difference between the present value of an alternative property ($1,646,400) and the value of the property at the time the plaintiff sold it ($890,000), namely $756,400.
[15]
Further or alternatively to paragraph 25 above, in the premises pleaded in paragraph 21(e) above, by the making of the representations pleaded in paragraphs 5, 6, 8A and 11 above, the plaintiff purchased a property that she would otherwise not have purchased, and as a result of that transaction suffered loss and damage, namely:
[16]
(a) interest paid on the purchase price of $1,225,000 that was borrowed from Westpac Banking Corporation from 9 June 2004 until 24 February 2009, totalling $409,221;
[17]
(b) loss on capital, being the purchase price of $1,225,000 minus sale price of $890,000, totalling $335,000; and
[18]
(c) transaction costs such as bank fees and conveyancing charges."
[19]
[175] The amendment sought on 16 April 2010 was to add to paragraph 26(b) the words "or alternatively to those particulars and sub-paragraph (a) herein, loss on capital, being the purchase price of $1,225,000 minus the value at the date of settlement, being approximately $810,000, totalling approximately $415,000." For the same reasons as articulated with regard to Barnscape, I do not regard it as necessary for the plaintiff to amend its pleading in order to claim that relief.
[20]
[176] In the prayer for relief, the plaintiff then claimed damages pursuant to s 82 of the TPA in the estimated amount of $450,000.
[21]
[177] In response, the first defendant pleaded in paragraph 22(ii) of the amended defence that:
[22]
"(a) Mrs Avis did not enter the contract to purchase the property on the basis of any false representations or misleading and deceptive conduct on the part of Mr Forsyth and/or the First Defendant as alleged because no such representations were made and no such conduct existed;
[23]
(b) Mrs Avis would not have found and purchased an alternative property as alleged for between $1 million - $1.45 million.
[24]
If, which is denied, Mrs Avis was interested in purchasing a penthouse having uninterrupted surf views (as alleged in paragraph 4 of the third further amended statement of claim) then neither of the alternative properties would have been purchased by her as they did not have any or all of those characteristics.
[25]
Further there were no other properties for sale which possessed the characteristics which the Plaintiff required a property to have before the Plaintiff would contemplate purchasing that property.
[26]
(i) that it does not admit that either of the alleged alternative properties were in fact available to be purchased in the middle of 2003 by the plaintiff. The First Defendant has made reasonable enquiries and remains uncertain of the truth or otherwise of the allegation and is unable to admit it for that reason;
[27]
(ii) at no time was the First Defendant or Mr Forsyth advised by the plaintiff that her budget was between $1 million - $1.45 million.
[28]
(d) The First Defendant admits that the plaintiff would have failed to find and purchase an alternative property having uninterrupted surf views, as alleged in sub-paragraph (e) of the second further amended statement of claim, but denies the allegations otherwise made in sub-paragraph (e) because they are untrue for the reasons set out in paragraph 22(i) and (ii) hereof."
[29]
[178] Paragraphs 22 to 26 of the statement of claim were partly admitted and otherwise denied.
[30]
[179] As in the Barnscape case, it is necessary to refer in detail to the evidence to determine what damage was suffered by Mrs Avis and therefore the appropriate measure of compensation.
[31]
[180] Mrs Avis's evidence was that if she had not purchased the unit at Number One Park, they would either have bought another unit or house somewhere on the east coast or not have purchased at all. She had access to an additional $250,000 should those moneys have been required. However, it is in my view, unlikely that she would have purchased unit 1 or unit 2 in Splash as neither had the required surf views. It is therefore more likely that they would not have purchased a property at Sunshine Beach. It could not therefore be said that they lost the opportunity to achieve the 34 per cent increase in value of units in that area. This is a case where, put simply, Mrs Avis bought a property which she would not otherwise have bought if it had not been for the misleading and deceptive conduct.
[32]
[181] After settlement, Mr and Mrs Avis furnished the unit and used it for themselves and their family for holidays. The fitout had been completed before they found out in September 2004 that Splash was not in breach of the height limits of the council.
[33]
[182] The funds used to purchase unit 8 were borrowed from Westpac. The Avises borrowed 100 per cent of the purchase price. Although the unit was purchased for capital growth, the unit was not used for income producing purposes, so the interest on the loan used to purchase the property was not tax deductible.
[34]
[183] Mr Avis said that they did not attempt to sell the unit until they had resolved the question of whether Splash was above the regulated height or not. Once they took legal proceedings they were uncertain whether or not to sell. Other reasons for selling were more personal. An additional reason for selling was the Avises' daughters had moved overseas and one had given birth so they started travelling to visit them rather than just visiting one holiday site in Australia. Mr Avis also needed to travel overseas because of a new position that he had taken up.
[35]
[184] On 1 August 2008 Mr and Mrs Avis decided to sell unit 8 and appointed Ray White Real Estate and Dowling & Neylan Real Estate to sell the unit for $1,035,000. The contract settled on 23 February 2009 for $890,000. The marketing brochure by Ray White Real Estate correctly referred to the unit having "ocean views".
[36]
[185] There is no dispute that the price obtained by Mrs Avis when she sold the unit was the market price and it was sold after a proper marketing campaign.
[37]
[186] In his evidence Mr Caspers valued unit 8 with its impeded view as being worth $755,000.00 as at 1 September 2003 and as at 9 June 2004 as $775,000. If the property had had an unimpeded view, as represented, its value would have been $875,000.00.
[38]
[187] Mr Caspers valued unit 8 as at 18 February 2008 at $985,000. Had it had an unimpeded view, it would have been valued at $1,145,000.
[39]
[188] If it had not been for the misrepresentations Mrs Avis would not have purchased unit 8. She would not then have suffered the capital loss of $335,000 pleaded in paragraphs 26(b); she would not have had to pay the interest on the capital borrowed of $409,221 and she would have saved on bank fees and conveyancing charges. However, Mr and Mrs Avis would not have enjoyed the personal use of the property. Their sale of the property was influenced by personal factors not related to the representations which induced its purchase. Those matters are particularly difficult to quantify.
[40]
[189] For similar reasons to those set out with regard to the calculation of the loss suffered by Barnscape, I would value the loss suffered by Mrs Avis as the difference between the price paid for the unit and its true value at the time of settlement of the Avis contract, $450,000, ie $1,225,000 less $775,000.
[41]
Effect on quantum of the compromise between plaintiffs and second defendant
[42]
[190] The first defendant submitted that in this instance the loss claimed by the plaintiffs is a single loss said to be occasioned by the first and second defendants. Agency, they submitted, is said to arise by virtue of s 84(2) of the TPA which has a deeming effect whereby the conduct of the agent is said to be conduct of the principal. In other words, the conduct of the second defendants is said to be exactly the same as the conduct of the first defendant. It was submitted that this is not a matter where there are joint tortfeasors and the plaintiff has the benefit of the provisions of the Law Reform Act 1995 (Qld) in respect of joint liability and being able to compromise with one of the defendants and pursue the other.[31] The first defendant submitted that in this instance, as it is exactly the same liability and loss and in circumstances where the plaintiffs compromise with one defendant in respect of exactly the same loss, it operates as a compromise of the entirety of the proceedings. The position would not be any different to that which exists at common law which was only abrogated in respect of tortious claims of and relating to joint liabilities. In the absence of an express provision abrogating it, where there is a compromise with the agent for the same loss, there is a compromise with the principal.
[43]
[191] The first defendant argued that where there are alternative claims between an agent and principal, judgment against one amounts to an election which precludes pursuit of the other.[32] In this instance, the first defendant submitted that there was one loss and no evidence to suggest that the loss sustained by the plaintiffs exceeded that for which the plaintiffs compromised the entire action by each accepting the payment of $200,000 from the second defendant. In the absence of proof that the loss was greater than the payment made, there should be no damages awarded.
[44]
[192] The first defendant also argued that the plaintiffs, if they were entitled to pursue their claim against the first defendant, were not entitled to double recovery. That is not disputed by the plaintiffs.
[45]
[193] The plaintiff raised four issues in response. The first was that when the Avis contract and the Barnscape contract settled on 9 June 2004 there was no provision for proportionate liability between the first defendant and the second defendant under Part VIA of the TPA. Part VIA which received Royal assent on 30 June 2004 does not apply to causes of action which arose before that date.[33]
[46]
[194] With regard to the question of election, the plaintiffs referred to the ratio of Petersen v Moloney at [19]. In Petersen v Moloney the plaintiff, who was the vendor of the property, sued the purchaser for recovery of the purchase price. The purchaser pleaded that he had paid the estate agent who was the vendor's agent with authority to receive the purchase money. The estate agent was thereupon joined as a defendant and as against him the vendor claimed, in the alternative, the purchase price as money received by him for her use. In such a case judgment entered against one defendant precluded judgment being entered against the other defendant since they were sued in the alternative.
[47]
[195] Dixon, Fullagar and Kitto JJ discussed the role of a real estate agent at 94-95:
[48]
"In connection with sales and purchases of property the word 'agent' is apt to be used in a misleading way. The legal conception of agency is expressed in the maxim 'Qui facit per alium facit per se', and an 'agent' is a person who is able, by virtue of authority conferred upon him, to create or affect legal rights and duties as between another person, who is called his principal, and third parties. When a person is employed to find a buyer of property, he is commonly said to be employed as an agent, and the term 'estate agent' is a common description of a class of persons whose business is to find buyers for owners who wish to sell property. But the mere employment of such a person under the designation of agent does not, apart from the general rule that the employer will be responsible for misrepresentations made by him, necessarily create any authority to do anything which will affect the legal position of his employer."
[49]
[196] In that case the purchaser paid the whole of the purchase price to the real estate agent who failed to pass it on to the vendor. The vendor took action in the alternative against the real estate agent or the purchaser. The High Court held that the real estate agent did not have authority to receive the purchase moneys on behalf of the vendor and that the vendor should not have succeeded therefore against the real estate agent but rather against the purchaser. The High Court held at 102:
[50]
"The case is clearly one of alternative liability. Either Maloney [the purchaser] or Pulbrook [the real estate agent] might be liable to the plaintiff, but both could not be. In such a case a final election to treat either as liable would preclude the plaintiff from proceeding against the other, and it is a well-settled general principle that, while the commencement of action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election: See Morel Bros & Co Ltd v Earl of Westmoreland.[34] In the present case the plaintiff (as she was clearly entitled to do) proceeded against both of the persons possibly liable, claiming alternatively as against each. After [the trial judge] had pronounced his decision she entered judgment against [the real estate agent]. Did this amount to a final election to treat [the real estate agent] as liable to the exclusion of [the purchaser]? Apart from appeal, clearly it would amount to such an election."
[51]
[197] That was a case in which "one but not both might have been liable". Their Honours referred to the rule stated by Atkin LJ (as he then was) in Moore v Flanagan[35] that:
[52]
"A plaintiff cannot sue an agent to judgment and then sue the principal".
[53]
[198] Their Honours held that the plaintiff in Petersen v Moloney did not offend against that rule. They observed at 103:
[54]
"It is to be noted that, although the rule is often stated in terms which would seem to make it depend on election, Vaughan Williams J (as he then was) in Hammond v Schofield[36] said:
[55]
'The basis of this defence is not the election or unconscious election, if there can be such a thing, of the plaintiff, but the right of the co-contractor when sued in a second action on the same contract to insist, though not a party to the first action, on the rule that there shall not be more than one judgment on one entire contract.'
[56]
This passage is quoted by Scrutton LJ in Moore v Flanagan [1902] I KB 919 at 925. Moore v Flanagan was not, and this case is not, a case of 'co-contractors', but the same rule is applicable, and it must rest on the same basis. There must not be more than one judgment where there is only one antecedent obligation."
[57]
[199] The principle was referred to by Gibbs and Mason JJ in Marginson v Ian Potter & Co[37] as follows:
[58]
"... once a third party has sued the agent to judgment he cannot thereafter, without setting aside that judgment, sue the undisclosed principal even if the existence of the principal was [not] known to the third party at the time when the judgment was obtained. This proposition rests not on the doctrine of election which depends in general upon knowledge of relevant facts but on another principle, namely that when judgment is obtained on a cause of action the cause of action merges in the judgment. Thus the liability of an undisclosed principal merges in a judgment obtained against the agent by the third party [Priestly v Fernie[1863] EngR 737; (1863) 3 H&C 977; 159 ER 820; Kendall v Hamilton(1879) 4 App Cas 504 at 514-515; Petersen v Moloney]."
[59]
[200] The plaintiffs argued that those cases do not apply here because the liability is not alternate as it is with third party contracts with an agent on behalf of the principal, it is joint.
[60]
[201] The principal in this case is jointly liable with the agents for the misrepresentations. It can offset the amount paid in the action by the agent but that does not in my view extinguish the principal's liability.
[61]
[202] The third issue dealt with by the plaintiffs in their submissions was the matter raised by the first defendant's submission that the compromise with the real estate agent was in respect of the same joint liability and therefore it amounted to a compromise of the entire proceedings. The plaintiffs conceded that if the settlement agreement be construed as a release, it would release all others who were jointly liable for the same conduct. However if the settlement agreement be construed merely as a covenant not to sue, it would not release the other debtors. Even if a settlement agreement purports to be a release, if it discloses an intention to reserve rights against the other joint tortfeasor, or can be construed such that the intention was that the other jointly liable parties were to remain liable, it will be treated as a mere covenant not to sue.
[62]
[203] The correspondence between the solicitors for the real estate agents and the solicitors for the plaintiffs clearly show that the offer to settle made by the second defendant real estate agents was made with the clear understanding that the plaintiffs could pursue their action against the first defendant. The settlement agreement between the plaintiffs and the second defendants was a contract between the plaintiff and the second defendant which compromised the action between them but did not affect the liabilities of the first defendant to the plaintiffs. It clearly disclosed an intention to reserve rights against the first defendant and as such is to be construed as a covenant not to sue the second defendant rather than a release of the whole action: see Pollak v National Australia Bank Limited.[38]
[63]
[204] The fourth matter raised by the plaintiffs was that they accepted that they must bring into account the settlement moneys they received from the second defendant in the assessment of any award of damages against the first defendant. The settlement sum in each case was an all-up figure inclusive of costs.
[64]
[205] In the Barnscape matter the all-up payment by the second defendant was $200,000. By that stage the plaintiff had incurred costs of $121,610.16. One can assume that those costs were apportioned equally between the two defendants and so one half of the costs, $60,805, was attributable to the case against the first defendant. The plaintiff submitted, and there is no reason to dispute, that that figure would be likely to be discounted by some 40 per cent in a costs assessment leaving an amount payable for costs of $36,483. The rest of the settlement of $200,000, that is $163,517, can be taken to be the damages part of that settlement and should be deducted from the damages awarded against the first defendant in this judgment. I would therefore order the first defendant to pay Barnscape the sum of $216,483 (being $380,000 less $163,517) together with interest.
[65]
[206] So far as the Avis matter is concerned the payment made by the second defendant was a payment of $200,000 inclusive of the claim, interest and costs. Exhibit 1 in that matter shows that the actual costs incurred by the plaintiff to that time were $113,057.16. One can assume that those costs were incurred equally by the plaintiff between the two defendants and so the amount of $56,528.58 was attributable to the legal costs involving the claim against the first defendant. As the plaintiff conceded in submissions, that should be reduced by another 40 per cent to take account of the amount that would be allowed on taxation bringing the amount to $33,917. The rest of the settlement i.e. $166,083 can be taken to be the damages part of that settlement and should be deducted against the damages awarded against the first defendant in this judgment. I would therefore order the first defendant to pay Mrs Avis the sum of $283,917 (being $450,000 less $166,083) together with interest.
[66]
[207] I shall hear submissions as to the precise form of the orders and costs.
"[19] In criminal proceedings, propensity evidence is not admissible unless it is sufficiently highly probative of a fact in issue to outweigh the prejudice it may cause. This is illustrative of the Court's discretion in weighing the probative value of evidence against its prejudicial effect. See Pfennig v The Queen[1995] HCA 7; (1994-95) 182 CLR 461; Hoch v The Queen[1988] HCA 50; (1988) 165 CLR 292.
"In the case of a claim arising out of a contravention of s 52 of the Act the relevant question, in this context at least, is always one of reliance or inducement. If, as a result of misleading conduct, a person is induced to enter into a contract and suffers loss, the right to a remedy will subsist whatever the parties may provide in their agreement: Clark Equipment Australia Ltd v Covcat Pty Ltd(1987) 71 ALR 367 at 371, per Sheppard J with whom Fox J and, relevantly, Jackson J were in agreement; Petera Pty Ltd v EAJ Pty Ltd[1985] FCA 277; (1985) 7 FCR 375 at 378, per Wilcox J; and Oraka Pty Ltd v Leda Holdings Ltd[1997] FCA 297; (1997) ATPR 41-558 at 43, 717. Exclusion clauses in a contract will only preclude a remedy under the Act when those clauses demonstrate that the party in question did not, in fact, rely on the conduct or where the conduct could not, as a whole, have been seen to be misleading: Lezam Pty Ltd v Seabridge Australia Pty Ltd[1992] FCA 206; (1992) 35 FCR 535 at 557; Kewside Pty Ltd v Warman International Ltd(1990) ATPR 41-012."
"The relief sought at trial against Plantation Equity included a declaration that each loan agreement was void. Mr H Fraser QC, for the appellants, concedes that remedy cannot be granted because the only remedy for a breach of s 851 of the Law is damages. Under UCPR r 658(2) a judge may grant relief beyond that specifically claimed where there is appropriate. This is such a case. If the appellants are entitled to damages for the amounts outstanding under the loan agreements they should be awarded those damages even though they originally claimed an entitlement to set aside the loan agreements rather than damages. The appellants are entitled to be placed in the position they would have been in had they not acted on Mr Horner's recommendation and taken part in the scheme: Manwelland Pty Ltd v Dames & Moore Pty Ltd[2001] QCA 436."